10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

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

For the Fiscal Year Ended:  December 31, 2004

OR

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

For the transition period from                                                           to                                                                  

Commission File Number:  000-22635

VORNADO REALTY L.P.

(Exact name of Registrant as specified in its charter)

Delaware	13-3925979
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
888 Seventh Avenue, New York, New York	10019
(Address of Principal Executive Offices)	(Zip Code)
Registrant’s telephone number including area code:                 (212) 894-7000

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:

Class A Units of Limited Partnership Interest
Series A Preferred Units of Limited Partnership Interest

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES   ý        NO   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     YES   ý        NO   o

There is no public market for the Class A units of the limited partnership interest of Vornado Realty L.P.  Based on the closing stock price of Vornado Realty Trust’s common shares on June 30, 2004, which are issuable upon redemption of the Class A units, the aggregate market value of the Class A units held by non-affiliates of the registrant, i.e. by persons other than Vornado Realty Trust and officers and trustees of Vornado Realty Trust was $5,790,469,000.

Documents Incorporated by Reference

Part III:  Portions of Vornado Realty Trust’s Proxy Statement for Annual Meeting of Shareholders to be held on May 18, 2005.

TABLE OF CONTENTS

	Item		Page
Part I.	1.	Business	4
	2.	Properties	17
	3.	Legal Proceedings	45
	4.	Submission of Matters to a Vote of Security Holders	46
		Executive Officers of the Registrant (1)	46
Part II.	5.	Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	47
	6.	Selected Financial Data	48
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
	7A.	Quantitative and Qualitative Disclosures about Market Risk	99
	8.	Financial Statements and Supplementary Data	101
	9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	154
	9A.	Controls and Procedures	154
	9B.	Other Information	156
Part III.	10.	Directors and Executive Officers of the Registrant	156
	11.	Executive Compensation (1)	156
	12.	Security Ownership of Certain Beneficial Owners and Management	156
	13.	Certain Relationships and Related Transactions	157
	14.	Principal Accountant Fees and Services	157
Part IV.	15.	Exhibits and Financial Statement Schedules	157
Signatures			158

(1)Vornado Realty Trust, the registrant’s general partner, will file a definitive Proxy Statement pursuant to Regulation 14A involving the election of trustees with the Securities and Exchange Commission not later than 120 days after December 31, 2004, portions of which are incorporated by reference herein. Information relating to Executive Officers of Vornado Realty Trust appears on page 46 of this Annual Report on Form 10-K.

2

FORWARD LOOKING STATEMENTS

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements are not guarantees of performance.  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 “plans,” “intends,” “estimates,” “anticipates,” “expects,” “believes” or similar expressions in this annual report on Form 10-K.  These forward-looking statements are subject to numerous assumptions, risks and uncertainties.  Many of the factors that will determine these items are beyond our ability to control or predict.  For further discussion of these factors see “Item 1. Business – Certain Factors That May Adversely Affect Our Business and Operations” in this annual report on Form 10-K.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this annual report on Form 10-K 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 after the date of this annual report on Form 10-K.

3

PART I

ITEM 1.BUSINESS

THE COMPANY

Vornado Realty L.P. (the “Operating Partnership” and/or the “Company”) is a Delaware limited partnership. Vornado Realty Trust (“Vornado”), a fully-integrated real estate investment trust (“REIT”), is the sole general partner of, and owned approximately 87% of the common limited partnership interest in, the Operating Partnership at December 31, 2004. All references to “We,” “Us,” and “Company” refer to the Operating Partnership and its consolidated subsidiaries.

The Company currently owns directly or indirectly:

Office Properties (“Office”):

(i)           all or portions of 86 office properties aggregating approximately 27.6 million square feet in the New York City metropolitan area (primarily Manhattan) and in the Washington D.C. and Northern Virginia area;

Retail Properties (“Retail”):

(ii)          94 retail properties in seven states and Puerto Rico aggregating approximately 14.2 million square feet, including 2.8 million square feet built by tenants on land leased from the Company;

Merchandise Mart Properties:

(iii)         8.6 million square feet of showroom and office space, including the 3.4 million square foot Merchandise Mart in Chicago;

Temperature Controlled Logistics:

(iv)        a 47.6% interest in Americold Realty Trust which owns and operates 88 cold storage warehouses nationwide;

Other Real Estate Investments:

(v)         33% of the outstanding common stock of Alexander’s, Inc. (“Alexander’s”) which has six properties in the greater New York metropolitan area;

(vi)        the Hotel Pennsylvania in New York City consisting of a hotel portion containing 1.0 million square feet with 1,700 rooms and a commercial portion containing 0.4 million square feet of retail and office space;

(vii)       a 22.4% interest in The Newkirk Master Limited Partnership (“Newkirk MLP”) which owns office, retail and industrial properties net leased primarily to credit rated tenants, and various debt interests in such properties;

(viii)      seven dry warehouse/industrial properties in New Jersey containing approximately 1.7 million square feet;

(ix)         mezzanine loans to real estate related companies; and

(x)          interests in other real estate including a 12.25% interest in GMH Communities L.P. (which owns and manages student and military housing properties throughout the United States), other investments and marketable securities.

4

OBJECTIVES AND STRATEGY

Our business objective is to maximize shareholder value.  We intend to achieve this objective by continuing to pursue our investment philosophy and executing our operating strategies through:

•Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;

•Investing in properties in select markets, such as New York City and Washington, D.C., where we believe there is high likelihood of capital appreciation;

•Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;

•Investing in retail properties in select under-stored locations such as the New York City metropolitan area;

•Investing in fully-integrated operating companies that have a significant real estate component with qualified, experienced operating management and strong growth potential which can benefit from our access to efficient capital;

•Developing/redeveloping our existing properties to increase returns and maximize value; and

•Providing specialty financing to real estate related companies.

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets.

5

2004 ACQUISITIONS AND INVESTMENTS

During the year ended December 31, 2004, the Company has completed $328,600,000 of acquisitions and investments in real estate, of which $246,600,000 related to the retail segment.  In addition, the Company made $183,400,000 of mezzanine loans during 2004 which increased the outstanding balance of Notes and Mortgage Loans Receivable to $440,186,000 at December 31, 2004.  Details of these transactions are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

Investment in GMH Communities L.P.

On July 20, 2004, the Company committed to make up to a $159,000,000 convertible preferred investment in GMH Communities L.P. (“GMH”), a partnership focused on the student and military housing sectors.  Distributions accrued on the full committed balance of the investment, whether or not drawn, from July 20, 2004, at a rate of 16.27%.  In connection with this commitment, the Company received a placement fee of $3,200,000.  The Company also purchased for $1,000,000, warrants to acquire GMH common equity.  These warrants entitle the Company to acquire (i) 6,666,667 limited partnership units in GMH at an exercise price of $7.50 per unit and (ii) 5,496,724 limited partnership units, through May 6, 2006, at an exercise price of $9.10 per unit.  As of November 3, 2004, the Company had funded a total of $113,777,000 of the commitment.

On November 3, 2004, GMH Communities Trust (“GCT”) closed its initial public offering (“IPO”) at a price of $12.00 per share.  GCT is a real estate investment trust that conducts its business through GMH, of which it is the sole general partner.  In connection with the IPO, the $113,777,000 previously funded by the Company under the $159,000,000 commitment was repaid, together with accrued distributions of $13,381,000.  The Company also exercised warrants to purchase 6,666,667 limited partnership units at a price of $7.50 per unit, or $50,000,000 in total, which resulted in a gain of $29,500,000.  The Company accounts for its interest in the partnership units on the equity-method based on its 12.25% ownership interest and right to appoint one of its executive officers to GCT’s Board of Trustees.  The Company records its pro-rata share of GMH’s net income or loss on a one-quarter lag basis as the Company files its financial statements on Form 10-K or 10-Q prior to the time GMH files its financial statements.

Under the warrant agreement, the number of GMH partnership units or GCT common shares underlying the warrants is adjusted for dividends declared by GCT.  On December 16, 2004, GCT declared a dividend of $.16 per common share, which increased the number of shares underlying the warrants from 5,496,724 to 5,563,417 and the exercise price was decreased from $9.10 to $8.99 per share.   Because these warrants are derivatives and do not qualify for hedge accounting treatment, the gains and losses resulting from the mark-to-market of the warrants at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  In the quarter ended December 31, 2004, the Company recognized income of $24,190,000 from the mark-to-market of these warrants, which were valued using a trinomial option pricing model based on GCT’s closing stock price on the NYSE of $14.10 per share on December 31, 2004.

Further, in connection with the IPO, the Company contributed its 90% interest in Campus Club Gainesville, which it acquired in 2000, in exchange for an additional 671,190 GMH limited partnership units.

Of the Company’s GMH units, 6,666,667 may be converted into an equivalent number of common shares of GCT commencing on May 2, 2005 and 671,190 units may be converted commencing on November 2, 2005.  The Company has agreed not to sell any common shares or units it owns or may acquire until May 2, 2005.

6

Investment in Sears, Roebuck and Co.

In July and August 2004, the Company acquired an aggregate of 1,176,600 common shares of Sears, Roebuck and Co. (“Sears”) for $41,945,000, an average price of $35.65 per share. Included in the cost is $1,361,000 for a performance-based participation.  These shares are recorded as marketable securities on the Company’s consolidated balance sheet and are classified as “available for sale.”  Appreciation or depreciation in the fair market value of these shares is recorded as an increase or decrease in “accumulated other comprehensive income” in the partners’ capital section of the Company’s consolidated balance sheet and not recognized in income.  At December 31, 2004, based on Sears’ closing stock price of $51.03 per share, $18,105,000 of appreciation in the value of these shares was included in “accumulated other comprehensive income.”

In August and September 2004, the Company acquired an economic interest in an additional 7,916,900 Sears common shares through a series of privately negotiated transactions with a financial institution pursuant to which the Company purchased a call option and simultaneously sold a put option at the same strike price on Sears common shares.  These call and put options have an initial weighted-average strike price of  $39.82 per share, or an aggregate of $315,250,000, expire in April 2006 and provide for net cash settlement.  Under these agreements, the strike price for each pair of options increases at an annual rate of LIBOR plus 45 basis points and is credited for the dividends received on the shares.  The options provide the Company with the same economic gain or loss as if it had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points.  Because these options are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  During the year ended December 31, 2004, the Company recorded net income of $81,730,000, comprised of (i) $88,782,000 from the mark-to-market of the options on December 31, 2004, based on Sears’ closing stock price of $51.03 per share and (ii) $2,295,000 for accrued dividends, partially offset by (i) $5,972,000 for a performance-based participation, (ii) $2,371,000 for the increase in strike price resulting from the LIBOR charge and (iii) $1,004,000 of professional fees.

On November 16, 2004, Kmart Holding Corporation (“Kmart”) and Sears entered into an Agreement and Plan of Merger.  Upon the effective date of the merger, each share of Sears common stock will be converted into the right to receive, at the election of the holder, (i) $50.00 in cash or (ii) 0.50 shares of common stock of the merged company, subject to proration so that 55% of the Sears shares are exchanged for shares of the merged company.

Based on Sears’ most recent filing with the Securities and Exchange Commission, the Company’s aggregate investment in Sears represents 4.2% of Sears’ outstanding common shares.

2004 DISPOSITIONS

On June 29, 2004, the Company sold the Palisades Residential Complex for $222,500,000, which resulted in a net gain on sale after closing costs of $65,905,000.  Substantially all of the proceeds from the sale were reinvested in tax-free “like kind” exchange investments pursuant to Section 1031 of the Internal Revenue Code (“Section 1031”).

On August 12, 2004, the Company sold its Dundalk, Maryland shopping center for $12,900,000, which resulted in a net gain on sale after closing costs of $9,850,000.  Substantially all of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments pursuant to Section 1031 .

On November 4, 2004, Americold Realty Trust (“Americold”), owned 60% by the Company, purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  On November 18, 2004 the Company and its 40% partner, Crescent Real Estate Equities Company (“CEI”) collectively sold 20.7% of Americold’s common shares to The Yucaipa Companies (“Yucaipa”) for $145,000,000, which resulted in a gain, of which the Company’s share was $18,789,000.  In connection with the governance provisions of the transaction, the Company has the right to appoint three of the five members to Americold’s Board of Trustees.  Consequently, the Company is deemed to exercise control over Americold and on November 18, 2004 began to consolidate Americold’s operations and financial position and no longer accounts for its investment on the equity method.

Further details regarding the Company’s dispositions are disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements in this annual report on Form 10-K.

7

DEVELOPMENT AND REDEVELOPMENT PROJECTS

The Company is currently engaged in various development/redevelopment projects for which it has budgeted approximately $470.0 million.  Of this amount $30.9 million was expended in 2004 (excluding $104.5 million for projects completed in 2004) and $310.0 million is estimated to be expended in 2005.  Below is a description of these projects.

	The Company’s Share of
($ in millions)	Estimated Completion Date	Estimated Project Cost			Costs Expended in Year Ended December 31, 2004		Estimated Costs to Complete
In Progress:
New York Office:
Redevelopment of 7 West 34th Street office space to permanent showroom space for Gift industry manufacturers and wholesalers	2005-2006	$	33.0		$	.5	$	32.5
CESCR:
Crystal City Office space to be vacated by the U.S. Government Patent and Trade Office (“PTO”):
(i) Renovation of buildings (see next page)	2005-2007	75.0		(1)	11.0		64.0
(ii) Cost to retenant	2005-2007	75.0		(1)	—		75.0
Retail:
Green Acres Mall – interior and exterior renovation, construction of an additional 63,600 square feet of free-standing retail space, parking decks and site-work and tenant improvements for B.J.’s Wholesale who will construct its own store (2)	2006	71.0			1.0		69.0
Bergen Mall – expand, re-tenant and redevelop the mall (2)	2008	102.0			1.6		100.0
Strip shopping centers – redevelopment of five properties and one industrial warehouse (2)	2005-2006	54.0			7.2		44.0
715 Lexington Avenue – demolition of existing building and construction of 24,000 square feet of retail space on four floors	Fall 2005	19.0			4.9		12.0
968 Third Avenue (50% interest) – demolition of existing building and construction of 5,700 square feet of retail space on three floors	Spring 2005	6.0			1.8		1.0
Other:
Penn Plaza Signage District - construction of approximately 21 signs at various locations in the Penn Plaza District, of which 10 have been completed as of December 31, 2004	Ongoing	35.0			2.9		20.0
		$	470.0		$	30.9	$	417.5

(1)Revised from the prior estimate of $90.0 million to renovate the buildings and $60.0 million to re-tenant the space.

(2)Subject to governmental approvals.

The Company is also in the pre-development phase of other projects including, retail space in the Penn Plaza area, repositioning of the Hotel Pennsylvania, expansion of the Monmouth Mall and renovation of the 2101 L Street office building.

There can be no assurance that any of the above projects will commence or be completed on schedule or on budget.

8

The Company has substantially completed the following projects during 2004:

	The Company’s Share of
($ in millions)	Project Cost		Costs Expended in Year Ended December 31, 2004		Estimated Costs to Complete
Completed in 2004:
New York City:
640 Fifth Avenue – construction of additional 47,000 square feet of office space and redevelopment of existing building	$	64.0	$	13.9	$	6.0
CESCR:
Crystal Drive Retail – construction of additional 57,000 square feet of retail space and improvements to the infrastructure including streets, signals and signs as part of “way finding” program	43.0		25.5		3.0
Retail:
4 Union Square South – redevelopment of 198,000 square feet, of which 193,000 square feet has been leased to Whole Foods, Forever 21, DSW Shoe Warehouse and Filenes	54.0		29.6		6.0
Strip shopping centers – site work and/or demolition of existing buildings as part of the redevelopment of six properties released to Wal-Mart and Lowes (each of these locations were previously leased to Bradlees.)	18.0		16.9		—
Merchandise Mart:
350 West Mart Center, Chicago – addition of 40,000 square feet at street level and new lobby and drive	18.0		14.6		2.0
Other:
400 North LaSalle (85% interest) – construction of 381,000 square foot, high-rise rental apartment complex containing 452 apartments	78.0		4.0		1.0
	$	275.0	$	104.5	$	18.0

PTO Space Redevelopment:

The Company plans to redevelop certain office buildings in which the PTO has vacated or will vacate space as their leases expire over the next two years as follows:

		Square Feet Vacated	Square Feet Expiring (in thousands)
		2004	2005				2006
	Total	Q4	Q1	Q2	Q3	Q4	Q1
Taken out of Service:
Crystal Plaza Three	263	263	—	—	—	—	—
Crystal Plaza Four	234	234	—	—	—	—	—
Remaining in Service:
Crystal Plaza Two	181	—	181	—	—	—	—
Crystal Park One	224	13	109	64	—	38	—
Crystal Park Two	406	39	103	77	—	98	89
Crystal Park Three	107	67	—	24	—	—	16
Crystal Park Five	194	—	—	194	—	—	—
Crystal Mall One	180	180	—	—	—	—	—
Other Buildings	150	141	—	—	—	9	—
	1,939	937	393	359	—	145	105

Renovations to Crystal Plaza Three and Four will include new mechanical systems, new restrooms, lobbies and corridors.  These buildings have been taken out of service for redevelopment which is expected to be completed over a 12 to 18 month period.  Renovations to the remaining buildings will consist of common area and exterior renovations to upgrade the buildings that will not be taken out of service.

See page 56 for details of the projected lease up of the PTO space.

9

FINANCING ACTIVITIES

During 2004, the Company and Vornado issued (i) $425,000,000 of Cumulative Redeemable Preferred Shares at a weighted average rate of 6.74%, (ii) $55,000,000 Cumulative Redeemable Preferred Units of the Operating Partnership at a weighted average rate of 6.96%, (iii) $46,700,000 of 3.0% Series D-13 preferred units and (iv) redeemed $85,000,000 and $27,500,000 of outstanding Cumulative Redeemable Preferred Shares and Units with a weighted average rate of 8.50% and 8.38%, respectively.  In addition, the Company completed property level financings of $520,000,000 and issued $250,000,000 of senior unsecured notes.  Details of these transactions as well as other financing activities are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

The Company may seek to obtain funds through equity offerings, debt financings or asset sales, although there is no express policy with respect thereto. The Company may offer common shares of Vornado or Operating Partnership units in exchange for property and may repurchase or otherwise re-acquire its shares or any other securities in the future.

COMPETITION

The Company’s business segments – Office, Retail, Merchandise Mart Properties, Temperature Controlled Logistics, and Other operate in highly competitive environments.  The Company has a large concentration of properties in the New York City metropolitan area and in the Washington, D.C. and Northern Virginia area.  The Company competes with a large number of real estate property owners and developers.  Principal factors of competition are rent charged, attractiveness of location, the quality of the property and breadth and quality of services provided.  The Company’s success depends upon, among other factors, trends of the national and local economies, 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.

ENVIRONMENTAL REGULATIONS

The Company’s 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 certain of these 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 the release.  The presence of contamination or the failure to remediate contamination may impair the Company’s 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) and underground storage tanks are also regulated by federal and state laws.  The Company could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or tanks or related claims arising out of environmental contamination or exposure at or from the Company’s properties.

Each of the Company’s properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any environmental condition material to the Company’s business.  However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or compliance requirements could result in significant costs to the Company.

10

TENANTS WHICH ACCOUNTED FOR OVER 10% OF REVENUES

In 2004, the Company had 106 separate leases with various agencies of the U.S. Government, the rent from which accounted for 12.5% of the Company’s consolidated total revenues.  The loss of this tenant would have a material adverse effect on the Company’s finances as a whole.

CERTAIN ACTIVITIES

Acquisitions and investments are not required to be based on specific allocation by type of property. The Company has historically held its properties for long-term investment; however, it is possible that properties in the portfolio may be sold in whole or in part, as circumstances warrant, from time to time. Further, the Company has not adopted a policy that limits the amount or percentage of assets which would be invested in a specific property. While Vornado may seek the vote of its shareholders in connection with any particular material transaction, generally the Company’s activities are reviewed and may be modified from time to time by Vornado’s Board of Trustees without the vote of securityholders.

EMPLOYEES

As of December 31, 2004, the Company and its majority-owned subsidiaries had approximately 2,592 employees, of which 186 were corporate staff.  The Office segment had 269 employees and 1,123 employees of Building Maintenance Services, a wholly-owned subsidiary.  The Retail segment, the Merchandise Mart segment and the Hotel Pennsylvania had 61, 479 and 474 employees, respectively.  This does not include employees of partially-owned entities, including Americold Realty Trust which had 6,058 employees as of December 31, 2004.

SEGMENT DATA

The Company operates in four business segments: Office Properties, Retail Properties, Merchandise Mart Properties and Temperature Controlled Logistics.  The Merchandise Mart segment has trade show operations in Canada.  The Temperature Controlled Logistics segment operates one managed warehouse in Canada.  Information related to the Company’s business segments for the years 2004, 2003 and 2002 is set forth in Note 18. Segment Information to the Company’s consolidated financial statements in this annual report on Form 10-K.

The Company’s principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894-7000.

MATERIALS AVAILABLE ON VORNADO’S WEBSITE

Copies of Vornado’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of the Company, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through Vornado’s website (www.vno.com) as soon as reasonably practicable after it is electronically filed with, or furnished to, the Securities and Exchange Commission.  We also have made available on Vornado’s website copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines.  In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on Vornado’s website.

11

CERTAIN FACTORS THAT MAY ADVERSELY AFFECT OUR BUSINESS AND OPERATIONS

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 limit our revenues and available cash.

The factors that affect the value of the our real estate include, among other things, national, regional and local economic conditions; consequences of any armed conflict involving, or terrorist attack against, the United States; our ability to secure adequate insurance; local conditions such as an oversupply of space or a reduction in demand for real estate in the area; competition from other available space; whether tenants consider a property attractive; the financial condition of our tenants, including the extent of tenant bankruptcies or defaults; whether we are able to pass some or all of any increased operating costs through to tenants; how well we manage our properties; fluctuations in interest rates; changes in real estate taxes and other expenses; changes in market rental rates; the timing and costs associated with property improvements and rentals; changes in taxation or zoning laws; government regulation; availability of financing on acceptable terms or at all; potential liability under environmental or other laws or regulations; and general competitive factors.

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 decline, we generally would expect to have less cash available to pay our indebtedness and distribute 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.

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

Our financial results depend on leasing space in our properties to tenants on economically favorable terms. In addition, because substantially all of our income comes from renting of real property, our income, funds available to pay indebtedness and funds available for distribution to our shareholders will decrease if a significant number of our tenants cannot pay their rent.  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 costs to enforce those rights. For information regarding the bankruptcy of our tenants, see “Bankruptcy or insolvency of tenants may decrease our revenues and available cash” below.

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

A number of companies, including some of our tenants, have declared bankruptcy in recent years, and other tenants may declare bankruptcy or become insolvent in the future.  If a major tenant declares bankruptcy or becomes insolvent, the rental property where it leases space may have lower revenues and operational difficulties, and, in the case of our shopping centers, we may 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 funds available for distribution to our securityholders or the payment of our indebtedness.

Real estate is a competitive business.

For a discussion of risks related to competition in the real estate business, see “Item 1.  Business – Competition.”

We may incur costs to comply with environmental laws.

For a discussion of risks related to the Company’s compliance with environmental laws, see “Item 1.  Business – Environmental Regulations.”

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

The Company carries comprehensive liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002 which expires in 2005 and (v) rental loss insurance) with respect to its assets.  In April 2004, the Company reviewed its all risk policies and increased its coverage for Acts of Terrorism for each of its New York Office, CESCR Office, Retail and Merchandise Mart divisions.  Below is a summary of the all risk property insurance and terrorism risk insurance for each of the Company’s business segments:

	Coverage Per Occurrence
	All Risk (1)		Sub-Limits for Acts of Terrorism
New York Office	$	1,400,000,000	$	750,000,000
CESCR Office	1,400,000,000		750,000,000
Retail	500,000,000		500,000,000
Merchandise Mart	1,400,000,000		750,000,000
Temperature Controlled Logistics	225,000,000		225,000,000

(1)Limited as to terrorism insurance by the sub-limit shown in the adjacent column.

In addition to the coverage above, the Company carries lesser amounts of coverage for terrorist acts not covered by the Terrorism Risk Insurance Act of 2002.  To the extent the Company incurs losses in excess of its insurance coverage, these losses would be born by the Company and could be significant.

The Company’s debt instruments, consisting of mortgage loans secured by its properties (which are generally non-recourse to the Company), its senior unsecured notes due 2007, 2009 and 2010 and its revolving credit agreement, contain customary covenants requiring the Company to maintain insurance. Although the Company believes that it has adequate insurance coverage under these agreements, the Company may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.  Further if lenders insist on greater coverage than the Company is able to obtain, or if the Terrorism Risk Insurance Act of 2002 is not extended, it could adversely affect the Company’s ability to finance and/or refinance its properties and expand its portfolio.

Our Investments Are Concentrated in the New York City/New Jersey and Washington, D.C. Metropolitan Areas.  Circumstances Affecting These Areas Generally Could Adversely Affect Our Business.

A significant proportion of our properties are in the New York City/New Jersey and Washington, D.C. metropolitan areas and are affected by the economic cycles and risks inherent to those regions.

During 2004, 64.2% of our EBITDA, excluding items that affect comparability, came from properties located in New Jersey and the New York City and Washington, D.C. metropolitan areas.  In addition, we may continue to concentrate a significant portion of our future acquisitions in New Jersey and the New York City and Washington, D.C. metropolitan areas.  Like other real estate markets, the real estate markets in these areas have experienced economic downturns in the past, and we cannot predict how the current economic conditions will impact these markets in both the short and long term.  Further declines in the economy or a decline in the real estate markets in these areas could hurt our financial performance and the value of our properties.  The factors affecting economic conditions in these regions include: space needs of the United States Government, business layoffs or downsizing; industry slowdowns; relocations of businesses; changing demographics; increased telecommuting and use of alternative work places; financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate industries; infrastructure quality; and any oversupply of or reduced demand for real estate.

It is impossible for us to assess the future effects of the current uncertain trends in the economic and investment climates of the New York City/New Jersey and Washington, D.C. regions, and more generally of the United States, or the real estate markets in these areas.  If these conditions persist or if any local, national or global economic recovery is of a short term, businesses and future profitability may be adversely affected.

Terrorist Attacks such as those of September 11, 2001 in New York City and the Washington, D.C. Area May Adversely Affect the Value of Our Properties and Our Ability to Generate Cash Flow.

We have significant investments in large metropolitan areas, including the New York/New Jersey, Washington, D.C. and Chicago metropolitan areas.  Tenants in these areas may choose to relocate their business to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity. This in turn would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease our properties on less favorable terms.  In addition, threatened or actual future terrorist attacks in these areas could directly or

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indirectly impact our properties.  As a result of the foregoing, the value of our properties and the level of our revenues could decline materially.

We May Acquire or Sell Additional Assets or Develop Additional Properties.  Our Failure or Inability to Consummate These Transactions or Manage the Results of These Transactions Could Adversely Affect Our Operations and Financial Results.

We have grown rapidly through acquisitions.  We may not be able to maintain this rapid growth and our failure to do so could adversely affect our stock price.

We have experienced rapid growth in recent years, increasing our total assets from approximately $565 million at December 31, 1996, to approximately $11.6 billion at December 31, 2004.  We may not be able to maintain a similar rate of growth in the future or manage our growth effectively.  Our failure to do so may have a material adverse effect on our financial condition and results of operations and ability to pay distributions to our securityholders.

We may acquire or develop new properties and this may create risks.

We may acquire or develop properties or acquire other real estate companies when we believe that an acquisition or development is consistent with our business strategies. We may not, however, succeed in consummating desired acquisitions or in completing developments on time or within budget. We also may not succeed in leasing newly developed or acquired properties at rents sufficient to cover their costs of acquisition or development and operations.  Difficulties in consummating desired acquisitions and integrating acquisitions may prove costly or time-consuming and could divert management’s attention.

It may be difficult to buy and sell real estate quickly.

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.

We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might otherwise desire to do so without incurring additional costs.

As part of an acquisition of a property, we may agree with the seller that we will not dispose of the acquired properties or reduce the mortgage indebtedness on them for significant periods of time unless we pay certain of the resulting tax costs of the seller.  These agreements could result in our holding on to properties that we would otherwise sell and not pay down or refinance indebtedness that we would otherwise pay down or refinance.

For example, subject to limited exceptions, we are restricted from selling or otherwise transferring or disposing of certain properties located in the Crystal City area of Arlington, Virginia or an interest in our division that manages the majority of our office properties in the Washington, D.C. metropolitan area, which we refer to as the CESCR Division, until 2014 with respect to certain properties located in the Crystal City area of Arlington, Virginia or until 2008 with respect to an interest in the CESCR Division.  These restrictions, which currently cover approximately 13.0 million square feet of space, could result in our inability to sell these properties or an interest in the CESCR Division at an opportune time and increase costs to us.

Our Organizational and Financial Structure Gives Rise to Operational and Financial Risks.

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 Internal Revenue Code of 1986, as amended, for a REIT is that it distribute 90% of its net 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).  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. We and other companies in the real estate industry have experienced limited availability of financing from time to time. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, new financing may not be 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 annual report on Form 10-K.

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We have indebtedness, and this indebtedness may increase.

As of December 31, 2004, we had approximately $5.2 billion in total debt outstanding including the Company’s proportionate share of debt of partially-owned entities.  Our ratio of total debt to total enterprise value was 30.4%. When we say “enterprise value” in the preceding sentence, we mean market equity value of Vornado Realty Trust plus total debt outstanding, including the Company’s pro-rata share of partially-owned entities debt, less cash. In the future, we may incur additional debt, and thus increase its ratio of total debt to total enterprise value, to finance acquisitions or property developments.

Loss of the Company’s key personnel could harm our operations and adversely affect the value of our common shares.

We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado Realty Trust, and Michael D. Fascitelli, the President of Vornado Realty Trust. While we believe that we could find replacements for these key personnel, the loss of their services could harm our operations and adversely affect the value or our common shares.

Our Ownership Structure and Related-Party Transactions May Give Rise to Conflicts of Interest.

Steven Roth and Interstate Properties may exercise substantial influence over the Company. They and some of the Company’s other trustees and officers have interests or positions in other entities that may compete with the Company.

As of December 31, 2004, Interstate Properties, a New Jersey general partnership, and its partners owned approximately 10.8% of the common shares of Vornado Realty Trust and approximately 27.4% of the common stock of Alexander’s, Inc.  Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the partners of Interstate Properties. Mr. Roth is the Chairman of the Board and Chief Executive Officer of Vornado Realty Trust, the managing general partner of Interstate Properties, the Chief Executive Officer and a director of Alexander’s.

As of December 31, 2004, we owned 33% of the outstanding common stock of Alexander’s. Alexander’s is a REIT engaged in leasing, managing, developing and redeveloping properties, focusing primarily on the locations where its department stores operated before they ceased operations in 1992. Alexander’s has six properties, which are located in the New York City metropolitan area. Mr. Roth and Mr. Fascitelli, the President and a trustee of Vornado Realty Trust, are directors of Alexander’s. Messrs. Mandelbaum, West and Wight are trustees of Vornado Realty Trust and are also directors of Alexander’s.

Prior to the dissolution of Vornado Operating on December 29, 2004, Interstate was also a significant equity holder of Vornado Operating.  When it existed, Vornado Operating’s principal business was operating, as tenant, the cold storage warehouses owned by our partially-owned subsidiary, Americold Realty Trust.  Messrs. Roth and Fascitelli were officers and directors of Vornado Operating.  Mr. Wight was also a director of Vornado Operating.

Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado Realty Trust (and therefore the Company) and Alexander’s and on the outcome of any matters submitted to Vornado Realty Trust or Alexander’s shareholders for approval. In addition, certain decisions concerning the Company’s operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and Interstate Properties and the Company’s other equity or debt holders. In addition, Mr. Roth and Interstate Properties and its partners currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting the Company or Alexander’s, such as which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, by the Company, Interstate Properties and Alexander’s, competition for properties and tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.

The Company currently manages and leases the real estate assets of Interstate Properties under a management agreement for which the Company receives an annual fee equal to 4% of base rent and percentage rent and certain other commissions. The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. The Company earned $726,000, $703,000, and $747,000 of management fees under the management agreement for the years ended December 31, 2004, 2003 and 2002.  Because the Company and Interstate Properties are controlled by the same persons, as described above, the terms of the management agreement and any future agreements between the Company and Interstate Properties may not be comparable to those the Company could have negotiated with an unaffiliated third party.

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There may be conflicts of interest between Alexander’s and Us

At December 31, 2004, the Company had loans receivable from Alexander’s of $124,000,000 at an interest rate of 9.0%, including $29,000,000 drawn under a $50,000,000 line of credit.  The maturity date of the loans is the earlier of January 3, 2006 or the date that Alexander’s Lexington Avenue construction loan is finally repaid. The Operating Partnership manages, develops and leases the Alexander’s properties under management and development agreements and leasing agreements under which the Operating Partnership receives annual fees from Alexander’s. These agreements have a one-year term expiring in March of each year, except that the Lexington Avenue management and development agreements have a term lasting until substantial completion of development of the Lexington Avenue property, and are all automatically renewable. Because the Company and Alexander’s share common senior management and because a majority of the trustees of Vornado Realty Trust also constitute the majority of the directors of Alexander’s, the terms of the foregoing agreements and any future agreements between us and Alexander’s may not be comparable to those we could have negotiated with an unaffiliated third party.

Interstate Properties, which is further described above, owned an additional 27.4% of the outstanding common stock of Alexander’s as of December 31, 2004.  Mr. Roth, Chairman of the Board and Chief Executive Officer of Vornado Realty Trust, is Chief Executive Officer and a director of Alexander’s, and Mr. Fascitelli, President and a trustee of Vornado Realty Trust, is President and a director of Alexander’s.  Messrs. Mandelbaum, West and Wight, trustees of the Company, are also directors of Alexander’s.  Alexander’s common stock is listed on the New York Stock Exchange under the symbol “ALX.”

For a description of Interstate Properties’ ownership of Vornado Realty Trust and Alexander’s, see “Steven Roth and Interstate Properties may exercise substantial influence over the Company. They and some of the Company’s other trustees and officers have interests or positions in other entities that may compete with the Company” above.

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ITEM 2.PROPERTIES

The Company currently owns, directly or indirectly, Office properties, Retail properties, Merchandise Mart properties and Temperature Controlled Logistics refrigerated warehouses. The Company also owns or has investments in Alexander’s, Hotel Pennsylvania, The Newkirk Master Limited Partnership, GMH Communities L.P., dry warehouses and industrial buildings.

Office Segment

The Company currently owns all or a portion of 86 office properties containing approximately 27.6 million square feet.  Of these properties, 20 containing 13.4 million square feet are located in the New York City metropolitan area (primarily Manhattan) (the “New York City Office Properties”) and 66 containing 14.2 million square feet are located in the Washington, D.C. and Northern Virginia area (the “CESCR Office Properties”).

New York City Office Properties:

The New York City Office Properties contain 12,607,000 square feet of office space and 805,000 square feet of retail space.  In addition, the New York City Office properties contain five garages totaling 332,000 square feet (1,600 spaces) which are managed by or leased to third parties.  The garage space is excluded from the statistics provided in this section.

The following table sets forth the percentage of the New York City Office Properties 2004 revenue by tenants’ industry:

Industry	Percentage
Retail	13	%
Publishing	10	%
Government	8	%
Legal	7	%
Technology	6	%
Advertising	6	%
Pharmaceuticals	5	%
Finance	5	%
Service Contractors	5	%
Communication	4	%
Not-for-Profit	4	%
Insurance	4	%
Bank Branches	3	%
Real Estate	3	%
Health Services	3	%
Engineering	3	%
Other	11	%
	100	%

The Company’s New York City Office properties lease terms generally range from five to seven years for smaller tenant spaces to as long as 15 years for major tenants, and may include extension options at market rates.  Leases typically provide for step-ups in rent periodically over the term of the lease and pass through to tenants the tenant’s share of increases in real estate taxes and operating expenses over a base year. Electricity is provided to tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.

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Below is a listing of tenants that accounted for 2% or more of the New York City Office Properties revenues in 2004:

Tenant	Square Feet Leased	2004 Revenues		Percentage of New York City Office Revenues		Percentage of Company Revenues
The McGraw-Hill Companies, Inc.	520,000	$	20,612,000	3.3	%	1.2	%
VNU Inc.	515,000	19,544,000		3.2	%	1.1	%
Sterling Winthrop, Inc.	429,000	18,879,000		3.0	%	1.1	%
Cablevision/Madison Square Garden L.P./ Rainbow Media Holdings, Inc.	285,000	14,905,000		2.4	%	0.9	%
Federated Department Stores	357,000	14,622,000		2.4	%	0.9	%
U.S. Government	639,000	14,411,000		2.3	%	0.8	%
New York Stock Exchange, Inc.	348,000	14,268,000		2.3	%	0.8	%

The following table sets forth the occupancy rate and the average annual escalated rent per square foot for the New York City Office properties, excluding garage space, at the end of each of the past five years.

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Escalated Rent Per Square Foot (excluding retail space)
2004	13,412,000	95.6	%	$	41.90
2003	13,253,000	95.8	%	37.36
2002	13,957,000	97.3	%	35.53
2001	13,953,000	96.2	%	32.18
2000	14,049,000	94.9	%	30.16

During 2004, the Company leased 1,623,000 square feet of New York City Office space as follows:

	2004 Leasing Activity
Location	Square Feet	Average Initial Rent Per Square Foot(1)
One Penn Plaza	411,000	$	39.79
909 Third Avenue	286,000	41.61
888 Seventh Avenue	170,000	54.43
330 Madison Avenue (25% interest)	146,000	39.57
Eleven Penn Plaza	114,000	33.84
Two Penn Plaza	110,000	37.65
640 Fifth Avenue	86,000	68.23
866 U.N. Plaza	84,000	42.22
150 East 58th Street	65,000	46.48
595 Madison	54,000	49.07
90 Park Avenue	24,000	44.02
825 Seventh Avenue (50% interest)	23,000	25.00
689 Fifth Avenue	18,000	49.56
40 Fulton Street	17,000	24.83
1740 Broadway	11,000	30.00
Paramus	4,000	19.06
Total	1,623,000	42.96
Vornado’s Ownership Interest	1,502,000	43.34

(1)   Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

In addition to the office space noted above, the Company leased 51,000 square feet of retail space at a weighted average initial rent of $118.39 per square foot.

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The following tables set forth lease expirations for the office and retail portions of the New York City Office Properties as of December 31, 2004, for each of the next 10 years assuming that none of the tenants exercise their renewal options.

Office Space:

Year	Number of Expiring Leases	Square Feet of Expiring Leases		Percentage of New York City Office Square Feet		Annual Escalated Rent of Expiring Leases
						Total		Per Square Foot
2005	170	698,000		5.5	%	$	29,312,000	$	41.99
2006	80	709,000		5.6	%	27,592,000		38.92
2007	81	632,000		5.0	%	26,494,000		41.92
2008	69	1,171,000	(1)	9.3	%	50,180,000		42.85
2009	84	653,000		5.2	%	27,271,000		41.76
2010	55	1,043,000		8.3	%	43,672,000		41.87
2011	35	863,000		6.8	%	43,036,000		49.87
2012	24	860,000		6.8	%	30,529,000		35.50
2013	20	584,000		4.6	%	22,909,000		39.23
2014	26	351,000		2.8	%	16,400,000		46.72

(1)Excludes 492,000 square feet at 909 Third Avenue leased to the U.S. Post Office through 2038 (including six five-year renewal options) for which the annual escalated rent is $8.96 per square foot.

Retail Space (contained in office buildings):

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of Retail Square Feet		Annual Escalated Rent of Expiring Leases
					Total		Per Square Foot
2005	11	24,000	3.0	%	$	1,473,000	$	61.38
2006	10	63,000	7.8	%	3,028,000		48.06
2007	3	4,000	0.5	%	770,000		192.50
2008	5	27,000	3.4	%	1,511,000		55.96
2009	6	26,000	3.2	%	4,509,000		173.42
2010	4	6,000	0.7	%	535,000		89.17
2011	3	9,000	1.1	%	667,000		74.11
2012	4	69,000	8.6	%	2,406,000		34.87
2013	10	36,000	4.5	%	3,629,000		100.56
2014	13	106,000	13.2	%	16,719,000		157.73

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The following table sets forth the New York City Office Properties owned by the Company as of December 31, 2004:

Location	Approximate Leasable Building Square Feet	Percent Leased		Encumbrances (in thousands)
NEW YORK (Manhattan)
One Penn Plaza (1)	2,379,000	94.0	%	$	—
Two Penn Plaza	1,543,000	91.7	%	300,000
909 Third Avenue (1)	1,359,000	98.5	%	125,000
770 Broadway	1,046,000	99.6	%	170,000
Eleven Penn Plaza	1,029,000	96.8	%	219,777
90 Park Avenue	890,000	98.5	%	—
888 Seventh Avenue (1)	833,000	99.0	%	105,000
330 West 34th Street (1)	637,000	99.9	%	—
1740 Broadway	567,000	96.1	%	—
150 East 58th Street (2)	522,000	90.5	%	—
866 United Nations Plaza	349,000	91.1	%	48,130
595 Madison (Fuller Building)	307,000	95.1	%	—
640 Fifth Avenue	324,000	99.5	%	—
40 Fulton Street	240,000	89.4	%	—
689 Fifth Avenue	90,000	98.8	%	—
7 West 34th Street	424,000	100.0	%	—
330 Madison Avenue (25% interest)	784,000	94.1	%	60,000
20 Broad Street (1)	466,000	85.3	%	—
825 Seventh Avenue (50% interest)	165,000	100.0	%	23,104
NEW JERSEY
Paramus	128,000	91.2	%	—
Total Office Buildings	14,082,000	95.6	%	$	1,051,011
Vornado’s Ownership Interest	13,412,000	95.6	%	$	994,459

(1)Ground leased.

(2)Less than 10% of this property is ground leased.

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Charles E. Smith Commercial Realty (“CESCR”) Office Properties:

CESCR owns 66 office buildings and a hotel in the Washington D.C. and Northern Virginia area containing 14.2 million square feet, including two buildings taken out of service for redevelopment.  CESCR manages an additional 7.1 million square feet of office and other commercial properties.  In addition, CESCR’s buildings contain 19 garages totaling approximately 7.4 million square feet (25,000 spaces) which are managed by or leased to third parties.  The garage space is excluded from the statistics provided in this section.  As of December 31, 2004, 35 percent of CESCR’s property portfolio is leased to various agencies of the U.S. government.

On July 1, 2004, the Company acquired the Marriott hotel located in its Crystal City office complex from a limited partnership in which Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members own approximately 67 percent.  The purchase price of $21,500,000 was paid in cash.  The hotel contains 343 rooms and is leased to an affiliate of Marriott International, Inc. until July 31, 2015, with one 10-year extension option.  The land under the hotel was acquired in 1999.

The following table sets forth the percentage of CESCR’s Office properties 2004 revenue by tenants’ industry:

Industry	Percentage
U.S. Government	42	%
Government Contractors	29	%
Legal Services	4	%
Communication	3	%
Transportation by Air	3	%
Real Estate	3	%
Trade Associations	2	%
Business Services	2	%
Eating and Drinking Places	1	%
Health Services	1	%
Other	10	%
	100	%

CESCR office leases are typically for four to seven year terms, and may provide for extension options at either pre-negotiated or market rates.  Most leases provide for annual rental escalations throughout the lease term, plus recovery of increases in real estate taxes and certain property operating expenses over a base year.  Annual rental escalations are typically based upon either fixed percentage increases or the consumer price index.  Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.

Below is a listing of tenants which accounted for 2% or more of the CESCR Office properties revenues during 2004:

Tenant	Square Feet Leased	2004 Revenues		Percentage of CESCR Revenues		Percentage of Company Revenues
U.S. Government (93 separate leases)	5,043,000	$	186,315,000	41.9	%	10.9	%
Science Applications International Corp	499,000	12,631,000		2.8	%	0.7	%
TKC Communications	305,000	10,221,000		2.3	%	0.6	%
The Boeing Company	283,000	9,035,000		2.0	%	0.5	%

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The following table sets forth the occupancy rate and the average annual escalated rent per square foot for the CESCR properties at the end of each of the past five years:

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Escalated Rent Per Square Foot
2004	14,216,000	91.5	%	$	30.06
2003	13,963,000	93.9	%	29.64
2002	13,395,000	93.6	%	29.38
2001	12,899,000	94.8	%	28.59
2000	12,495,000	97.9	%	27.38

During 2004, the Company leased 2,824,000 square feet of CESCR office space as follows:

Location	Square Feet	Average Initial Rent Per Square Foot(1)
Skylines	762,000	$	26.13
Crystal Gateway	529,000	32.53
Crystal Plaza	499,000	29.40
Crystal Park	201,000	32.62
Crystal Square	158,000	32.83
Tysons Dulles	142,000	24.25
Reston Executive	90,000	24.19
Courthouse Plaza	88,000	26.61
Commerce Executive	83,000	19.97
1919 South Eads Street	57,000	33.22
1730 M Street	45,000	31.14
Arlington Plaza	36,000	29.35
Crystal Mall	32,000	29.00
Fairfax Square (20% interest)	30,000	26.75
1101 17th Street	20,000	33.63
1150 17th Street	19,000	34.00
1140 Connecticut Avenue	12,000	33.39
Democracy Plaza	11,000	33.54
1750 Pennsylvania	10,000	38.00
	2,824,000	28.93

(1)Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased.

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The following table sets forth lease expirations for the CESCR Office Properties as of December 31, 2004 for each of the next 10 years, assuming that none of the tenants exercise their renewal options.

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of CESCR Square Feet		Annual Escalated Rent of Expiring Leases
					Total		Per Square Foot
2005	375	2,909,000	20.5	%	$	87,280,000	$	30.00
2006	195	2,362,000	16.6	%	75,044,000		31.77
2007	157	1,075,000	7.6	%	33,134,000		30.83
2008	135	1,246,000	8.8	%	38,598,000		30.99
2009	126	1,305,000	9.2	%	37,874,000		29.02
2010	49	447,000	3.1	%	14,152,000		31.66
2011	62	952,000	6.7	%	28,391,000		29.81
2012	28	620,000	4.4	%	20,743,000		33.46
2013	24	361,000	2.5	%	12,172,000		33.70
2014	24	441,000	3.1	%	11,236,000		25.47

The above table includes 1,002,000 square feet leased to the U.S. Patent and Trademark Office (“PTO”) in the Crystal City submarket.  Of this square feet, 393,000 expires in Q1 2005, 359,000 expires in Q2 2005, 145,000 expires in Q4 2005 and 105,000 expires in Q1 2006.  In addition, the PTO vacated 937,000 square feet in the fourth quarter of 2004, of which 497,000 has been taken out of service, and will vacate another 1,002,000 square feet during 2005 and the first quarter of 2006.  As of February 1, 2005, the Company has leased 416,000 square feet of the PTO space vacated.  Of this space, 262,000 square feet was leased to the Federal Supply Service which will be relocated from 240,000 square feet in other Crystal City buildings, 122,000 square feet was leased to the Public Broadcasting Service and 32,000 square feet was leased to Lockheed Martin.

Below is a comparison of the Company’s actual leasing activity to the Company’s projection for the lease-up of this space:

	Square Feet Leased (in thousands)
Period in which rent commences:	Projection	Actual Through February 1, 2005
Q4 2004	—	32
Q3 2005	—	122
Q4 2005	247	—
Q1 2006	793	262
Q2 2006	404	—
Q3 2006	252	—
Q4 2006	98	—
Q1 2007	145	—
	1,939	416

Straight-line rent per square foot for the actual square feet leased is $32.34 as compared to $31.94 projected.  Actual tenant improvements and leasing commissions per square foot is $45.25 as compared to $45.28 projected.

The Company’s original redevelopment plans for the PTO space included taking Crystal Park One and Crystal Plaza Three and Four out of service.  Plans for Crystal Plaza Three and Four have not changed.  Current plans for Crystal Park One are to lease its 224,000 square feet to private sector tenants, which will not require taking the building out of service, as opposed to leasing it to another government agency which would have required taking it out of service.  As a result, the Company will recognize approximately $4,000,000 of expense in 2005, which under the original plan would have been capitalized as part of development costs.

23

The following table sets forth the CESCR Office Properties owned by the Company as of December 31, 2004:

Location/Complex	Number of Buildings		Approximate Leasable Building Square Feet	Percent Leased		Encumbrances (in thousands)
Crystal Mall	4		1,067,000	85.9	%	$	48,618
Crystal Plaza	7	(1)	1,231,000	85.4	%	—
Crystal Square	4		1,420,000	95.0	%	185,296
Crystal City Hotel	1		266,000	100	%	—
Crystal City Shops	1		47,000	100	%	—
Crystal Gateway	5		1,465,000	93.9	%	203,928
Crystal Park	5		2,180,000	89.0	%	253,238
1919 S. Eads Street	1		97,000	98.5	%	11,952
Total Crystal City	28		7,773,000	91.0	%	703,032
Skyline	8		2,542,000	93.7	%	194,897
Courthouse Plaza (2)	2		624,000	95.7	%	77,153
1101 17th Street	1		207,000	96.7	%	25,537
1730 M Street	1		190,000	82.7	%	15,944
1140 Connecticut Avenue	1		179,000	90.8	%	18,888
1150 17th Street	1		227,000	76.6	%	30,838
1750 Pennsylvania Avenue	1		259,000	97.9	%	48,876
2101 L Street	1		354,000	99.5	%	—
Democracy Plaza I (2)	1		210,000	91.2	%	26,095
Tysons Dulles	3		484,000	93.8	%	—
Commerce Executive	3		382,000	74.9	%	51,796
Reston Executive	3		487,000	91.1	%	71,197
South Capitol	3		58,000	96.9	%	—
Fairfax Square (20% interest)	3		524,000	90.7	%	67,215
Kaempfer equity interests (.1% to 10% interests)	6		3,437,000	99.4	%	491,869
Total Office Buildings	66		17,937,000	92.1	%	$			1,823,337
Vornado’s Ownership Interest	66		14,216,000	91.5	%	$		1,296,549
Assets Held for Sale:
Arlington Plaza	1		179,000	93.3	%	$		14,691

(1)Includes Crystal Plaza Three and Four containing an aggregate of 354,000 square feet which have been taken out of service for redevelopment and not included in Percent Leased.

(2)Ground leased.

24

Retail Segment

The Company owns 94 retail properties, of which 51 are strip shopping centers located in the Northeast and Mid-Atlantic; 25 are supermarkets in Southern California; five are regional malls located in New York, New Jersey and San Juan, Puerto Rico; and 13 are retail properties located in New York City.  The Company’s strip shopping centers and malls are generally located on major regional highways in mature, densely populated areas.  The Company believes these properties attract consumers from a regional, rather than a neighborhood market place because of their location on regional highways.

The Company’s strip shopping centers contain an aggregate of 9.2 million square feet and are substantially (over 80%) leased to large stores (over 20,000 square feet).  Tenants include destination retailers such as discount department stores, supermarkets, home improvement stores, discount apparel stores and membership warehouse clubs.  Tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building materials and home improvement supplies, and compete primarily on the basis of price and location.

The Company’s five regional malls are as follows :

The Green Acres Mall in Long Island, New York contains 1.6 million square feet, and is anchored by four major department stores: Sears, J.C. Penney and Company, Inc., Federated Department Stores, Inc. (“Federated”) doing business as Macy’s and Macy’s Men’s Furniture Gallery (formerly “Sterns”).  The complex also includes The Plaza at Green Acres, a 175,000 square foot strip shopping center which is anchored by Wal-Mart and National Wholesale Liquidators.  The Company plans to renovate the interior and exterior of the mall.  In addition, the Company has entered into a ground lease with B.J.’s Wholesale Club who will construct its own free-standing store in the mall complex.  Further, the Company will construct 63,600 square feet of free-standing retail space and parking decks in the complex, subject to governmental approvals.  The expansion and renovation are expected to be completed in 2006.

The Monmouth Mall in Eatontown, New Jersey, owned 50% by the Company, contains 1.4 million square feet and is anchored by four department stores; Macy’s, Lord & Taylor, J.C. Penney and Boscovs, three of which own their stores aggregating 718,000 square feet.

The Bergen Mall in Paramus, New Jersey, contains 893,000 square feet.  The Company has entered into agreements to terminate its lease with Macy’s effective April 2005 and its lease with Value City effective January 2006.  Under these agreements, in January 2005, the Company received $2,000,000 from Macy’s and paid $12,000,000 to Value City, both of which were reflected in the acquisition price of the mall.  The Company plans to expand, re-tenant and redevelop the mall subject to governmental approvals and anticipates taking the mall out of service in phases beginning in the second quarter of 2005.

The Montehiedra Mall in San Juan, Puerto Rico, contains 554,000 square feet and is anchored by Home Depot, Kmart, and Marshalls.

The Las Catalinas Mall in San Juan, Puerto Rico, contains 354,000 square feet and is anchored by Kmart and Sears, which owns its store.

25

2004 Retail Property Acquisitions

On February 3, 2004, the Company acquired the Forest Plaza Shopping Center for approximately $32,500,000, of which $14,000,000 was paid in cash and $18,500,000 was debt assumed.  Forest Plaza is a 165,000 square foot shopping center located in Staten Island, New York.

On March 19, 2004, the Company acquired a 62,000 square foot free-standing retail building located at 25 W. 14^th Street in Manhattan for $40,000,000 in cash.

On July 29, 2004, the Company acquired a real estate portfolio containing 25 supermarkets for $65,000,000 in cash.  These properties, all of which are all located in Southern California and contain an aggregate of approximately 766,000 square feet, were purchased from the Newkirk MLP, in which the Company currently owns a 22.4% interest.  The supermarkets are net leased to Stater Brothers for an initial term expiring in 2008, with six 5-year extension options.  Stater Brothers is a Southern California regional grocery chain that operates 158 supermarkets and has been in business since 1936.

On August 30, 2004, the Company acquired 99-01 Queens Boulevard, a 68,000 square foot free-standing building in Forest Hills, New York for $26,500,000 in cash.

On November 2, 2004, the Company acquired a 50% joint venture interest in a 92,500 square foot property located at Broome Street and Broadway in New York City.  The Company contributed $4,462,000 of equity and provided a $24,000,000 bridge loan with interest at 10% per annum.  Upon the refinancing of the bridge loan, which is expected to close in the second quarter of 2005, the Company will be repaid $15,106,000 and the balance of $8,894,000 will remain in the venture as additional equity.

On November 12, 2004 and December 1, 2004, the Company acquired two shopping centers aggregating 185,000 square feet, in Lodi, New Jersey and Long Island (Inwood), New York, for a total purchase price of $36,600,000 in cash plus $10,900,000 of assumed debt.

In December 2004, the Company acquired two retail condominiums aggregating 12,000 square feet, located at 386 and 387 West Broadway in New York City for $16,900,000 in cash plus $4,700,000 of assumed debt.

26

The following table sets forth the percentage of the Retail Properties 2004 revenues by type of retailer:

Industry	Percentage
Department Stores	20	%
Family Apparel	14	%
Supermarkets	10	%
Home Improvement	8	%
Restaurants	6	%
Home Entertainment and Electronics	6	%
Women’s Apparel	5	%
Other	31	%
	100	%

The Company’s shopping center lease terms range from five years or less in some instances for smaller tenant spaces to as long as 25 years for major tenants. Leases generally provide for additional rents based on a percentage of tenants’ sales and pass through to tenants of the tenants’ share of all common area charges (including roof and structure in strip shopping centers, unless it is the tenant’s direct responsibility), real estate taxes and insurance costs and certain capital expenditures. Percentage rent accounted for less than 1% of total shopping center revenues in 2004.  None of the tenants in the Retail segment accounted for more than 10% of the Company’s 2004 total revenues.

Below is a listing of tenants which accounted for 2% or more of the Retail properties revenues in 2004:

Tenant	Square Feet	2004 Revenues		Percentage of Retail Revenues		Percentage of Company Revenues
Wal-Mart/Sam’s Wholesale	1,561,000	$	13,561,000	5.5	%	.8	%
Stop & Shop Companies, Inc, (Stop & Shop).	311,000	10,177,000		4.1	%	.6	%
The Home Depot, Inc	630,000	9,986,000		4.0	%	.6	%
Kohl’s	698,000	7,347,000		3.0	%	.4	%
Hennes & Mauritz	60,000	7,317,000		2.9	%	.4	%
Federated Department Stores	705,000	6,155,000		2.5	%	.4	%
Shop Rite	364,000	5,406,000		2.2	%	.3	%
The TJX Companies, Inc.	389,000	5,057,000		2.0	%	.3	%

See Item 3. Legal Proceedings for details of Stop & Shop litigation.

27

The aggregate occupancy rate for the 14,210,000 square feet of retail properties at December 31, 2004 is 93.9%.  The following sets forth the occupancy rate and the average annual base rent per square foot for the Strip Shopping Centers and Regional Malls at the end of each of the past five years.

Strip Shopping Centers:

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Base Rent Per Square Foot
2004	9,931,000	94.5	%	$	12.00
2003	8,798,000	92.3	%	11.91
2002	9,295,000	85.7	%	11.11
2001	9,008,000	89.0	%	10.60
2000	9,000,000	91.1	%	10.72

Regional Malls:

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Base Rent Per Square Foot
				Mall Tenants		Total
2004	3,766,000	93.1	%	$	33.05	$	17.32
2003	3,766,000	94.1	%	31.08		16.41
2002	2,875,000	95.4	%	27.79		17.15
2001	2,293,000	98.7	%	34.04		15.31
2000	2,293,000	95.5	%	32.05		14.84

Manhattan Retail and Other:

Manhattan retail is comprised of 13 properties containing 513,000 square feet.

The following table sets forth the lease expirations for the Retail Properties as of December 31, 2004 for each of the next 10 years assuming that none of the tenants exercise their renewal options.

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of Retail Square Feet		Annual Rent of Expiring Leases
					Total		Per Square Foot
2005	152	869,000	6.1	%	$	14,327,000	$	16.49
2006	89	799,000	5.6	%	7,593,000		9.50
2007	127	556,000	3.9	%	11,009,000		19.81
2008	136	1,495,000	10.5	%	16,293,000		10.90
2009	102	729,000	5.1	%	11,505,000		15.78
2010	57	590,000	4.1	%	9,048,000		15.34
2011	48	787,000	5.5	%	11,069,000		14.06
2012	43	416,000	2.9	%	6,346,000		15.25
2013	62	857,000	6.0	%	13,065,000		15.24
2014	62	906,000	6.4	%	13,029,000		14.38

28

During 2004, the Company leased 1,021,000 square feet of Retail space as follows:

	2004 Leasing Activity
Location	Square Feet	Average Initial Rent Per Square Foot (1)
Green Acres Mall, Valley Stream, NY	276,000	$	18.46
Albany (Menands), NY	104,000	9.00
Woodbridge, NJ	60,000	13.84
Freeport, NY	55,000	17.50
East Hanover I, NJ	48,000	19.93
Dover, NJ	46,000	10.79
York, PA	46,000	6.07
Totowa, NJ	45,000	13.65
Towson, MD	42,000	6.26
Bethlehem, PA	35,000	5.31
Monmouth Mall, Eatontown, NJ (50%)	33,000	21.10
Middletown, NJ	32,000	14.29
Montehiedra, Puerto Rico	25,000	32.83
Jersey City, NJ	21,000	17.43
Lawnside, NJ	20,000	12.50
Las Catalinas, Puerto Rico	17,000	47.34
Cherry Hill, NJ	16,000	15.67
Lancaster, PA	15,000	4.50
Waterbury, CT	14,000	14.95
Bricktown, NJ	11,000	20.78
Union, NJ	11,000	32.50
Hackensack, NJ	9,000	33.33
Bensalem, PA	6,000	16.50
Chicopee, MA	6,000	14.17
North Plainfield, NJ	5,000	22.38
Bergen Mall, Paramus, NJ	4,000	32.51
East Hanover II, NJ	3,000	18.00
Turnersville, NJ	3,000	7.63
Watchung, NJ	3,000	15.50
25 W. 14th Street, Manhattan, NY	2,000	95.00
Kearny, NJ	2,000	28.00
Manalapan, NJ	2,000	57.50
Staten Island, NY	2,000	35.34
Morris Plains, NJ	1,000	90.00
4 Union Square South, Manhattan, NY	1,000	136.78
	1,021,000	16.33

(1)Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

29

The following table sets forth the Retail Properties owned by the Company as of December 31, 2004:

	Approximate Leasable Building Square Footage
Location	Owned/ Leased by Company	Owned by Tenant on Land Leased from Company	Percent Leased		Encumbrances (in thousands)
REGIONAL MALLS:
Green Acres Mall, Valley Stream, NY (1)	1,517,000	79,000	95.8	%	$	152,819
Monmouth Mall, Eatontown, NJ (50% ownership)	718,000	—	96.1	%	135,000
Montehiedra, Puerto Rico	554,000	—	89.1	%	58,019
Las Catalinas, Puerto Rico	354,000	—	97.1	%	65,696
Bergen Mall, Paramus, NJ	893,000	10,000	87.7	%	—
Total Regional Malls	4,036,000	89,000	93.4	%	$	411,534
Vornado’s ownership interest	3,677,000	89,000	93.1	%	$	344,034
STRIP SHOPPING CENTERS:
NEW JERSEY
Bordentown	179,000	—	95.0	%	$	7,893	(2)
Bricktown	260,000	3,000	98.6	%	15,951		(2)
Cherry Hill	58,000	206,000	90.5	%	14,670		(2)
Delran	169,000	3,000	95.5	%	6,288		(2)
Dover	173,000	—	78.2	%	7,190		(2)
East Brunswick	221,000	10,000	100.0	%	22,273		(2)
East Hanover I and II	348,000	—	99.0	%	26,703		(2)
Hackensack	209,000	60,000	100.0	%	24,470		(2)
Jersey City	47,000	173,000	100.0	%	18,733		(2)
Kearny	40,000	66,000	92.4	%	3,657		(2)
Lawnside	142,000	3,000	92.5	%	10,366		(2)
Lodi	171,000	—	100.0	%	9,186		(2)
Lodi II	85,000	—	100.0	%	12,228
Manalapan	196,000	2,000	100.0	%	12,260		(2)
Marlton	174,000	7,000	95.0	%	11,921		(2)
Middletown	180,000	52,000	95.4	%	16,092		(2)
Montclair	18,000	—	100.0	%	1,881		(2)
Morris Plains	176,000	1,000	100.0	%	11,780		(2)
North Bergen	7,000	55,000	100.0	%	3,878		(2)
North Plainfield (1)	219,000	—	89.5	%	10,649		(2)
Totowa	178,000	139,000	100.0	%	28,898		(2)
Turnersville	89,000	7,000	100.0	%	3,998		(2)
Union	120,000	159,000	98.4	%	32,818		(2)
Watchung	50,000	116,000	98.3	%	13,241		(2)
Woodbridge	88,000	140,000	96.1	%	21,631		(2)
Total New Jersey	3,597,000	1,202,000	96.6	%	348,655
NEW YORK
Albany (Menands)	140,000	—	74.0	%	6,083		(2)
Buffalo (Amherst) (1)	185,000	112,000	81.1	%	6,855		(2)
Freeport	167,000	—	100.0	%	14,480		(2)
New Hyde Park (1)	101,000	—	100.0	%	7,309		(2)
Inwood	100,000	—	100.0	%	—
North Syracuse (1)	—	98,000	100.0	%	—
Rochester (Henrietta) (1)	148,000	—	57.9	%	—
Rochester	—	205,000	100.0	%	—
Staten Island	165,000	—	94.3	%	20,923
Total New York	1,006,000	415,000	88.4	%	55,650

30

	Approximate Leasable Building Square Footage
Location	Owned/ Leased by Company	Owned by Tenant on Land Leased from Company	Percent Leased		Encumbrances (in thousands)
PENNSYLVANIA
Allentown	269,000	354,000	96.9	%	22,741		(2)
Bensalem	122,000	8,000	96.1	%	6,284		(2)
Bethlehem	159,000	—	98.2	%	3,977		(2)
Broomall	147,000	22,000	86.5	%	9,563		(2)
Glenolden	10,000	92,000	100.0	%	7,172		(2)
Lancaster	58,000	170,000	100.0	%	—
Levittown	105,000	—	100.0	%	3,213		(2)
10th and Market Streets, Philadelphia	271,000	—	76.2	%	8,760		(2)
Upper Moreland	122,000	—	100.0	%	6,799		(2)
York	111,000	—	66.1	%	4,021		(2)
Total Pennsylvania	1,374,000	646,000	92.5	%	72,530
MARYLAND
Baltimore (Towson)	152,000	—	64.4	%	11,144		(2)
Glen Burnie	65,000	56,000	100.0	%	5,735		(2)
Total Maryland	217,000	56,000	80.2	%	16,879
CONNECTICUT
Newington	43,000	140,000	100.0	%	6,405		(2)
Waterbury	146,000	—	92.2	%	6,038		(2)
Total Connecticut	189,000	140,000	96.5	%	12,443
MASSACHUSETTS
Chicopee	—	118,000	100.0	%	—
Milford (1)	83,000	—	100.0	%	—
Springfield	8,000	117,000	100.0	%	3,057		(2)
Total Massachusetts	91,000	235,000	100.0	%	3,057
SUPERMARKETS:
CALIFORNIA
Anaheim	26,000	—	100.0	%	—
Barstow	30,000	—	100.0	%	—
Beaumont	29,000	—	100.0	%	—
Calimesa	29,000	—	100.0	%	—
Colton	73,000	—	100.0	%	—
Colton	26,000	—	100.0	%	—
Corona (1)	33,000	—	100.0	%	—
Costa Mesa	18,000	—	100.0	%	—
Costa Mesa	17,000	—	100.0	%	—
Desert Hot Springs	29,000	—	100.0	%	—
Fontana	26,000	—	100.0	%	—
Garden Grove	26,000	—	100.0	%	—
Mojave (1)	34,000	—	100.0	%	—
Moreno Valley	30,000	—	100.0	%	—
Ontario	24,000	—	100.0	%	—
Orange	26,000	—	100.0	%	—
Rancho Cucamonga	24,000	—	100.0	%	—
Rialto	29,000	—	100.0	%	—
Riverside	42,000	—	100.0	%	—
Riverside	39,000	—	100.0	%	—
San Bernadino	40,000	—	100.0	%	—
San Bernadino	30,000	—	100.0	%	—
Santa Ana	26,000	—	100.0	%	—
Westminister	26,000	—	100.0	%	—
Yucaipa	31,000	—	100.0	%	—
Total California	763,000	—	100.0	%	—
Total	7,237,000	2,694,000	94.5	%	$	509,214

31

	Approximate Leasable Building Square Footage
Location	Owned/ Leased by Company	Owned by Tenant on Land Leased from Company	Percent Leased		Encumbrances (in thousands)
OTHER RETAIL:
NEW YORK (Manhattan)
1135 Third Avenue	25,000	—	100.0	%	—
4 Union Square South	198,000	—	97.5	%	—
25 W. 14th Street	62,000	—	89.5	%	—
386 W. Broadway	3,000	—	100.0	%	5,084
387 W. Broadway	9,000	—	59.1	%	—
424 Sixth Avenue	10,000	—	100.0	%	—
435 Seventh Avenue	43,000	—	100.0	%	—
478-486 Broadway (50%)	93,000	—	83.0	%	—
484 Eighth Avenue	14,000	—	100.0	%	—
715 Lexington Avenue (1) (in development)	32,000	—	—		—
825 Seventh Avenue	3,000	—	100.0	%	—
968 Third Avenue (50%) (in development)	—	—	—		—
NEW YORK (Queens)
99-01 Queens Boulevard	68,000	—	55.0	%	—
Total Other Retail	560,000	—	88.1	%	$	5,084
Total Retail Space	11,833,000	2,783,000	94.0	%	$	925,832
Vornado’s Ownership Interest	11,427,000	2,783,000	93.9	%	$	858,332
ASSETS HELD FOR SALE:
Vineland, New Jersey	143,000	—	0	%	$	—

(1)100% ground and/or building leasehold interest; other than Green Acres, where approximately 10% of the ground is leased.

(2)These encumbrances are cross collateralized under a blanket mortgage in the amount of $476,063,000 at December 31, 2004.

32

Merchandise Mart Segment

The Merchandise Mart Properties are a portfolio of 8 properties containing an aggregate of 8.6 million square feet.

Below is a breakdown of square feet by location and use as of December 31, 2004.

					Showroom
(Amounts in thousands)	Total		Office		Total		Permanent	Temporary Trade Show	Retail
Chicago, Illinois
Merchandise Mart	3,446		1,029		2,336		1,950	386	81
350 West Mart Center	1,210		1,066		144		144	—	—
33 N. Dearborn	334		320		—		—	—	14
Other	19		—		—		—	—	19
Total Chicago, Illinois	5,009		2,415		2,480		2,094	386	114
HighPoint, North Carolina
Market Square Complex	1,749		—		1,734		1,174	560	15
National Furniture Mart	259		—		259		259	—	—
Total HighPoint, North Carolina	2,008		—		1,993		1,433	560	15
L.A. Mart	783		—		783		729	54	—
Washington, D.C.
Washington Design Center	393		60		333		333	—	—
Washington Office Center	397		362		—		—	—	35
Total Washington, D.C.	790		422		333		333	—	35
Total Merchandise Mart Properties	8,590		2,837		5,589		4,589	1,000	164
Occupancy rate	96.9	%	96.0	%	97.6	%			89.4	%

The Merchandise Mart Properties also contain seven parking garages totaling 1,150,000 square feet (3,500 spaces).  The garage space is excluded from the statistics provided in this section.

Office Space

The following table sets forth the percentage of the Merchandise Mart Properties 2004 office revenues by tenants’ industry during 2004:

Industry	Percentage
Service	31	%
Government	23	%
Banking	15	%
Telecommunications	12	%
Insurance	6	%
Pharmaceutical	4	%
Publications	4	%
Other	5	%
	100	%

33

The Company’s Merchandise Mart properties lease terms generally range from three to seven years for smaller tenants to as long as 15 years for large tenants. Leases typically provide for step-ups in rent periodically over the term of the lease and pass through to tenants the tenants’ share of increases in real estate taxes and operating expenses for a building over a base year. Electricity is provided to tenants on a sub-metered basis or included in rent and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction of its premises.

Below is a listing of the Merchandise Mart Properties office tenants which accounted for 2% or more of the Merchandise Mart Properties’ revenues in 2004:

Tenant	Square Feet Leased	2004 Revenues		Percentage of Segment Revenues		Percentage of Company Revenues
U.S. Government	344,000	$	12,401,000	5.2	%	.7	%
SBC Ameritech	234,000	6,829,000		2.9	%	.4	%
Bank of America	205,000	5,461,000		2.3	%	.3	%
WPP Group	228,000	5,252,000		2.2	%	.3	%

The following table sets forth the occupancy rate and the average annual escalated rent per square foot for the Merchandise Mart Properties’ office space at the end of each of the past five years.

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Escalated Rent Per Square Foot
2004	2,837,000	96.0	%	$	24.87
2003	2,825,000	92.6	%	25.23
2002	2,838,000	91.7	%	24.00
2001	2,841,000	89.2	%	23.84
2000	2,869,000	90.2	%	23.52

During 2004, the Company leased 568,740 square feet of Merchandise Mart Properties office space as follows:

	2004 Leasing Activity
	Square Feet	Average Initial Rent Per Square Foot (1)
350 West Mart Center	359,339	$	21.38
Merchandise Mart	120,898	23.08
33 North Dearborn Street	62,561	25.42
Washington Design Center	15,210	36.00
Washington Office Center	10,732	35.83
Total	568,740	22.85

(1)Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

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The following table sets forth lease expirations for the Merchandise Mart Properties office space as of December 31, 2004 for each of the next 10 years assuming that none of the tenants exercise their renewal options.

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of Merchandise Mart Office Square Feet		Annual Escalated Rent of Expiring Leases
					Total		Per Square Foot
2005	29	159,000	5.6	%	$	3,633,000	$	22.82
2006	18	166,000	5.8	%	4,077,000		24.59
2007	17	228,000	8.0	%	5,433,000		23.79
2008	20	276,000	9.7	%	6,394,000		23.15
2009	13	295,000	10.3	%	7,233,000		24.53
2010	4	364,000	12.8	%	12,205,000		33.50
2011	2	193,000	6.7	%	5,902,000		30.51
2012	2	45,000	1.5	%	1,167,000		25.70
2013	11	135,000	4.9	%	3,665,000		27.18
2014	4	85,000	2.9	%	2,371,000		27.84

Showroom Space

The showrooms provide manufacturers and wholesalers with permanent and temporary space in which to display products for buyers, specifiers and end users.  The showrooms are also used for hosting trade shows for the contract furniture, casual furniture, gifts, carpet, residential furnishings, building products, crafts, apparel and design industries.  Merchandise Mart Properties own and operate five of the leading furniture and gifts trade shows including the contract furniture industry’s largest annual trade show, NeoCon, which attracts over 45,000 attendees each June and is hosted at the Merchandise Mart building in Chicago. The Market Square Complex co-hosts the home furniture industry’s semi-annual (April and October) market weeks which occupy over 11,500,000 square feet in the High Point, North Carolina region.

The following table sets forth the percentage of the Merchandise Mart Properties 2004 showroom revenues by tenants’ industry:

Industry	Percentage
Residential Design	25	%
Gift	21	%
Residential Furnishings	17	%
Contract Furnishings	14	%
Market Suites	14	%
Casual Furniture	4	%
Building Products	3	%
Apparel	2	%
	100	%

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The following table sets forth the occupancy rate and the average escalated rent per square foot for this space at the end of each of the past five years.

As of December 31,	Rentable Square Feet	Occupancy Rate		Average Annual Escalated Rent Per Square Foot
2004	5,589,000	97.6	%	$	23.08
2003	5,640,000	95.1	%	22.35
2002	5,528,000	95.2	%	21.46
2001	5,532,000	95.5	%	22.26
2000	5,044,000	97.6	%	22.85

During 2004, the Company leased 1,037,536 square feet of Merchandise Mart Properties showroom space as follows:

	2004 Leasing Activity
	Square Feet	Average Initial Rent Per Square Foot(1)
Market Square Complex	438,740	$	16.31
Merchandise Mart	374,604	30.57
L.A. Mart	130,798	17.92
350 West Mart Center	50,939	23.39
Washington Design Center	42,455	31.99
Total	1,037,536	22.65

(1)Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased.

The following table sets forth lease expirations for the Merchandise Mart Properties showroom space as of December 31, 2004 for each of the next 10 years assuming that none of the tenants exercise their renewal options.

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of Merchandise Mart Showroom Square Feet		Annual Escalated Rent of Expiring Leases
					Total		Per Square Foot
2005	239	576,000	10.6	%	$	13,269,000	$	23.06
2006	254	585,000	10.7	%	15,212,000		26.02
2007	237	1,004,000	18.4	%	21,576,000		21.49
2008	149	547,000	10.0	%	13,472,000		24.63
2009	137	556,000	10.2	%	13,233,000		23.78
2010	54	337,000	6.2	%	8,867,000		26.27
2011	31	167,000	3.1	%	4,714,000		28.25
2012	8	50,000	0.9	%	1,557,000		31.32
2013	43	267,000	4.9	%	7,854,000		29.42
2014	18	158,000	2.9	%	3,230,000		20.44

Retail Space

The Merchandise Mart Properties portfolio also contains approximately 180,000 square feet of retail space which was 89.4% occupied at December 31, 2004.

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The following table sets forth the Merchandise Mart Properties owned by the Company as of December 31, 2004:

Location	Approximate Leasable Building Square Feet	Percent Leased		Encumbrances (in thousands)
ILLINOIS
Merchandise Mart, Chicago	3,446,000	97.1	%	$	—
350 West Mart Center, Chicago	1,210,000	96.0	%	—
33 North Dearborn Street, Chicago	334,000	92.0	%	—
Other (50% interest)	19,000	95.6	%	12,480
Total Illinois	5,009,000	96.5	%	12,480
WASHINGTON, D.C.
Washington Office Center	397,000	99.2	%	—
Washington Design Center	393,000	99.6	%	48,000
Total Washington, D.C.	790,000	99.2	%	48,000
HIGH POINT, NORTH CAROLINA
Market Square Complex	2,008,000	98.9	%	108,000
CALIFORNIA
L.A. Mart	783,000	92.2	%	—
Total Merchandise Mart Properties	8,590,000	96.9	%	$	168,480

37

Temperature Controlled Logistics Segment

Prior to November 18, 2004, the Company owned a 60% interest in Vornado Crescent Portland Partnership (“VCPP”) which owned Americold Realty Trust (“Americold”).  Americold owns 88 temperature controlled warehouses, all of which were leased to AmeriCold Logistics.  On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  On November 18, 2004, the Company and its 40% partner, Crescent Real Estate Equities Company (“CEI”) collectively sold 20.7% of Americold’s common shares to The Yucaipa Companies (“Yucaipa”) for $145,000,000, which resulted in a gain, of which the Company’s share was $18,789,000. The sale price was based on a $1.450 billion valuation for Americold before debt and other obligations.  Yucaipa is a private equity firm with significant expertise in the food distribution, logistics and retail industries.  Upon closing of the sale to Yucaipa on November 18, 2004, Americold is owned 47.6% by the Company, 31.7% by CEI and 20.7% by Yucaipa. Pursuant to the sales agreement: (i) Yucaipa may earn a promote of 20% of the increase in the value of Americold through December 31, 2007, limited to 10% of the Company’s and CEI’s remaining interest in Americold; (ii) the annual asset management fee payable by CEI to the Company has been reduced from approximately $5,500,000 to $4,548,000, payable quarterly through October 30, 2027.  CEI, at its option, may terminate the payment of this fee at any time after November 2009, by paying the Company a termination fee equal to the present value of the remaining payments through October 30, 2027, discounted at 10%.  In addition, CEI is obligated to pay a pro rata portion of the termination fee to the extent it sells a portion of its equity interest in Americold; and (iii) VCPP was dissolved.  The Company has the right to appoint three of the five members to Americold’s Board of Trustees.  Consequently, the Company is deemed to exercise control over Americold and, on November 18, 2004, the Company began to consolidate the operations and financial position of Americold into its accounts and no longer accounts for its investment on the equity method.

AmeriCold Logistics, headquartered in Atlanta, Georgia, provides the food industry with refrigerated warehousing and transportation management services. Refrigerated warehouses are comprised of production, distribution and public facilities.  In addition, AmeriCold Logistics manages facilities owned by its customers for which it earns fixed and incentive fees.  Production facilities typically serve one or a small number of customers, generally food processors that are located nearby. Customers store large quantities of processed or partially processed products in these facilities until they are shipped to the next stage of production or distribution. Distribution facilities primarily warehouse a wide variety of customers’ finished products until future shipment to end-users. Each distribution facility generally services the surrounding regional market. Public facilities generally serve the needs of local and regional customers under short-term agreements. Food manufacturers and processors use these facilities to store capacity overflow from their production facilities or warehouses. AmeriCold Logistics’ transportation management services include freight routing, dispatching, freight rate negotiation, backhaul coordination, freight bill auditing, network flow management, order consolidation and distribution channel assessment. AmeriCold Logistics’ temperature controlled logistics expertise and access to both frozen food warehouses and distribution channels enable its customers to respond quickly and efficiently to time-sensitive orders from distributors and retailers.

AmeriCold Logistics’ customers consist primarily of national, regional and local frozen food manufacturers, distributors, retailers and food service organizations.  Below is a listing of customers which accounted for 2% or more of AmeriCold Logistics’ revenue in 2004:

(Amounts in thousands)	2004 Revenues		Percentage of Temperature Controlled Logistics Revenues
H.J. Heinz & Co.	$	111,872	16.0	%
Con-Agra Foods, Inc.	79,192		11.3	%
Altria Group Inc. (Kraft Foods)	46,825		6.7	%
Sara Lee Corp.	34,913		5.0	%
Tyson Foods, Inc.	27,757		4.0	%
General Mills	27,057		3.9	%
Schwan Corporation	23,690		3.4	%
McCain Foods, Inc.	22,187		3.2	%

On November 18, 2004, Tony Schnug became Chief Executive Officer of Americold.  Mr. Schnug is a partner of The Yucaipa Companies responsible for conducting due diligence of potential acquisitions and oversees management of portfolio companies on strategy and operational issues.   Previously, Mr. Schnug was an executive officer of Yucaipa portfolio companies including Fred Meyer, Ralphs and Food 4 Less with responsibilities covering logistics, manufacturing and construction.

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The following table sets forth certain information for the Temperature Controlled Logistics properties as of December 31, 2004:

Property	Cubic Feet (in millions)	Square Feet (in thousands)
ALABAMA
Birmingham	2.0	85.6
Montgomery	2.5	142.0
Gadsden (1)	4.0	119.0
Albertville	2.2	64.5
	10.7	411.1
ARIZONA
Phoenix	2.9	111.5
ARKANSAS
Fort Smith	1.4	78.2
West Memphis	5.3	166.4
Texarkana	4.7	137.3
Russellville	5.6	164.7
Russellville	9.5	279.4
Springdale	6.6	194.1
	33.1	1,020.1
CALIFORNIA
Ontario (1)	8.1	279.6
Fullerton (1)	2.8	107.7
Pajaro (1)	1.4	53.8
Turlock	2.5	108.4
Watsonville (1)	5.4	186.0
Turlock	3.0	138.9
Ontario	1.9	55.9
	25.1	930.3
COLORADO
Denver	2.8	116.3
FLORIDA
Tampa	0.4	22.2
Plant City	0.8	30.8
Bartow	1.4	56.8
Tampa	2.9	106.0
Tampa (1)	1.0	38.5
	6.5	254.3
GEORGIA
Atlanta	11.1	476.7
Atlanta	2.9	157.1
Augusta	1.1	48.3
Atlanta	11.4	334.7
Atlanta	5.0	125.7
Montezuma	4.2	175.8
Atlanta	6.9	201.6
Thomasville	6.9	202.9
	49.5	1,722.8
IDAHO
Burley	10.7	407.2
Nampa	8.0	364.0
	18.7	771.2
ILLINOIS
Rochelle	6.0	179.7
East Dubuque	5.6	215.4
	11.6	395.1
INDIANA
Indianapolis	9.1	311.7
IOWA
Fort Dodge	3.7	155.8
Bettendorf	8.8	336.0
	12.5	491.8
KANSAS
Wichita	2.8	126.3
Garden City	2.2	84.6
	5.0	210.9
KENTUCKY
Sebree	2.7	79.4
MAINE
Portland	1.8	151.6
MASSACHUSETTS
Gloucester	1.9	95.5
Gloucester	0.3	13.6
Gloucester	2.8	95.2
Gloucester	2.4	126.4
Boston	3.1	218.0
	10.5	548.7
MINNESOTA
Park Rapids  (50% interest)	3.0	86.8
MISSOURI
Marshall	4.8	160.8
Carthage	42.0	2,564.7
	46.8	2,725.5
MISSISSIPPI
West Point	4.7	180.8
NEBRASKA
Fremont	2.2	84.6
Grand Island	2.2	105.0
	4.4	189.6
NEW YORK
Syracuse	11.8	447.2

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Property	Cubic Feet (in millions)	Square Feet (in thousands)
NORTH CAROLINA
Charlotte	1.0	58.9
Charlotte	4.1	164.8
Tarboro	4.9	147.4
	10.0	371.1
OHIO
Massillon	5.5	163.2
OKLAHOMA
Oklahoma City	0.7	64.1
Oklahoma City	1.4	74.1
	2.1	138.2
OREGON
Hermiston	4.0	283.2
Milwaukee	4.7	196.6
Salem	12.5	498.4
Woodburn	6.3	277.4
Brooks	4.8	184.6
Ontario	8.1	238.2
	40.4	1,678.4
PENNSYLVANIA
Leesport	5.8	168.9
Fogelsville	21.6	683.9
	27.4	852.8
SOUTH CAROLINA
Columbia	1.6	83.7
SOUTH DAKOTA
Sioux Falls	2.9	111.5
TENNESSEE
Memphis	5.6	246.2
Memphis	0.5	36.8
Murfreesboro	4.5	106.4
	10.6	389.4
TEXAS
Amarillo	3.2	123.1
Fort Worth	3.4	102.0
	6.6	225.1
UTAH
Clearfield	8.6	358.4
VIRGINIA
Norfolk	1.9	83.0
Strasburg	6.8	200.0
	8.7	283.0
WASHINGTON
Burlington	4.7	194.0
Moses Lake	7.3	302.4
Walla Walla	3.1	140.0
Connell	5.7	235.2
Wallula	1.2	40.0
Pasco	6.7	209.0
	28.7	1,120.6
WISCONSIN
Tomah	4.6	161.0
Babcock	3.4	111.1
Plover	9.4	358.4
	17.4	630.5
Total Temperature Controlled Logistics Properties	443.7	17,562.6

(1)Leasehold interest.

On February 5, 2004, Americold completed a $254,400,000 mortgage financing for 21 of its owned and seven of its leased temperature-controlled warehouses.  The loan bears interest at LIBOR plus 2.95% (with a LIBOR floor of 1.5% with respect to $54,400,000 of the loan) and requires principal payments of $5,000,000 annually.  The loan matures in April 2009 and is pre-payable without penalty after February 5, 2006.  The net proceeds were approximately $225,000,000 after providing for usual escrows, closing costs and the repayment of $12,900,000 of existing mortgages on two of the warehouses, of which $135,000,000 was distributed to the Company and the remainder was distributed to its partner, CEI.  As at December 31, 2004, all except two of Americold’s properties are encumbered under cross-collateralized mortgage loans aggregating $733,740,000.

40

Alexander’s

The Company owns 33% of Alexander’s outstanding common shares.  The following table shows the location, approximate size and leasing status of each of the properties owned by Alexander’s as of December 31, 2004.

Location	Land Area in Square Feet or Acreage	Building Area/ Number of Floors		Percent Leased		Significant Tenants	Encumbrances
Operating Properties
New York:
731 Lexington Avenue-Manhattan	84,420 SF					Bloomberg The Home Depot The Container Store
Office and Retail		1,052,000/31		84.9	%	Hennes & Mauritz	$	465,168
Residential condominiums		248,000/24
		1,300,000/55
Kings Plaza Regional Shopping Center-Brooklyn	24.3 acres	759,000/2	and 4(1)(2)	98.1	%	Sears 123 Mall Tenants	213,699
Rego Park I-Queens	4.8 acres	351,000/3	(1)	100.0	%	Sears Circuit City Bed, Bath & Beyond Marshalls	81,661
Flushing-Queens (3)	44.975 SF	177,000/4	(1)	0	%		—
New Jersey:
Paramus-New Jersey	30.3 acres	—		100.0	%	IKEA Property, Inc.	68,000
		2,587,000
Development Property
Rego Park II-Queens	10.0 acres						—

(1)Excludes parking garages.

(2)Excludes 339,000 square foot Macy’s store, owned and operated by Federated Department Stores, Inc.

(3)Leased by Alexander’s through January 2027.

731 Lexington Avenue

731 Lexington Avenue is a 1.3 million square foot multi-use building.  The building contains approximately 885,000 net rentable square feet of office space, approximately 174,000 net rentable square feet of retail space and approximately 248,000 net saleable square feet of residential space consisting of 105 condominium units (through a taxable REIT subsidiary (“TRS”)).  Of the construction budget of $630,000,000 (which excludes $29,000,000 for development and guarantee fees to the Company), $489,400,000 has been expended through December 31, 2004 and an additional $23,500,000 has been committed at December 31, 2004.  Construction is expected to be completed by the end of 2005.

As of December 31, 2004, Alexander’s has leased 697,000 square feet of office space to Bloomberg L.P. and 144,000 square feet of retail space to, among others, The Home Depot (excluding 14,800 square feet of the mezzanine also leased to The Home Depot), Hennes & Mauritz and The Container Store.  On January 25, 2005, Alexander’s leased an additional 176,000 square feet of office space to Citibank N.A.  As a result, 100% of the property’s 885,000 square feet of office space has been leased.

The offering plan for the residential space, as amended for price increases through December 31, 2004, would produce an aggregate sale price of $500,000,000 (reflecting the value of existing contracts and the offering price for the remaining units).  As of December 31, 2004, Alexander’s has received deposits of $64,060,000 on sales of the condominium units.  On January 24, 2005 the offering plan was declared effective by the State of New York at which time 83 units were under sales contract.  Alexander’s expects to close on these sales during 2005 and recognize approximately $38,000,000 of income after taxes of which $32,000,000 will be recognized in the first quarter using the percentage-of-completion method.  The Company’s share of the income to be recognized in the first quarter is $10,560,000.

41

On February 13, 2004, Alexander’s completed a $400,000,000 mortgage financing on the office space of its Lexington Avenue development project.  The loan bears interest at 5.33%, matures in February 2014 and beginning in the third year, provides for principal payments based on a 25-year amortization schedule such that over the remaining eight years of the loan, ten years of amortization will be paid.  Of the loan proceeds, $253,529,000 was used to repay the entire amount outstanding under the construction loan.  The construction loan was modified so that the remaining availability is $237,000,000, which was approximately the amount estimated to complete the Lexington Avenue development project.  The interest rate on the construction loan is LIBOR plus 2.5% (4.92% at December 31, 2004) and matures in January 2006, with two one-year extensions.  The collateral for the construction loan is the same, except that the office space has been removed from the lien.  Further, the construction loan permits the release of the retail space for a payment of $15,000,000 and requires all proceeds from the sale of the residential condominium units to be applied to the construction loan balance until it is finally repaid.

The Company guaranteed to the 731 Lexington Avenue construction lender, the lien free, timely completion of the construction of the project and funding of project costs in excess of a stated budget, if not funded by Alexander’s (the “Completion Guarantee”).  The $6,300,000 estimated fee payable by Alexander’s to the Company for the Completion Guarantee is 1% of construction costs (as defined).  Based upon the current status of construction, management does not anticipate a requirement to fund pursuant to this completion guarantee.

The Newkirk Master Limited Partnership

In 1998, the Company and affiliates of Apollo Real Estate Investment Fund III, L.P. (“Apollo”) formed a joint venture (30% owned by the Company and 70% owned by Apollo) (“Newkirk JV”) to acquire general and limited partnership interests in a portfolio of 104 partnerships, which own triple net leased properties.  Since its formation, Newkirk JV has acquired equity interests in the above partnerships, which own approximately 19.6 million square feet of real estate and acquired certain first and second mortgages (“Contract Rights”) secured by a portion of these properties.  On January 1, 2002, Newkirk JV completed a merger of 91 of the partnerships as well as the other assets it owned relating to the other 13 partnerships into The Newkirk Master Limited Partnership (“MLP”).  The partnerships were merged into MLP to create a vehicle to enable the partners to have greater access to capital and future investment opportunities.  In connection with the merger, the Company received limited partner interests in the MLP equal to an approximate 21.1% interest and Apollo received limited partner interests in the MLP equal to an approximate 54.5% interest. At December 31, 2004, the Company has a 22.4% interest in the MLP.  Newkirk JV is the general partner of the MLP.

The Company’s share of the MLP and the joint venture debt was approximately $213,688,000 at December 31, 2004.

The following table sets forth a summary of the real estate owned throughout the United States by the MLP:

	Number of Properties	Square Feet
Office	36	7,352,000
Retail	151	5,427,000
Other	21	5,257,000
	208	18,036,000

As of December 31, 2004, the occupancy rate of the MLP’s properties is 98.6%.

42

The primary lease terms range from 20 to 25 years from their original commencement dates with rents, typically above market, which fully amortize the first mortgage debt on the properties.  In addition, tenants generally have multiple renewal options, with rents, on average, below market.

Below is a listing of tenants which accounted for 2% or more of the MLP’s revenues in 2004:

Tenant	Square Feet Leased	2004 Revenues		Percentage
Raytheon	2,287,000	$	40,421,000	15.8	%
Albertson’s Inc.	2,810,000	26,683,000		10.4	%
The Saint Paul Co.	530,000	25,532,000		9.9	%
Honeywell	728,000	19,799,000		7.7	%
Federal Express	592,000	14,812,000		5.8	%
Owens-Illinois	707,000	13,363,000		5.2	%
Entergy Gulf States	489,000	12,212,000		4.8	%
Safeway Inc.	736,000	8,543,000		3.3	%
Hibernia Bank	403,000	8,196,000		3.2	%
Nevada Power Company	282,000	7,189,000		2.8	%
The Kroger Company	474,000	6,920,000		2.7	%
Xerox	379,000	5,940,000		2.3	%
Cheeseborough/Ragu	484,000	5,541,000		2.2	%
Stater Bros Markets	668,000	5,352,000		2.1	%

The following table sets forth lease expirations for each of the next 10 years, as of December 31, 2004, assuming that none of the tenants exercise their renewal options.

Year	Number of Expiring Leases	Square Feet of Expiring Leases	Percentage of MLP Square Feet		Annual Escalated Rent of Expiring Leases
					Total		Per Square Foot
2005	19	792,000	1.5	%	$	4,642,000	$	5.86
2006	28	2,298,000	10.1	%	26,726,000		11.63
2007	32	3,005,000	14.5	%	37,460,000		12.46
2008	63	6,791,000	40.7	%	103,773,000		15.28
2009	44	2,685,000	24.3	%	57,261,000		21.33
2010	5	1,006,000	1.9	%	4,542,000		4.52
2011	4	267,000	1.3	%	3,373,000		12.65
2012	9	395,000	1.2	%	3,187,000		8.07
2013	1	40,000	0.3	%	870,000		21.96
2014	1	282,000	2.7	%	7,189,000		25.49

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Hotel Pennsylvania

The Hotel Pennsylvania is located in New York City on Seventh Avenue opposite Madison Square Garden and consists of a hotel portion containing 1,000,000 square feet of hotel space with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space.  The following table presents rental information for the Hotel:

	Year Ended December 31,
	2004			2003			2002			2001			2000
Hotel:
Average occupancy rate	78.9		%	63.7		%	64.7		%	63.0		%	76.0		%
Average daily rate	$	97.36		$	89.12		$	89.44		$	110.00		$	114.00
Revenue per available room	$	77.56		$	58.00		$	58.00		$	70.00		$	87.00
Commercial:
Office space:
Average occupancy rate	39.7		%	39.7		%	47.8		%	51.3		%	63.0		%
Annual rent per square feet	$	10.04		$	9.92		$	13.36		$	16.39		$	17.00
Retail space:
Average occupancy rate	90.7		%	89.8		%	92.6		%	56.2		%	85.0		%
Annual rent per square feet	$	29.67		$	28.11		$	28.06		$	41.00		$	45.00

GMH Communities L.P.

At December 31, 2004, the Company has a 12.25% interest in GMH Communities L.P. (“GMH”), resulting from the Company’s conversion of warrants into 6.7 million limited partnership units of GMH Communities LP on November 3, 2004.  In addition, the Company holds warrants to purchase an additional 5.6 million limited partnership units of GMH or common shares of GMH Communities Trust (“GCT”) at a price of $8.99 per unit or share through May 2, 2006.  See page 6 for further details.  GMH owns 30 student housing properties, aggregating 7.8 million square feet and 19,085 beds, and manages an additional 20 properties that serve colleges and universities throughout the United States.  In addition, GMH manages 51 military housing projects containing 101,216 units under long-term agreements with the United States Government.  GMH has $359,276,000 of debt outstanding at December 31, 2004, of which the Company’s share is $44,011,000.

Dry Warehouse/Industrial Properties

The Company’s dry warehouse/industrial properties consist of seven buildings in New Jersey containing approximately 1.7 million square feet.  The properties are encumbered by two cross-collateralized mortgage loans aggregating $48,385,000 as of December 31, 2004.  Average lease terms range from three to five years.  The following table sets forth the occupancy rate and average annual rent per square foot at the end of each of the past five years.

As of December 31,	Occupancy Rate		Average Annual Rent Per Square Foot
2004	88	%(1)	$	3.96	(1)
2003	88	%(1)	3.86		(1)
2002	95	%	3.81
2001	100	%	3.67
2000	90	%	3.52

(1)Excludes the Company’s East Brunswick industrial warehouse.  In November 2002, the Company entered into an agreement to ground lease the East Brunswick industrial property to Lowe’s.  In connection therewith, the Company is razing the 326,000 square foot warehouse and Lowe’s will construct its own retail store on the site.

400 North LaSalle

The 400 North LaSalle venture was formed in July 2001, to develop a 381,000 square foot, high-rise residential tower with an attached parking garage in Chicago, Illinois, containing 452 apartments.  Under the agreement the Company contributed 92% of the equity and is entitled to receive 85% of the profits.  The development of the residential tower and garage was substantially completed and phased into service as of January 2004 and is 90.0% occupied as of December 31, 2004.  As of December 31, 2004, the Company has classified this asset as held for sale on its consolidated balance sheets and the related revenues and expenses as discontinued operations on the consolidated statements of operations.

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ITEM 3.LEGAL PROCEEDINGS

The Company is from time to time involved in legal actions arising in the ordinary course of its business.  In the opinion of management, after consultation with legal counsel, the outcome of such matters, including in respect of the matter referred to below, is not expected to have a material adverse effect on the Company’s financial position or results of operation.

Stop & Shop

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming the Company has no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated.  Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze the Company’s right to re-allocate which effectively terminated the Company’s right to collect the additional rent from Stop & Shop.  On March 3, 2003, after the Company moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint.  On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint.  On April 9, 2003, the Company moved the New York Supreme Court action to the United States District Court for the Southern District of New York.  Stop & Shop moved to remand and both sides moved for summary judgment.  On June 30, 2003, the District Court ordered that the case be placed in suspense and ordered the parties to proceed with a motion for interpretation that the Company made in the United States Bankruptcy Court for the Southern District of New York.  On July 24, 2003, the Bankruptcy Court referred the motion to mediation.  The mediation concluded in June 2004 without resolving the dispute.  On June 9, 2004, after reconvening the hearing on the Company’s motion for interpretation, the Bankruptcy Court entered an order abstaining from hearing the Company’s motion.  On June 17, 2004, the Company filed a notice of appeal from the Bankruptcy Court’s order to the District Court.  On January 19, 2005, the District Court issued a decision affirming the Bankruptcy Court’s decision and remanded the removed action to the New York Supreme Court.  The Company believes that the additional rent provision of the guaranty expires at the earliest in 2012 and will vigorously oppose Stop & Shop’s complaint.

Vornado Operating Company

In November 2004, a class action shareholder derivative lawsuit was brought in the Delaware Court of Chancery against Vornado Operating Company (“Vornado Operating”), its directors and the Company.  The lawsuit sought to enjoin the dissolution of Vornado Operating, rescind the previously completed sale of AmeriCold Logistics (owned 60% by Vornado Operating) to Americold Realty Trust (owned 60% by the Company) and damages.  In addition, the plaintiffs claimed that the Vornado Operating directors breached their fiduciary duties.  On November 24, 2004, a stipulation of settlement was entered into under which the Company agreed to settle the lawsuit with a payment of approximately $4.5 million or about $1 per Vornado Operating share or partnership unit before litigation expenses. The proposed settlement payment would be in addition to the liquidation distribution of $2 per Vornado Operating share or unit that Vornado Operating made to its equity-holders when it dissolved on December 29, 2004.  On January 20, 2005, the Delaware Court of Chancery postponed deciding upon the proposed settlement and requested further but limited information before holding an additional hearing regarding the settlement, which has been scheduled for March 2005.  The Company has accrued the proposed settlement payment and related legal costs as part of “general and administrative expense” in the fourth quarter of 2004.  The Company believes that the ultimate outcome of this matter will not have a material effect on the Company’s consolidated financial statements.

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ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2004.

EXECUTIVE OFFICERS OF THE REGISTRANT

The Operating Partnership is managed by Vornado, its sole general partner.  The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office that run until the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Vornado’s Shareholders unless they are removed sooner by the Board.

Name	Age	PRINCIPAL OCCUPATION, POSITION AND OFFICE (current and during past five years with Vornado unless otherwise stated)
Steven Roth	63	Chairman of the Board, Chief Executive Officer and Chairman of the Executive Committee of the Board; the Managing General Partner of Interstate Properties, an owner of shopping centers and an investor in securities and partnerships; Chief Executive Officer of Alexander’s, Inc. since March 1995, a Director since 1989, and Chairman since May 2004.
Michael D. Fascitelli	48	President and a Trustee since December 1996; President of Alexander’s Inc. since August 2000 and Director since December 1996; Partner at Goldman, Sachs & Co. in charge of its real estate practice from December 1992 to December 1996; and Vice President at Goldman, Sachs & Co., prior to December 1992.
Melvyn H. Blum	58	Executive Vice President—Development since January 2000; Senior Managing Director at Tishman Speyer Properties in charge of its development activities in the United States from July 1998 to January 2000; and Managing Director of Development and Acquisitions at Tishman Speyer Properties prior to July 1998.
Michelle Felman	42	Executive Vice President—Acquisitions since September 2000; Independent Consultant to Vornado from October 1997 to September 2000; Managing Director-Global Acquisitions and Business Development of GE Capital from 1991 to July 1997.
David R. Greenbaum	53	President of the New York City Office Division since April 1997 (date of the Company’s acquisition); President of Mendik Realty (the predecessor to the New York City Office Properties Division) from 1990 until April 1997.
Christopher Kennedy	41	President of the Merchandise Mart Division since September 2000; Executive Vice President of the Merchandise Mart Division from April 1998 to September 2000; Executive Vice President of Merchandise Mart Properties, Inc. from 1994 to April 1998.
Joseph Macnow	59	Executive Vice President—Finance and Administration since January 1998 and Chief Financial Officer since March 2001; Vice President-Chief Financial Officer of the Company from 1985 to January 1998; Executive Vice President and Chief Financial Officer of Alexander’s, Inc. since August 1995.
Sandeep Mathrani	42	Executive Vice President—Retail Real Estate since March 2002; Executive Vice President, Forest City Ratner from 1994 to February 2002.
Mitchell N. Schear	46	President of Charles E. Smith Commercial Realty since April 2003; President of Kaempfer Company from 1998 to April 2003 (date acquired by the Company).
Wendy Silverstein	44	Executive Vice President—Capital Markets since April 1998; Senior Credit Officer of Citicorp Real Estate and Citibank, N.A. from 1986 to 1998.
Robert H. Smith	76	Chairman of Charles E. Smith Commercial Realty since January 2002 (date acquired by the Company); Co-Chief Executive Officer and Co-Chairman of the Board of Charles E. Smith Commercial Realty L.P. (the predecessor to Charles E. Smith Commercial Realty) prior to January 2002.

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PART II

ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established trading market for the units of the Operating Partnership.  At March 1, 2005, there were 1,556 Class A unitholders of record.

Distributions

During the year ended December 31, 2004, the Company declared four quarterly distributions in the amounts of $0.87, $0.71, $0.71 and $0.76 per unit from the first to the fourth quarter, respectively.  The first quarter distribution was comprised of a regular distribution of $0.71 per unit and a special capital gain cash distribution of $0.16 per unit.

During the year ended December 31, 2003, the Company declared four quarterly distributions in the amounts of $0.68, $0.68, $0.68 and $0.87 per unit from the first to the fourth quarter, respectively.  The fourth quarter distribution was comprised of a regular distribution of $0.71 per unit and a special capital gain cash distribution of $0.16 per unit.

Recent Sales of Unregistered Securities

On May 27, 2004, the Company sold $35,000,000 of 7.2% Series D-11 Cumulative Redeemable Preferred Units to an institutional investor in a private placement. These units were issued without registration under the Securities Act of 1933 in reliance on Section 4(2) of that Act.

On December 17, 2004, the Company sold $20,000,000 of 6.55% Series D-12 Cumulative Redeemable Preferred Units to an institutional investor in a private placement.  These units were issued without registration under the Securities Act of 1933 in reliance on Section 4(2) of that Act.

On December 30, 2004, the Company sold $46,700,000 of 3.0% Series D-13 Cumulative Redeemable Preferred Units to an institutional investor in a private placement.  These units were issued without registration under the Securities Act of 1933 in reliance on Section 4(2) of that Act.

On November 17, 2003, the Company sold $80,000,000 of 7.00% Series D-10 Cumulative Redeemable Preferred Units to an institutional investor in a private placement.  These units were issued without registration under the Securities Act of 1933 in reliance on Section 4(2) of that Act.

During the year ended December 31, 2003, the Company issued 695,894 Class A units.  12,500 of those Class A units were issued as consideration in connection with the October 7, 2003 acquisition of the Waterfront Interest.  The remainder of those units were issued to holders of the Company’s C-1 preferred units in a 1 for 1.1431 exchange of the C-1 preferred units.  These units were issued without registration under the Securities Act of 1933 in reliance on Section 4(2) of that Act.

Information relating to compensation plans under which equity securities of Vornado are authorized for issuance is set forth under Part III, Item 12 of this annual report on Form 10-K and such information is incorporated herein by reference.

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ITEM 6.SELECTED FINANCIAL DATA:

	Year Ended December 31,
(in thousands, except unit and per unit amounts)	2004 (1)			2003			2002(2)			2001			2000
Operating Data:
Revenues:
Property rentals	$	1,344,812		$	1,256,073		$	1,204,349		$	813,089		$	666,248
Tenant expense reimbursements	191,059			179,115			154,727			129,013			116,422
Temperature Controlled Logistics	87,428			—			—			—			—
Fee and other income	83,963			62,795			27,718			10,059			9,753
Total Revenues	1,707,262			1,497,983			1,386,794			952,161			792,423
Expenses:
Operating	679,790			581,550			517,958			385,449			305,141
Depreciation and amortization	242,914			213,679			197,704			120,614			96,116
General and administrative	145,218			121,857			100,035			71,716			47,093
Amortization of officer’s deferred compensation expense	—			—			27,500			—			—
Costs of acquisitions and development not consummated	1,475			—			6,874			5,223			—
Total Expenses	1,069,397			917,086			850,071			583,002			448,350
Operating Income	637,865			580,897			536,723			369,159			344,073
Income applicable to Alexander’s	8,580			15,574			29,653			25,718			17,363
Income from partially-owned entities	43,381			67,901			44,458			80,612			86,654
Interest and other investment income	203,995			25,397			31,678			54,385			32,809
Interest and debt expense	(241,968		)	(228,860		)	(232,891		)	(167,430		)	(164,325		)
Net gain (loss) on disposition of wholly-owned and partially-owned assets other than depreciable real estate	19,775			2,343			(17,471		)	(8,070		)	—
Minority interest	(110		)	(1,089		)	(3,534		)	(2,480		)	(1,965		)
Income from continuing operations	671,518			462,163			388,616			351,894			314,609
Income from discontinued operations	78,597			176,388			11,815			25,837			19,791
Cumulative effect of change in accounting principle	—			—			(30,129		)	(4,110		)	—
Net income	750,115			638,551			370,302			373,621			334,400
Preferred unit distributions	(94,070		)	(116,619		)	(119,214		)	(130,815		)	(124,736		)
Net income applicable to Class A units	$	656,045		$	521,932		$	251,088		$	242,806		$	209,664
Income from continuing operations - basic	$	4.01		$	2.63		$	2.12		$	2.32		$	2.05
Income from continuing operations - diluted	$	3.84		$	2.58		$	2.06		$	2.25		$	2.00
Income per Class A unit–basic	$	4.56		$	3.97		$	1.97		$	2.55		$	2.26
Income per Class A unit–diluted	$	4.36		$	3.81		$	1.92		$	2.47		$	2.20
Cash distributions declared for Class A units	$	3.05		$	2.91		$	2.97		$	2.63		$	1.97
Balance Sheet Data:
Total assets	$	11,580,517		$	9,518,928		$	9,018,179		$	6,777,343		$	6,403,210
Real estate, at cost	9,718,845			7,629,736			7,217,515			4,426,560			4,220,307
Accumulated depreciation	1,404,441			867,177			701,327			485,447			375,730
Debt	4,936,633			4,039,542			4,073,253			2,477,173			2,688,308
Partners’ capital	5,679,381			4,995,804			4,644,206			4,024,235			3,519,417

(1)Operating results for the year ended December 31, 2004, reflect the consolidation of the Company’s investment in Americold Realty Trust beginning on November 18, 2004.  Previously, this investment was accounted for on the equity method.

(2)Operating results for the year ended December 31, 2002, reflect the Company’s January 1, 2002 acquisition of the remaining 66% of Charles E. Smith Commercial Realty L.P. (“CESCR”) and the resulting consolidation of CESCR’s operations.

48

ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Page
Overview	50
Overview – Leasing Activity	54
Critical Accounting Policies	57
Results of Operations:
Years Ended December 31, 2004 and 2003	64
Years Ended December 31, 2003 and 2002	73
Supplemental Information:
Summary of Net Income and EBITDA for the Three Months Ended December 31, 2004 and 2003	83
Changes by segment in EBITDA for the Three Months Ended December 31, 2004 and 2003	86
Changes by segment in EBITDA for the Three Months Ended December 31, 2004 as compared to September 30, 2004	87
Americold Realty Trust Proforma Net Income and EBITDA for the Three Months and Years Ended December 31, 2004 and 2003	88
Related Party Transactions	90
Liquidity and Capital Resources	93
Certain Future Cash Requirements	93
Financing Activities and Contractual Obligations	94
Cash Flows for the Year Ended December 31, 2004	95
Cash Flows for the Year Ended December 31, 2003	96
Cash Flows for the Year Ended December 31, 2002	98

49

Overview

The Company owns and operates office, retail and showroom properties with large concentrations of office and retail properties in the New York City metropolitan area and in the Washington, D.C. and Northern Virginia area.  In addition, the Company has a 47.6% interest in an entity that owns and operates 88 cold storage warehouses nationwide.

The Company’s business objective is to maximize shareholder value.  The Company’s measures its success in meeting this objective by Vornado’s total return to its shareholders.  Below is a table comparing Vornado’s performance to the Morgan Stanley REIT Index (“RMS”) for the following periods ending December 31, 2004:

	Total Return (1)
	Vornado		RMS
One-year	46.5	%	31.5	%
Three-years	114.8	%	86.4	%
Five-years	207.3	%	166.6	%
Ten-years	612.5	%	284.8	%(2)

(1)Past performance is not necessarily indicative of how the Company will perform in the future.

(2)From inception on July 25, 1995.

The Company intends to continue to achieve its business objective by pursuing its investment philosophy and executing its operating strategies through:

•Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit.

•Investing in properties in select markets, such as New York City and Washington, D.C., where we believe there is high likelihood of capital appreciation.

•Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents.

•Investing in retail properties in select under-stored locations such as the New York City metropolitan area.

•Developing/redeveloping the Company’s existing properties to increase returns and maximize value.

The Company competes with a large number of real estate property owners and developers.  Principal factors of competition are rent charged, attractiveness of location and quality and breadth of services provided.  The Company’s success depends upon, among other factors, trends of the national and local economies, 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.  Economic growth has been fostered, in part, by low interest rates, Federal tax cuts, and increases in government spending.  To the extent economic growth stalls, the Company may experience lower occupancy rates which may lead to lower initial rental rates, higher leasing costs and a corresponding decrease in net income, funds from operations and cash flow.  Alternatively, if economic growth is sustained, the Company may experience higher occupancy rates leading to higher initial rents and higher interest rates causing an increase in the Company’s weighted average cost of capital and a corresponding effect on net income, funds from operations and cash flow.

2004 Acquisitions

During the year ended December 31, 2004, the Company completed $328,600,000 of acquisitions and investments in real estate, of which $246,600,000 related to the retail segment.  In addition, the Company made $183,400,000 of mezzanine loans during 2004 which increased the outstanding balance of Notes and Mortgage Loans Receivable to $440,186,000 at December 31, 2004.  Following are the details of these transactions.

On February 3, 2004, the Company acquired the Forest Plaza Shopping Center for approximately $32,500,000, of which $14,000,000 was paid in cash and $18,500,000 was debt assumed.  Forest Plaza is a 165,000 square foot shopping center located in Staten Island, New York.

50

Overview - continued

On March 19, 2004, the Company acquired a 62,000 square foot free-standing retail building located at 25 W. 14^th Street in Manhattan for $40,000,000 in cash.

On July 1, 2004, the Company acquired the Marriott hotel located in its Crystal City office complex from a limited partnership in which Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members own approximately 67 percent.  The purchase price of $21,500,000 was paid in cash.  The hotel contains 343 rooms and is leased to an affiliate of Marriott International, Inc. until July 31, 2015, with one 10-year extension option.  The land under the hotel was acquired in 1999.

On July 29, 2004, the Company acquired a real estate portfolio containing 25 supermarkets for $65,000,000 in cash.  These properties, all of which are all located in Southern California and contain an aggregate of approximately 766,000 square feet, were purchased from the Newkirk MLP, in which the Company currently owns a 22.4% interest.  The supermarkets are net leased to Stater Brothers for an initial term expiring in 2008, with six 5-year extension options.  Stater Brothers is a Southern California regional grocery chain that operates 158 supermarkets and has been in business since 1936.

On August 30, 2004, the Company acquired a 68,000 square foot free-standing building in Forest Hills, New York for $26,500,000 in cash.  The property is located at 99-01 Queens Boulevard and its principal tenants are Rite Aid and Fleet Bank.

On November 2, 2004, the Company acquired a 50% joint venture interest in a 92,500 square foot property located at Broome Street and Broadway in New York City.  The Company contributed $4,462,000 of equity and provided a $24,000,000 bridge loan with interest at 10% per annum.  Upon the refinancing of the bridge loan, which is expected to close in the second quarter of 2005, the Company will be repaid $15,106,000 and the balance of $8,894,000 will remain in the venture as additional equity.

On November 12, 2004 and December 1, 2004, the Company acquired two shopping centers aggregating 185,000 square feet, in Lodi, New Jersey and Long Island (Inwood), New York, for a total purchase price of $36,600,000 in cash plus $10,900,000 of assumed debt.

In December 2004, the Company acquired two retail condominiums aggregating 12,000 square feet, located at 386 and 387 West Broadway in New York City for $16,900,000 in cash plus $4,700,000 of assumed debt.

Investment in GMH Communities L.P.

On July 20, 2004, the Company committed to make up to a $159,000,000 convertible preferred investment in GMH Communities L.P. (“GMH”), a partnership focused on the student and military housing sectors.  Distributions accrued on the full committed balance of the investment, whether or not drawn, from July 20, 2004, at a rate of 16.27%.  In connection with this commitment, the Company received a placement fee of $3,200,000.  The Company also purchased for $1,000,000, warrants to acquire GMH common equity.  These warrants entitle the Company to acquire (i) 6,666,667 limited partnership units in GMH at an exercise price of $7.50 per unit and (ii) 5,496,724 limited partnership units, through May 6, 2006, at an exercise price of $9.10 per unit.  As of November 3, 2004, the Company had funded a total of $113,777,000 of the commitment.

On November 3, 2004, GCT closed its initial public offering (“IPO”) at a price of $12.00 per share.  GCT is a real estate investment trust that conducts its business through GMH, of which it is the sole general partner.  In connection with the IPO, the $113,777,000 previously funded by the Company under the $159,000,000 commitment was repaid, together with accrued distributions of $13,381,000.  The Company also exercised warrants to purchase 6,666,667 limited partnership units at a price of $7.50 per unit, or $50,000,000 in total, which resulted in a net gain of $29,500,000.  The Company accounts for its interest in the partnership units on the equity-method based on its 12.25% ownership interest and right to appoint one of its executive officers to GCT’s Board of Trustees.  The Company records its pro-rata share of GMH’s net income or loss on a one-quarter lag basis as the Company files its financial statements on Form 10-K or 10-Q prior to the time GMH files its financial statements.

51

Overview - continued

Under the warrant agreement, the number of GMH partnership units or GCT common shares underlying the warrants is adjusted for dividends declared by GCT.  On December 16, 2004, GCT declared a dividend of $.16 per common share, which increased the number of shares underlying the warrants from 5,496,724 to 5,563,417 and the exercise price was decreased from $9.10 to $8.99 per share.   Because these warrants are derivatives and do not qualify for hedge accounting treatment, the gains and losses resulting from the mark-to-market of the warrants at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  In the quarter ended December 31, 2004, the Company recognized income of $24,190,000 from the mark-to-market of these warrants, which were valued using a trinomial option pricing model based on GCT’s closing stock price on the NYSE of $14.10 per share on December 31, 2004.

Further, in connection with the IPO, the Company contributed its 90% interest in Campus Club Gainesville, which it acquired in 2000, in exchange for an additional 671,190 GMH limited partnership units.

Of the Company’s GMH units, 6,666,667 may be converted into an equivalent number of common shares of GCT commencing on May 2, 2005 and 671,190 units may be converted commencing on November 2, 2005.  The Company has agreed not to sell any common shares or units it owns or may acquire until May 2, 2005.

Investment in Sears, Roebuck and Co.

In July and August 2004, the Company acquired an aggregate of 1,176,600 common shares of Sears, Roebuck and Co. (“Sears”) for $41,945,000, an average price of $35.65 per share. Included in the cost is $1,361,000 for a performance-based participation.  These shares are recorded as marketable securities on the Company’s consolidated balance sheet and are classified as “available for sale.”  Appreciation or depreciation in the fair market value of these shares is recorded as an increase or decrease in “accumulated other comprehensive income” in the partners’ capital section of the Company’s consolidated balance sheet and not recognized in income.  At December 31, 2004, based on Sears’ closing stock price of $51.03 per share, $18,105,000 of appreciation in the value of these shares was included in “accumulated other comprehensive income.”

In August and September 2004, the Company acquired an economic interest in an additional 7,916,900 Sears common shares through a series of privately negotiated transactions with a financial institution pursuant to which the Company purchased a call option and simultaneously sold a put option at the same strike price on Sears common shares.  These call and put options have an initial weighted-average strike price of  $39.82 per share, or an aggregate of $315,250,000, expire in April 2006 and provide for net cash settlement.  Under these agreements, the strike price for each pair of options increases at an annual rate of LIBOR plus 45 basis points and is credited for the dividends received on the shares.  The options provide the Company with the same economic gain or loss as if it had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points.  Because these options are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  During the year ended December 31, 2004, the Company recorded net income of $81,730,000, comprised of (i) $88,782,000 from the mark-to-market of the options on December 31, 2004, based on Sears’ closing stock price of $51.03 per share and (ii) $2,295,000 for accrued dividends, partially offset by (i) $5,972,000 for a performance-based participation, (ii) $2,371,000 for the increase in strike price resulting from the LIBOR charge and (iii) $1,004,000 of professional fees.

On November 16, 2004, Kmart Holding Corporation (“Kmart”) and Sears entered into an Agreement and Plan of Merger.  Upon the effective date of the merger, each share of Sears common stock will be converted into the right to receive, at the election of the holder, (i) $50.00 in cash or (ii) 0.50 shares of common stock of the merged company, subject to proration so that 55% of the Sears shares are exchanged for shares of the merged company.

Based on Sears’ most recent filing with the Securities and Exchange Commission, the Company’s aggregate investment in Sears represents 4.2% of Sears’ outstanding common shares.

52

Overview – continued

2004 Dispositions

In anticipation of selling the Palisades Residential Complex, on February 27, 2004, the Company acquired the remaining 25% interest in the Palisades venture it did not previously own for approximately $17,000,000 in cash.  On June 29, 2004, the Company sold the Palisades for $222,500,000, which resulted in a gain on sale after closing costs of $65,905,000.

On August 12, 2004, the Company sold its Dundalk, Maryland shopping center for $12,900,000, which resulted in a net gain on sale after closing costs of $9,850,000.

2004 Financings

On January 6, 2004, the Company redeemed all of its 8.375% Series D-2 Cumulative Redeemable Preferred Units at a redemption price equal to $50.00 per unit for an aggregate of $27,500,000 plus accrued distributions.

On March 17, 2004, the Company redeemed all of its Series B preferred units at a redemption price equal to $25.00 per unit for an aggregate of $85,000,000 plus accrued distributions.  The redemption amount exceeded the carrying amount by $3,195,000, representing the original issuance costs.  Upon redemption, these issuance costs were recorded as a reduction to earnings in arriving at net income applicable to Class A units, in accordance with the July 2003 EITF clarification of Topic D-42.

On May 27, 2004, the Company sold $35,000,000 of 7.2% Series D-11 Cumulative Redeemable Preferred Units to an institutional investor in a private placement. These perpetual preferred units may be called without penalty at the Company’s option commencing in May 2009.

On August 16, 2004, the Company completed a public offering of $250,000,000 aggregate principal amount of 4.50% senior unsecured notes due August 15, 2009.  Interest on the notes is payable semi-annually on February 15, and August 15, commencing February 15, 2005.  The notes were priced at 99.797% of their face amount to yield 4.546%.  The notes are subject to the same financial covenants as the Company’s previously issued senior unsecured debt.

On August 17, 2004, Vornado sold $75,000,000 of 7.0% Series E Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series E preferred units to Vornado.  The Company may redeem the Series E preferred units at a redemption price of $25.00 per unit after August 20, 2009.

On November 10, 2004, Vornado sold $150,000,000 of 6.75% Series F Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series F preferred units to Vornado.  The Company may redeem the Series F preferred units at a redemption price of $25.00 per unit after November 17, 2009.

On December 16, 2004, Vornado sold $200,000,000 of 6.625% Series G Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series G preferred units to Vornado.  The Company may redeem the Series G preferred units at a redemption price of $25.00 per unit after January 19, 2005.

On December 17, 2004, the Company sold $20,000,000 of 6.55% Series D-12 Cumulative Redeemable Preferred Units to an institutional investor in a private offering.  The Series D-12 units may be called without penalty at the option of the Company commencing in December 2009.

On December 30, 2004, the Company sold $46,700,000 of 3.0% Series D-13 Cumulative Redeemable Preferred Units to an institutional investor in a private offering.  The Series D-13 units may be called without penalty at the option of the Company commencing in December 2011.  The Series D-13 units may also be redeemed at the option of the holder commencing on December 2006.

On January 19, 2005, the Company redeemed all of Vornado’s 8.5% Series C Cumulative Redeemable Preferred Shares and $80,000,000 of its Series D-3 Perpetual Preferred Units at the stated redemption price of $25.00 per share or $115,000,000, plus accrued distributions.  The redemption amount exceeded the carrying amount by $6,052,000, representing the original issuance costs.  Upon redemption in the first quarter of 2005, these issuance costs were recorded as a reduction to earnings in arriving at net income applicable to Class A units, in accordance with the July 2003 EITF clarification of Topic D-42.

53

Overview – Leasing Activity

The following table summarizes, by business segment, the leasing statistics which the Company views as key performance indicators.

	Office															Temperature Controlled Logistics
(Square feet and cubic feet in thousands)	New York City			CESCR			Retail			Merchandise Mart
										Office			Showroom
As of December 31, 2004:
Square feet/cubic feet	13,412			14,216			14,210			2,837			5,589			17,563/443,700
Number of properties	20			66			94			8			8			88
Occupancy rate	95.6		%	91.5		%(2)	93.9		%	96.0		%	97.6		%	76.9	%
Leasing Activity:
Year Ended December 31, 2004:
Square feet	1,502			2,824			1,021			569			1,038			—
Initial rent (1)	$	43.34		$	28.93		$	16.33		$	22.85		$	22.65		—
Weighted average lease terms (years)	9.4			6.1			8.0			12.1			5.2			—
Rent per square foot on relet space:	—
Square feet	1,074			2,030			682			323			1,038			—
Initial Rent (1)	$	42.54		$	29.38		$	16.64		$	22.92		$	22.65		—
Prior escalated rent	$	40.02		$	29.98		$	13.99		$	24.80		$	22.92		—
Percentage increase	6.3		%	(2.0		)%	18.9		%	(7.6		)%	(1.2		)%	—
Rent per square foot on space previously vacant:
Square feet	428			793			339			246			—			—
Initial rent (1)	$	45.35		$	27.77		$	15.71		$	22.76		—			—
Tenant improvements and leasing commissions per square foot	$	38.63		$	20.03		$	4.89		$	65.50		$	5.38		—
Tenant improvements and leasing commissions per square foot per annum	$	4.10		$	3.28		$	0.61		$	5.42		$	1.04		—
Quarter ended December 31, 2004:
Square feet	263			568			184			81			305			—
Initial rent (1)	$	49.96		$	29.05		$	17.48		$	25.60		$	21.69		—
Weighted average lease terms (years)	8.2			7.8			7.4			6.9			4.8			—
Rent per square foot on relet space:
Square feet	153			322			103			36			305			—
Initial rent (1)	$	46.70		$	29.30		$	21.39		$	30.87		$	21.69		—
Prior escalated rent	$	40.74		$	30.64		$	17.87		$	32.52		$	22.31		—
Percentage increase (decrease)	14.6		%	(4.4		)%	19.7		%	(5.1		)%	(2.8		)%	—
Rent per square foot on space previously vacant:
Square feet	110			246			81			45			—			—
Initial rent (1)	$	54.48		$	28.73		$	12.55		$	21.32		—			—
Tenant improvements and leasing commissions per square foot	$	36.67		$	25.82		$	6.54		$	45.57		$	4.15		—
Tenant improvements and leasing commissions per square foot per annum	$	4.47		$	3.31		$	0.89		$	6.64		$	0.87		—

In addition to the leasing activity in the table above, in the year ended December 31, 2004, 51,000 square feet of retail space included in the New York City Office segment was leased at an initial rent of $118.39 per square foot and in the three months ended December 31, 2004, 9,000 square feet of retail space was leased at an initial rent of $73.86 per square foot.

54

Overview – Leasing Activity – continued

	Office															Temperature Controlled Logistics
(Square feet and cubic feet in thousands)	New York City			CESCR			Retail			Merchandise Mart
										Office			Showroom
As of December 31, 2003:
Square feet/cubic feet	13,253			13,963			12,888			2,808			5,624			17,476/440,700
Number of properties	20			63			60			9			9			88
Occupancy rate	95.2		%	93.9		%	93.0		%	92.6		%	95.1		%	76.2	%
Leasing Activity:
Year Ended December 31, 2003:
Square feet	925			2,848			1,046			270			1,157			—
Initial rent (1)	$	44.60		$	30.26		$	15.56		$	21.24		$	23.43		—
Weighted average lease terms (years)	9.1			4.8			12.8			9.8			5.2
Rent per square foot on relet space:
Square feet	677			2,510			1,046			270			1,157			—
Initial Rent (1)	$	44.41		$	30.62		$	15.56		$	21.24		$	23.43		—
Prior escalated rent	$	38.51		$	29.86		$	13.75		$	22.44		$	23.28		—
Percentage increase	15.3		%	2.5		%	13.2		%	(5.3		)%	0.6		%	—
Rent per square foot on space previously vacant:
Square feet	248			338			—			—			—			—
Initial rent (1)	$	45.09		$	27.58		—			—			—			—
Tenant improvements and leasing commissions per square foot	$	38.00		$	13.54		$	4.46		$	40.35		$	7.82		—
Tenant improvements and leasing commissions per square foot per annum	$	4.17		$	2.85		$	0.35		$	4.11		$	1.51		—

(1)Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

(2)Excludes Crystal Plazas 3 and 4 containing an aggregate of 497 square feet which were taken out of service for redevelopment.  See discussion of Crystal City PTO space below.

55

Overview – Leasing Activity – continued

Crystal City PTO Space

The PTO vacated 937,000 square feet in Crystal City in the fourth quarter of 2004, of which 497,000 has been taken out of service, and will vacate another 1,002,000 square feet during 2005 and the first quarter of 2006.  As of February 1, 2005, the Company has leased 416,000 square feet of the PTO space vacated.  Of this space, 262,000 square feet was leased to the Federal Supply Service which will be relocated from 240,000 square feet in other Crystal City buildings, 122,000 square feet was leased to the Public Broadcasting Service and 32,000 square feet was leased to Lockheed Martin.

Below is a comparison of the Company’s actual leasing activity to the Company’s projection for the lease-up of this space:

	Square Feet Leased (in thousands)
Period in which rent commences:	Projection	Actual Through February 1, 2005
Q4 2004	—	32
Q3 2005	—	122
Q4 2005	247	—
Q1 2006	793	262
Q2 2006	404	—
Q3 2006	252	—
Q4 2006	98	—
Q1 2007	145	—
	1,939	416

Straight-line rent per square foot for the actual square feet leased is $32.34 as compared to $31.94 projected.  Actual tenant improvements and leasing commissions per square foot is $45.25 as compared to $45.28 projected.

The Company’s original redevelopment plans for the PTO space included taking Crystal Park One and Crystal Plaza Three and Four out of service.  Plans for Crystal Plaza Three and Four have not changed.  Current plans for Crystal Park One are to lease its 224,000 square feet to private sector tenants, which will not require taking the building out of service, as opposed to leasing it to another government agency which would have required taking it out of service.  As a result, the Company will recognize approximately $4,000,000 of expense in 2005, which under the original plan would have been capitalized as part of development costs.

56

Critical Accounting Policies

In preparing the consolidated financial statements management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.  Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements.   The summary should be read in conjunction with the more complete discussion of the Company’s accounting policies included in Note 2 to the consolidated financial statements in this annual report on Form 10-K.

Real Estate

Real estate is carried at cost, net of accumulated depreciation and amortization.  As of December 31, 2004, the Company’s carrying amount of its real estate, net of accumulated depreciation is $8.3 billion.  Maintenance and repairs are charged to operations as incurred.  Depreciation requires an estimate by management 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.  If the Company does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated.

Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, identified intangibles such as acquired above and below market leases and acquired in-place leases and customer relationships) and acquired liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141: Business Combinations and SFAS No. 142: Goodwill and Other Intangible Assets, and allocates purchase price based on these assessments.  The Company assesses 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 the historical operating results, known trends, and market/economic conditions that may affect the property.  The Company’s properties, including any related intangible assets, are reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable.  If the Company incorrectly estimates the values at acquisition or the undiscounted cash flows, initial allocations of purchase price and future impairment charges may be different.  The impact of the Company’s estimates in connection with acquisitions and future impairment analysis could be material to the Company’s consolidated financial statements.

Identified Intangible Assets

Upon an acquisition of a business the Company records intangible assets acquired at their estimated fair value separate and apart from goodwill.  The Company amortizes identified intangible assets that are determined to have finite lives which are based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the business acquired.  Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.  An impairment loss is recognized if the carrying amount of an intangible asset, including the related real estate when appropriate, is not recoverable and its carrying amount exceeds its estimated fair value.

As of December 31, 2004 and 2003, the carrying amounts of the Company’s identified intangible assets are $176,314,000 and $130,875,000, respectively.  Such amounts are included in “other assets” on the Company’s consolidated balance sheet.  In addition, the Company has $71,272,000 and $47,359,000, of identified intangible liabilities as of December 31, 2004 and 2003, which are included in “deferred credit” on the Company’s consolidated balance sheets.  If these assets are deemed to be impaired, or the estimated useful lives of finite-life intangibles change, the impact to the Company’s consolidated financial statements could be material.

57

Notes and Mortgage Loans Receivable

The Company’s policy is to record mortgages and notes receivable at the stated principal amount net of any discount or premium.  As of December 31, 2004, the carrying amount of Notes and Mortgage Loans Receivable was $440,186,000.  The Company accretes or amortizes any discounts or premiums over the life of the related loan receivable utilizing the effective interest method.  The Company evaluates the collectibility of both interest and principal of each of its loans, if circumstances warrant, to determine whether it is impaired. A loan is considered to be impaired, when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or, as a practical expedient, to the value of the collateral if the loan is collateral dependent.  The impact of the Company’s estimates in connection with the collectibility of both interest and principal of its loans could be material to the Company’s consolidated financial statements.

Partially-Owned Entities

As of December 31, 2004, the carrying amount of investments and advances to partially-owned entities, including Alexander’s, was $605,300,000.  In determining whether the Company has a controlling interest in a partially-owned entity and the requirement to consolidate the accounts of that entity, it considers factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. The Company has concluded that it does not have a controlling ownership interest with respect to the Company’s 80% interest in Starwood Ceruzzi Venture, and 50% interests in Monmouth Mall, Wells Kinzie, Orleans Hubbard and 825 Seventh Avenue.

The Company consolidates entities that it is able to control.  The Company accounts for investments on the equity method when its ownership interest is greater than 20% and less than 50%, and the Company does not have direct or indirect control.  When partially-owned entities are in partnership form, the 20% threshold may be reduced.  Equity method investments are initially recorded at cost and subsequently adjusted for the Company’s share of net income or loss and cash contributions and distributions to and from these entities.  All other investments are accounted for on the cost method.

On a periodic basis the Company evaluates whether there are any indicators that the value of the Company’s investments in partially-owned entities are impaired.  The ultimate realization of the Company’s investment in partially-owned entities is dependent on a number of factors including the performance of the investee and market conditions.  If the Company determines that a decline in the value of the investee is other than temporary, an impairment charge would be recorded.

Allowance For Doubtful Accounts

The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts ($17,339,000 as at December 31, 2004) for estimated losses resulting from the inability of tenants to make required payments under the lease agreement.  The Company also maintains an allowance for receivables arising from the straight-lining of rents ($6,787,000 as at December 31, 2004).  This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements.  Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates.  These estimates may differ from actual results, which could be material to the Company’s consolidated financial statements. 

58

Revenue Recognition

The Company has the following revenue sources and revenue recognition policies:

•Base Rents — income arising from tenant leases.  These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases.

•Percentage Rents — income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold.  These rents are recognized in accordance with Staff Accounting Bulletin No. 104: Revenue Recognition, which states that this income is to be recognized only after the contingency has been removed (i.e. sales thresholds have been achieved).

•Hotel Revenues — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and beverage revenue, and banquet revenue.  Income is recognized when rooms are occupied.  Food and beverage and banquet revenue are recognized when the services have been rendered.

•Trade Show Revenues — income arising from the operation of trade shows, including rentals of booths.  This revenue is recognized in accordance with the booth rental contracts when the trade shows have occurred.

•Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property.  This revenue is accrued in the same periods as the expenses are incurred.

•Temperature Controlled Logistics revenue – income arising from the Company’s investment in Americold.  Storage and handling revenue is recognized as services are provided.  Transportation fees are recognized upon delivery to customers.

•Management, Leasing and Other Fees – income arising from contractual agreements with third parties or with partially-owned entities.  This revenue is recognized as the related services are performed under the respective agreements.

Before the Company recognizes revenue, it assesses among other things, its collectibility.  If the Company’s assessment of the collectibility of its revenue changes, the impact on the Company’s consolidated financial statements could be material.

59

Net income and EBITDA (1) for the years ended December 31, 2004, 2003 and 2002.

Below is a summary of Net income and EBITDA(1) by segment for the years ended December 31, 2004, 2003 and 2002.  On January 1, 2003, the Company revised its definition of EBITDA to comply with the Securities and Exchange Commission’s Regulation G concerning non-GAAP financial measures.  The revised definition of EBITDA includes minority interest, gains (losses) on the sale of depreciable real estate and income arising from the straight-lining of rent and the amortization of acquired in-place leases.  Accordingly, EBITDA for all periods disclosed represents “Earnings before Interest, Taxes, Depreciation and Amortization.”  Management considers EBITDA a supplemental measure for making decisions and assessing the unlevered performance of its segments as it is related to the return on assets as opposed to the levered return on equity.  As properties are bought and sold based on a multiple of EBITDA, management utilizes this measure to make investment decisions as well as to compare the performance of its assets to that of its peers.  EBITDA is not a surrogate for net income because net income is after interest expense and accordingly, is a measure of return on equity as opposed to return on assets.

	December 31, 2004
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	1,268,764		$	838,665		$	160,620		$	206,668		$	—		$	62,811
Straight-line rents:
Contractual rent increases	35,214			27,165			4,882			3,002			—			165
Amortization of free rent	26,264			10,118			10,998			5,154			—			(6		)
Amortization of acquired below market leases, net	14,570			9,697			4,873			—			—			—
Total rentals	1,344,812			885,645			181,373			214,824			—			62,970
Expense reimbursements	191,059			109,255			64,474			14,045			—			3,285
Temperature Controlled Logistics	87,428			—			—			—			87,428			—
Fee and other income:
Tenant cleaning fees	31,293			31,293			—			—			—			—
Management and leasing fees	16,754			15,501			1,084			155			—			14
Other	35,916			25,573			1,617			8,662			—			64
Total revenues	1,707,262			1,067,267			248,548			237,686			87,428			66,333
Operating expenses	679,790			396,698			77,277			92,636			67,989			45,190
Depreciation and amortization	242,914			161,381			26,327			34,025			7,968			13,213
General and administrative	145,218			38,446			13,187			22,487			4,264			66,834
Costs of acquisitions not consummated	1,475			—			—			—			—			1,475
Total expenses	1,069,397			596,525			116,791			149,148			80,221			126,712
Operating income (loss)	637,865			470,742			131,757			88,538			7,207			(60,379		)
Income applicable to Alexander’s	8,580			433			668			—			—			7,479
Income (loss) from partially-owned entities	43,381			2,728			(1,678		)	545			5,641			36,145
Interest and other investment income	203,995			994			397			105			220			202,279
Interest and debt expense	(241,968		)	(128,729		)	(58,625		)	(11,255		)	(6,379		)	(36,980		)
Net gain on disposition of wholly-owned and partially-owned assets other than real estate	19,775			369			—			—			—			19,406
Minority interest	(110		)	—			—			——			(158		)	48
Income from continuing operations	671,518			346,537			72,519			77,933			6,531			167,998
Income from discontinued operations	78,597			1,584			10,054			—			—			66,959
Net income	750,115			348,121			82,573			77,933			6,531			234,957
Interest and debt expense(2)	313,289			133,602			61,820			12,166			30,337			75,364
Depreciation and amortization(2)	296,980			165,492			30,121			34,559			34,567			32,241
Income taxes	1,664			406			—			852			79			327
EBITDA(1)	$	1,362,048		$	647,621		$	174,514		$	125,510		$	71,514		$	342,889
Percentage of EBITDA (1) by segment	100		%	47.5		%	12.8		%	9.2		%	5.3		%	25.2		%

Included in EBITDA (1) are (i) gains on sale of real estate of $75,755, of which $9,850 and $65,905 are in the Retail and Other segments, respectively, and (ii) net gains from the mark-to-market and conversion of derivative instruments of $135,372 and certain other gains and losses that affect comparability which are in the Other segment.  Excluding these items the percentages of EBITDA by segment are 63.6% for Office, 16.6% for Retail, 12.4% for Merchandise Mart, 7.0% for Temperature Controlled Logistics and 0.4% for Other.

See Notes on page 63.

60

	December 31, 2003
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	1,205,822		$	819,277		$	136,490		$	197,554		$	—		$	52,501
Straight-line rents:
Contractual rent increases	34,288			27,296			3,108			3,875			—			9
Amortization of free rent	7,071			(561		)	5,390			2,251			—			(9		)
Amortization of acquired below market leases, net	8,892			7,852			1,040			—			—			—
Total rentals	1,256,073			853,864			146,028			203,680			—			52,501
Expense reimbursements	179,115			102,727			56,900			16,402			—			3,086
Fee and other income:
Tenant cleaning fees	29,062			29,062			—			—			—			—
Management and leasing fees	12,812			11,427			1,290			—			—			95
Other	20,921			8,852			4,694			7,344			—			31
Total revenues	1,497,983			1,005,932			208,912			227,426			—			55,713
Operating expenses	581,550			376,012			70,462			91,033			—			44,043
Depreciation and amortization	213,679			151,050			18,835			30,125			—			13,669
General and administrative	121,857			37,229			9,783			20,215			—			54,630
Total expenses	917,086			564,291			99,080			141,373			—			112,342
Operating income (loss)	580,897			441,641			109,832			86,053			—			(56,629		)
Income applicable to Alexander’s	15,574			—			640			—			—			14,934
Income (loss) from partially-owned entities	67,901			2,426			3,752			(108		)	18,416			43,415
Interest and other investment income	25,397			2,956			359			93			—			21,989
Interest and debt expense	(228,860		)	(133,511		)	(59,674		)	(14,788		)	—			(20,887		)
Net gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate	2,343			180			—			188			—			1,975
Minority interest	(1,089		)	(1,119		)	—			—			—			30
Income from continuing operations	462,163			312,573			54,909			71,438			18,416			4,827
Income (loss) from discontinued operations	176,388			173,949			4,850			—			—			(2,411		)
Net income	638,551			486,522			59,759			71,438			18,416			2,416
Interest and debt expense (2)	296,059			138,379			62,718			15,700			24,670			54,592
Depreciation and amortization (2)	279,507			155,743			21,642			30,749			34,879			36,494
Income taxes	1,627			45			—			—			—			1,582
EBITDA(1)	$	1,215,744		$	780,689		$	144,119		$	117,887		$	77,965		$	95,084
Percentage of EBITDA(1) by segment	100		%	64.2		%	11.9		%	9.7		%	6.4		%	7.8		%

Included in EBITDA are gains on sale of real estate of $161,789, of which and $157,200 and $4,589 are in the Office and Retail segments, respectively.  Excluding these items, the percentages of EBITDA by segment are 69.3% for Office, 15.9% for Retail, 13.5% for Merchandise Mart, 8.9% for Temperature Controlled Logistics and (7.6)% for Other. 

See Notes on page 63.

61

	December 31, 2002
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	1,154,206		$	789,194		$	120,451		$	191,197		$	—		$	53,364
Straight-line rents:
Contractual rent increases	30,994			27,269			1,777			1,772			—			176
Amortization of free rent	6,796			2,374			3,317			1,105			—			—
Amortization of acquired below market leases, net	12,353			12,188			165			—			—			—
Total rentals	1,204,349			831,025			125,710			194,074			—			53,540
Expense reimbursements	154,727			85,381			51,008			14,754			—			3,584
Fee and other income:
Tenant cleaning fees	—			—			—			—			—			—
Management and leasing fees	14,800			13,317			1,450			33			—			—
Other	12,918			7,783			172			4,743			—			220
Total revenues	1,386,794			937,506			178,340			213,604			—			57,344
Operating expenses	517,958			329,198			61,500			86,022			—			41,238
Depreciation and amortization	197,704			142,124			14,957			26,716			—			13,907
General and administrative	100,035			33,319			7,640			20,382			—			38,694
Amortization of officer’s deferred compensation expense	27,500			—			—			—			—			27,500
Costs of acquisitions and development not consummated	6,874			—			—			—			—			6,874
Total expenses	850,071			504,641			84,097			133,120			—			128,213
Operating income (loss)	536,723			432,865			94,243			80,484			—			(70,869		)
Income applicable to Alexander’s	29,653			—			598			—			—			29,055
Income (loss) from partially-owned entities	44,458			1,966			(687		)	(339		)	9,707			33,811
Interest and other investment income	31,678			6,465			323			507			—			24,383
Interest and debt expense	(232,891		)	(137,509		)	(56,643		)	(22,948		)	—			(15,791		)
Net gain (loss) disposition of wholly-owned and partially-owned assets other than depreciable real estate	(17,471		)	—			—			2,156			—			(19,627		)
Minority interest	(3,534		)	(3,526		)	—			—			—			(8		)
Income (loss) from continuing operations before cumulative effect of change in accounting principle	388,616			300,261			37,834			59,860			9,707			(19,046		)
Income (loss) from discontinued operations	11,815			17,841			723			—			—			(6,749		)
Cumulative effect of change in accounting principle	(30,129		)	—			—			—			(15,490		)	(14,639		)
Net income (loss)	370,302			318,102			38,557			59,860			(5,783		)	(40,434		)
Cumulative effect of change in accounting principle	30,129			—			—			—			15,490			14,639
Interest and debt expense (2)	305,920			143,068			58,409			23,461			25,617			55,365
Depreciation and amortization (2)	257,707			149,361			17,532			27,006			34,474			29,334
EBITDA(1)	$	964,058		$	610,531		$	114,498		$	110,327		$	69,798		$	58,904
Percentage of EBITDA (1) by segment	100		%	63.3		%	11.9		%	11.4		%	7.2		%	6.2		%

See Notes on the following page.

62

Notes to the preceding tabular information:

(1)EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.”  EBITDA should not be considered a substitute for net income.  EBITDA may not be comparable to similarly titled measures employed by other companies.

(2)Interest and debt expense and depreciation and amortization included in the reconciliation of net income to EBITDA reflects the Company’s share of the interest and debt expense and depreciation and amortization of its partially-owned entities.

(3)Operating results for the year ended December 31, 2004, reflect the consolidation of the Company’s investment in Americold Realty Trust beginning on November 18, 2004.  Previously, this investment was accounted for on the equity method.  See page 88 for condensed proforma operating results of Americold Realty Trust for the years ended December 31, 2004 and 2003, giving effect to the acquisition of its tenant, Americold Logistics, as if it had occurred on January 1, 2003.

(4)Other EBITDA is comprised of:

	For the Year Ended December 31,
(Amounts in thousands)	2004			2003			2002
Newkirk Master Limited Partnership:
Equity in income (A)	$	52,331		$	68,341		$	60,756
Interest and other income (B)	18,186			8,532			8,795
Alexander’s (C)	25,909			22,361			38,838
Industrial warehouses	5,309			6,208			6,223
Hotel Pennsylvania	15,643			4,573			7,636
GMH Communities L.P. (D)	—			—			—
Student Housing	1,440			2,000			2,340
	118,818			112,015			124,588
Minority interest expense	48			30			(8		)
Corporate general and administrative expenses	(62,854		)	(51,461		)	(34,743		)
Investment income and other (E)	215,639			28,350			22,907
Discontinued Operations:
Palisades	3,792			5,006			161
400 North LaSalle	1,541			(418		)	—
Gain on sale of Palisades	65,905			—			—
Net gain on sale of marketable securities	—			2,950			12,346
Primestone foreclosure and impairment loss	—			(1,388		)	(35,757		)
Amortization of Officer’s deferred compensation expense	—			—			(27,500		)
Write-off of 20 Times Square pre-development costs	—			—			(6,874		)
Gain on transfer of mortgages	—			—			2,096
Net gain on sale of air rights.	—			—			1,688
	$	342,889		$	95,084		$	58,904

(A)EBITDA for the year ended December 31, 2004, includes the Company’s $2,901 share of impairment losses recorded by Newkirk MLP, partially offset by the Company’s $2,705 share of gains on sale of real estate.  EBITDA for the year ended December 31, 2003, includes the Company’s $9,900 share of gains on sale of real estate and early extinguishment of debt, partially offset by a charge of $1,210 for an impairment loss and a litigation settlement.  The remaining decrease in EBITDA from 2003 to 2004 is due primarily to the sale of properties (primarily Stater Brothers Supermarkets).

(B)Interest and other income for the year ended December 31, 2004, includes a gain of $7,494, resulting from the exercise of an option by the Company’s joint venture partner to acquire certain MLP units held by the Company.  The MLP units subject to this option had been issued to the Company on behalf of the Company’s joint venture partner in exchange for the Company’s operating partnership units as part of the tender offers to acquire certain of the units of the MLP in 1998 and 1999.

(C)Includes Alexander’s stock appreciation rights compensation expense, of which the Company’s share was $25,340, $14,868 and $0 for the year ended December 31, 2004, 2003 and 2002, respectively.  The year ended December 31, 2004, also includes the Company’s $1,274 share of a gain on sale of land parcel and the Company’s $1,010 share of Alexander’s loss on early extinguishment of debt.

(D)The Company’s share of EBITDA for the period from November 3, 2004 to December 31, 2004, will be recognized in the quarter ended March 31, 2005, as the investee has not published its earnings for the year ended December 31, 2004 prior to the filing of the Company’s annual report on Form 10-K.

(E)See page 70 for details.

63

Results Of Operations - Years Ended December 31, 2004 and December 31, 2003

Revenues

The Company’s revenues, which consist of property rentals, tenant expense reimbursements, Temperature Controlled Logistics revenues, hotel revenues, trade shows revenues, amortization of acquired below market leases net of above market leases pursuant to SFAS No. 141 and 142, and fee income, were $1,707,262,000 for the year ended December 31, 2004, compared to $1,497,983,000 in the prior year, an increase of $209,279,000.  Below are the details of the increase (decrease) by segment:

(Amounts in thousands) Property rentals:	Date of Acquisition	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics		Other
Increase (decrease) due to:
Acquisitions:
Bergen Mall	December 2003	$	10,156		$	—		$	10,156		$	—		$	—	$	—
2101 L Street	August 2003	7,197			7,197			—			—			—		—
So. California supermarkets	July 2004	2,217			—			2,217			—			—		—
Marriot Hotel	July 2004	1,890			1,890			—			—			—		—
25 W. 14th Street	March 2004	2,212			—			2,212			—			—		—
Forest Plaza Shopping Center	February 2004	2,581			—			2,581			—			—		—
99-01 Queens Boulevard	August 2004	491			—			491			—			—		—
Lodi Shopping Center	November 2004	267			—			267			—			—		—
Burnside Plaza Shopping Center	December 2004	166			—			166			—			—		—
Development placed into service: 4 Union Square South		6,989			—			6,989			—			—		—
Amortization of acquired below market leases, net		5,806			1,973			3,833			—			—		—
Operations:
Hotel activity		13,075		(1)	—			—			—			—		13,075		(1)
Trade shows activity		3,033			—			—			3,033			—		—
Leasing activity		32,659			20,721		(2)	6,433			8,111			—		(2,606		)
Total increase in property rentals		88,739			31,781			35,345			11,144			—		10,469
Tenant expense reimbursements:
Increase (decrease) due to:
Acquisitions		7,561			1,157			6,404			—			—		—
Operations		4,383			5,371		(3)	1,170			(2,357		)(4)	—		199
Total increase (decrease) in tenant expense reimbursements		11,944			6,528			7,574			(2,357		)	—		199
Temperature Controlled Logistics (effect of consolidating Americold from November 18, 2004 vs. equity method prior)		87,428			—			—			—			87,428		—
Fee and other income:
Increase (decrease) in:
Acquisitions (Kaempfer Management Company)		3,695			3,695			—			—			—		—
Lease cancellation fee income		8,505			9,829		(5)	(1,291		)	(33		)	—		—
BMS Cleaning fees		2,231			2,231			—			—			—		—
Management and leasing fees		328			379			(206		)	155			—		—
Other		6,409			6,892		(6)	(1,786		)	1,351			—		(48		)
Total increase (decrease) in fee and other income		21,168			23,026			(3,283		)	1,473			—		(48		)
Total increase in revenues		$	209,279		$	61,335		$	39,636		$	10,260		$	87,428	$	10,620

See notes on following page.

See Leasing Activity on page 54 for further details and corresponding changes in occupancy.

64

Notes to preceding tabular information:

(1)Average occupancy and REVPAR were 78.9% and $77.56 for the year ended December 31, 2004 compared to 63.7% and $58.00 for the prior year.

(2)Reflects increases of $19,845 from New York City Office primarily from higher rents for space relet.

(3)Reflects higher reimbursements from tenants resulting primarily from increases in New York City Office real estate taxes and utilities.

(4)Reflects lower reimbursements from tenants resulting primarily from a decrease in accrued real estate taxes based on the finalization of 2003 real estate taxes in September of 2004.

(5)The increase relates to early lease terminations at the Company’s 888 Seventh Avenue and 909 Third Avenue office properties for approximately 175 square feet, a substantial portion of which has been re-leased at equal or higher rents (see page 54).

(6)Reflects an increase of $4,541 from New York Office, which primarily relates to an increase in Penn Plaza signage income.

65

Expenses

The Company’s expenses were $1,069,397,000 for the year ended December 31, 2004, compared to $917,086,000 in the prior year, an increase of $152,311,000.

Below are the details of the increase (decrease) by segment:

(Amounts in thousands) Operating:	Date of Acquisition	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics		Other
Increase (decrease) due to:
Acquisitions:
Bergen Mall	December 2003	$	6,015		$	—		$	6,015		$	—		$	—	$	—
2101 L Street	August 2003	2,431			2,431			—			—			—		—
25 W. 14th Street	March 2004	254			—			254			—			—		—
Forest Plaza Shopping Center	February 2004	986			—			986			—			—		—
99-01 Queens Boulevard	August 2004	109			—			109			—			—		—
Lodi Shopping Center	November 2004	36			—			36			—			—		—
Burnside Plaza Shopping Center	December 2004	66			—			66			—			—		—
Development placed into service:
4 Union Square South		1,139			—			1,139			—			—		—
Americold – effect of consolidating Americold from November 18, 2004 vs. equity method accounting prior		67,989			—			—			—			67,989		—
Hotel activity		1,862			—			—			—			—		1,862
Trade shows activity		1,946			—			—			1,946			—		—
Operations		15,407			18,255		(1)	(1,790		)(2)	(343		)(3)	—		(715		)
Total increase in operating expenses		98,240			20,686			6,815			1,603			67,989		1,147
Depreciation and amortization:
Increase (decrease) due to:
Acquisitions/Development		10,214			2,249			7,965			—			—		—
Americold – effect of consolidating Americold from November 18, 2004 vs. equity method accounting prior		7,968			—			—			—			7,968		—
Operations		11,053		(4)	8,082			(473		)	3,900			—		(456		)
Total increase (decrease) in depreciation and amortization		29,235			10,331			7,492			3,900			7,968		(456		)
General and administrative:
Increase due to:
Americold – effect of consolidating Americold from November 18, 2004 vs. equity method accounting prior		4,264			—			—			—			4,264		—
Operations		19,097		(5)	1,217			3,404			2,272			—		12,204
Total increase in general and administrative		23,361			1,217			3,404			2,272			4,264		12,204
Cost of acquisitions and development not consummated		1,475		(6)	—			—			—			—		1,475		(6)
Total increase in expenses		$	152,311		$	32,234		$	17,711		$	7,775		$	80,221	$	14,370

See notes on following page.

66

(1)Results primarily from (i) a $8,134 increase in real estate taxes, of which $6,700 relates to the New York Office portfolio, (ii) a $5,452 increase in utility costs, of which $2,816 and $2,636 relate to the New York Office and CESCR portfolios, respectively and (iii) a $1,192 increase due to higher of repairs and maintenance (primarily New York Office).

(2)Results primarily from a net decrease in the allowance for bad debts due to recoveries in 2004.

(3)Results primarily from (i) reversal of overaccrual of 2003 real estate taxes of $3,928, based on finalization of 2003 taxes in September 2004, offset by (ii) increase in the allowance for straight-lined rent receivables in 2004 of $3,585.

(4)Primarily due to additions to buildings and improvements during 2003 and 2004.

(5)The increase in general and administrative expenses results from:

Bonuses to four executive vice presidents in connection with the successful leasing, development and financing of Alexander’s	$	6,500
Costs of Vornado Operating Company litigation in 2004 (see page 91 for further details)	4,643
Legal fees in 2004 in connection with Sears investment	1,004
Increase in payroll and fringe benefits	6,555
Severance payments and the non-cash charge related to the accelerated vesting of severed employees’ restricted stock in 2003 in excess of 2004 amounts	(2,319		)
Costs in 2003 in connection with the relocation of CESCR’s accounting operations to the Company’s administrative headquarters in New Jersey	(1,123		)
Other, net	3,837
	$	19,097

(6)Results from the write-off of costs associated with the Mervyn’s Department Stores acquisition not consummated.

67

Income Applicable to Alexander’s

Income applicable to Alexander’s (loan interest income, management, leasing, development and commitment fees, and equity in income) was $33,920,000 before $25,340,000 of Alexander’s stock appreciation rights compensation (“SAR”) expense or $8,580,000 net, in the year ended December 31, 2004, compared to income of $30,442,000 before $14,868,000 of SAR expense or $15,574,000 net, in the year ended December 31, 2003, a decrease after SAR expense of $6,994,000.  This decrease resulted primarily from (i) an increase in the Company’s share of Alexander’s SAR expense of $10,472,000, (ii) the Company’s $1,434,000 share of Alexander’s loss on early extinguishment of debt in 2004, partially offset by, (iii) income in 2004 from the commencement of leases with Bloomberg on November 15, 2003 and other tenants in second half of 2004 at Alexander’s 731 Lexington Avenue property and (iv) the Company’s $1,274 share of gain on sale of a land parcel in the quarter ended September 30, 2004.

Income from Partially-Owned Entities

Below are the condensed statements of operations of the Company’s unconsolidated subsidiaries as well as the increase (decrease) in income from these partially-owned entities for the years ended December 31, 2004 and 2003:

(Amounts in thousands) For the year ended:	Total			Newkirk MLP			Temperature Controlled Logistics (2)			Monmouth Mall			Partially- Owned Office Buildings			Starwood Ceruzzi Joint Venture			Other
December 31, 2004:
Revenues				$	239,496		$	131,053		$	24,936		$	118,660		$	1,649
Expenses:
Operating, general and administrative				(23,495		)	(29,351		)	(9,915		)	(48,329		)	(3,207		)
Depreciation				(45,134		)	(50,211		)	(6,573		)	(19,167		)	(634		)
Interest expense				(80,174		)	(45,504		)	(6,390		)	(32,659		)	—
Other, net				45,344			(5,387		)	(3,208		)	975			(4,791		)
Net income (loss)				$	136,037		$	600		$	(1,150	)	$	19,480		$	(6,983	)
Vornado’s interest				22.4		%	47.6		%	50		%	17		%	80		%
Equity in net income (loss)	$	22,860		$	24,041	(1)	$	360		$	(576	)	$	2,935		$	(5,586	)(5)	$			1,686
Interest and other income	14,459			11,396		(4)	(20		)	3,290			(207		)	—			—
Fee income	6,062			—			5,035			1,027			—			—			—
Income (loss) from partially-owned entities	$	43,381		$	35,437		$	5,375		$	3,741		$	2,728		$	(5,586	)	$	1,686
December 31, 2003:
Revenues				$	273,500		$	119,605		$	24,121		$	99,590		$	4,394
Expenses:
Operating, general and administrative				(15,357		)	(6,905		)	(10,520		)	(39,724		)	(3,381		)
Depreciation				(51,777		)	(56,778		)	(4,018		)	(18,491		)	(998		)
Interest expense				(97,944		)	(41,117		)	(6,088		)	(27,548		)	—
Other, net				43,083			5,710			(3,220		)	2,516			(866		)
Net income (loss)				$	151,505		$	20,515		$	275		$	16,343		$	(851	)
Vornado’s interest				22.6		%	60		%	50		%	15		%	80		%
Equity in net income (loss)	$	51,057		$	33,243	(3)	$	12,869		$	138		$	2,426		$	(681	)(5)	$			3,062	(6)
Interest and other income	10,292			7,002			—			3,290			—			—			—
Fee income	6,552			—			5,547			1,005			—			—			—
Income (loss) from partially-owned entities	$	67,901		$	40,245		$	18,416		$	4,433		$	2,426		$	(681	)	$		3,062
Increase (decrease) in income from partially-owned entities	$	(24,520	)	$	(4,808	)	$	(13,041	)(2)	$	(692	)	$	302		$	(4,905	)(5)	$		(1,376		)(6)

See footnotes on following page.

68

Notes to preceding tabular information:

(1)Includes the Company’s $2,479 share of gains on sale of real estate and the Company’s $2,901 share of impairment losses recorded by Newkirk MLP.  Excludes the Company’s $7,119 share of the gain recognized by Newkirk MLP on the sale of its Stater Brothers real estate portfolio to the Company on July 29, 2004, which was reflected as an adjustment to the basis of the Company’s investment.

(2)On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700 in cash.  In addition, on November 18, 2004 the Company and its 40% partner, CEI collectively sold 20.7% of Americold’s common shares to Yucaipa for $145,000, which resulted in a gain, of which the Company’s share was $18,789.  Beginning on November 18, 2004, the Company is deemed to exercise control over Americold and, accordingly, began to consolidate the operations and financial position of Americold into its accounts and ceased accounting for the investment on the equity method.  See page 88 for further details.

(3)Includes the Company’s $9,900 share of gains on sale of real estate and early extinguishment of debt.

(4)Includes a gain of $7,494, resulting from the exercise of an option by the Company’s joint venture partner to acquire certain MLP units held by the Company.

(5)Equity in income for the year ended December 31, 2004 includes the Company’s $3,833 share of an impairment loss.  Equity in income for the year ended December 31, 2003 includes the Company’s $2,271 share of income from the settlement of a tenant bankruptcy claim, partially offset by the Company’s $876 share of a net loss on disposition of leasehold improvements.

(6)Includes $5,583 for the Company’s share of Prime Group Realty L.P.’s equity in net income of which $4,413 was for the Company’s share of Prime Group’s lease termination fee income.  On May 23, 2003, the Company exchanged the units it owned for common shares and no longer accounts for its investment in the partnership on the equity method.

69

Interest and Other Investment Income

Interest and other investment income (interest income on mortgage loans receivable, other interest income and dividend income) was $203,995,000 for the year ended December 31, 2004, compared to $25,397,000 in the year ended December 31, 2003, an increase of $178,598,000.  This increase results from:

(Amounts in thousands)
Income from the mark-to-market of Sears’ option position (see page 52 for details)	$	82,734
Investment in GMH Communities L.P. (see page 51 for details):
Net gain on exercise of warrants for 6.7 million GMH limited partnership units	29,452
Net gain from the mark-to-market of 5.6 million warrants at December 31, 2004	24,190
Distributions received on $159,000 commitment	16,581
Increase in interest income on $275,000 GM building mezzanine loans (1)	22,187
Interest income recognized on the repayment of the Company’s loan to Vornado Operating Company in November 2004	4,771
Increase in interest income from mezzanine loans in 2004	5,495
Other, net – primarily $5,655 of contingent interest income in 2003 from the Dearborn Center loan	(6,812		)
	$	178,598

(1)On January 7, 2005, the Company was repaid $275,000 of loans secured by partnership interests in the General Motors Building.  Vornado also received a prepayment penalty of $4,500 together with interest through January 14, 2005 on $225,000 of these loans.  The $4,500 and an additional $879 of unamortized fees will be included in income in the first quarter of 2005.

Interest and Debt Expense

Interest and debt expense was $241,968,000 for the year ended December 31, 2004, compared to $228,860,000 in the year ended December 31, 2003, an increase of $13,108,000.  This increase is primarily due to (i) $6,379,000 resulting from the consolidation of the Company’s investment in Americold Realty Trust from November 18, 2004 vs. equity method accounting prior, (ii) $7,411,000 from an increase in average outstanding debt balances, primarily due to the issuance of $250,000,000 and $200,000,000 of senior unsecured notes in August 2004 and November 2003, respectively, and  (iii) $1,206,000 from an increase in the weighted average interest rate on total debt of three basis points.

Net Gain on Disposition of Wholly-owned and Partially-owned Assets other than Depreciable Real Estate

The following table sets forth the details of net gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate for the years ended December 31, 2004 and 2003:

	For the Year Ended December 31,
(Amounts in thousands)	2004			2003
Wholly-owned Assets:
Gain on sale of residential condominiums units	$	776		$	282
Net (loss) gain on sale of marketable securities	(159		)	2,950
Loss on settlement of Primestone guarantees	—			(1,388		)
Gain on sale of land parcels	—			499
Partially-owned Assets:
Net gain on sale of a portion of investment in Americold to Yucaipa	18,789			—
Other	369			—
	$	19,775		$	2,343

70

Discontinued Operations

Assets related to discontinued operations consist primarily of real estate, net of accumulated depreciation.  The following table set forth the balances of the assets related to discontinued operations as of December 31, 2004 and 2003.

(Amounts in thousands)	December 31,
	2004		2003
400 North LaSalle	$	82,624	$	80,685
Arlington Plaza	35,127		36,109
Palisades (sold on June 29, 2004)	—		138,629
Baltimore (Dundalk) (sold on August 12, 2004)	—		2,167
Vineland	908		908
	$	118,659	$	258,498

The following table sets forth the balances of the liabilities related to discontinued operations (primarily mortgage notes payable) as of December 31, 2004 and 2003.

(Amounts in thousands)	December 31,
	2004		2003
Arlington Plaza	$	15,867	$	16,487
400 North LaSalle	5,187		3,038
Palisades (sold on June 29, 2004)	—		120,000
	$	21,054	$	139,525

The combined results of operations of the assets related to discontinued operations for the years ended December 31, 2004 and 2003 are as follows:

(Amounts in thousands)	December 31,
	2004		2003
Total Revenues	$	19,799	$	47,770
Total Expenses	16,957		33,171
Net income	2,842		14,599
Gains on sale of real estate	75,755		161,789
Income from discontinued operations	$	78,597	$	176,388

On January 9, 2003, the Company sold its Baltimore, Maryland shopping center for $4,752,000, which resulted in a net gain after closing costs of $2,644,000.

On October 10, 2003, the Company sold Two Park Avenue, a 965,000 square foot office building, for $292,000,000, which resulted in a net gain on the sale after closing costs of $156,433,000.

On November 3, 2003, the Company sold its Hagerstown, Maryland shopping center for $3,100,000, which resulted in a net gain on sale after closing costs of $1,945,000.

In anticipation of selling the Palisades Residential Complex, on February 27, 2004, the Company acquired the remaining 25% interest in the Palisades venture it did not previously own for approximately $17,000,000 in cash.  On June 29, 2004, the Company sold the Palisades for $222,500,000, which resulted in a net gain on sale after closing costs of $65,905,000.

On August 12, 2004, the Company sold its Dundalk, Maryland shopping center for $12,900,000, which resulted in a net gain on sale after closing costs of $9,850,000.

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EBITDA

Below are the details of the changes by segment in EBITDA.

(Amounts in thousands)	Total		Office			Retail			Merchandise Mart			Temperature Controlled Logistics			Other
Year ended December 31, 2003	$	1,215,744	$	780,689		$	144,119		$	117,887		$	77,965		$	95,084
2004 Operations: Same store operations(1)			18,793			7,333			10,144			—
Acquisitions, dispositions and non-same store income and expenses			(151,861		)	23,062			(2,521		)	(6,451		)
Year ended December 31, 2004	$	1,362,048	$	647,621		$	174,514		$	125,510		$	71,514		$	342,889
% increase in same store operations			3.1		%(2)	5.5		%	8.9		% (3)	N/A		(4)

(1)Represents operations which were owned for the same period in each year and excludes non-recurring income and expenses which are included in acquisitions, dispositions and non-same store income and expenses above.

(2)EBITDA and the same store percentage increase were $343,421 and 4.4% for the New York office portfolio and $304,200 and 1.7% for the CESCR portfolio.

(3)EBITDA and the same store percentage increase reflect the commencement of the WPP Group leases (228 square feet) in the third quarter of 2004 and the Chicago Sun Times lease (127 square feet) in the second quarter of 2004.  EBITDA for the year ended December 31, 2004, exclusive of the incremental impact of these leases was $121,876 or a 5.6% same store increase over the prior year.

(4)Not comparable because prior to November 4, 2004, (date the operations of AmeriCold Logistics were combined with Americold Realty Trust), the Company reflected its equity in the rent Americold received from AmeriCold Logistics.  Subsequent thereto, the Company reflects its equity in the operations of the combined company.  See page 88 for condensed proforma operating results of Americold for the years ended December 31, 2004 and 2003, giving effect to the acquisition of its tenant, AmeriCold Logistics, as if it had occurred on January 1, 2003.

72

Results of Operations - Years Ended December 31, 2003 and December 31, 2002

Revenues

The Company’s revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below market leases net of above market leases pursuant to SFAS No. 141 and 142, and fee income, were $1,497,983,000 for the year ended December 31, 2003, compared to $1,386,794,000 in the prior year, an increase of $111,189,000.  Below are the details of the increase (decrease) by segment:

(Amounts in thousands)	Date of Acquisition	Total			Office			Retail			Merchandise Mart			Other
Property rentals:
Acquisitions:
Las Catalinas (acquisition of remaining 50% and consolidation vs. equity method accounting for 50%)	September 2002	$	8,546		$	—		$	8,546		$	—		$	—
Crystal Gateway One	July 2002	5,851			5,851			—			—			—
435 Seventh Avenue (placed in service)	August 2002	4,528			—			4,528			—			—
2101 L Street	August 2003	4,958			4,958			—			—			—
Bergen Mall	December 2003	602			—			602			—			—
424 Sixth Avenue	July 2002	557			—			557			—			—
(Decrease) increase in amortization of acquired below market leases, net		(3,461		)	(4,336		)	875			—			—
Operations:
Hotel activity		73		(1)	—			—			—			73		(1)
Trade Shows activity		3,807		(2)	—			—			3,807		(2)	—
Leasing activity		26,263			16,366		(3)	5,210		(4)	5,799		(5)	(1,112		)
Total increase (decrease) in property rentals		51,724			22,839			20,318			9,606			(1,039		)
Tenant expense reimbursements:
Acquisitions		4,290			238			4,052			—			—
Operations		20,098			17,108		(6)	1,840			1,648			(498		)
Total increase (decrease) in tenant expense reimbursements		24,388			17,346			5,892			1,648			(498		)
Fee and other income
Acquisitions:
BMS Tenant cleaning fees		28,968			28,968			—			—			—
Kaempfer management and leasing fees		2,441			2,441			—			—			—
Increase (decrease) in:
Lease cancellation fee income		4,429			514			2,056			1,859			—
Management and leasing fees		(3,844		)	(3,667		)(7)	(160		)	(17		)	—
Other		3,083			(15		)	2,466			726			(94		)
Total increase (decrease) in fee and other income		35,077			28,241			4,362			2,568			(94		)
Total increase (decrease) in revenues		$	111,189		$	68,426		$	30,572		$	13,822		$	(1,631	)

See notes on following page.

See Leasing Activity on page 54 for further details and corresponding changes in occupancy.

73

Notes to preceding tabular information:

(1)Average occupancy and REVPAR for the Hotel Pennsylvania were 64% and $58 for the year ended December 31, 2003 compared to 65% and $58 for the prior year.

(2)Reflects an increase of $2,841 resulting from the rescheduling of two trade shows from the fourth quarter of 2002, in which they were previously held to the first quarter of 2003, and $1,400 relates to a new show held for the first time in 2003, partially offset by lower trade show revenue in 2003 primarily due to a smaller April Market show as a result of a conversion of trade show space to permanent space.

(3)Reflects increases of $12,953 from New York City Office leasing activity and $3,413 from CESCR’s leasing activity.  These increases resulted primarily from higher rents for space relet in 2003 and 2002 (full year impact in 2003 as compared to a partial year in 2002) and an increase in CESCR occupancy of .3% this year, partially offset by a decrease in NYC office occupancy of .6%.  Initial rent for the 677 square feet of space relet in New York City was $44.41 per square foot in 2003, a 15.3% increase over prior escalated rent.  Initial rent for the 2,510 square feet of space relet in CESCR portfolio was $30.62 per square foot a 2.5% increase over prior escalated rents.  For further details of NYC and CESCR office leasing activity see page 54.

(4)Resulted primarily from (i) an increase in the occupancy rate from 88.3% at December 31, 2002 to 93.0% at December 31, 2003 as a result of leasing space previously vacated by Bradlees and Kmart and (ii) higher rents for space relet in 2003 and 2002 (full year impact in 2003 as compared to a partial year in 2002).  Initial rent for the 1,046 square feet of space relet in 2003 was $15.56 per square foot, a 13.2% increase over prior rent.  For further details of Retail leasing activity see page 54.

(5)Reflects an increase in occupancy of Merchandise Mart office space of 0.9% from 2002, higher rents for 1,157 square feet of showroom space relet in 2003 and 911 square feet relet in 2002 (full year impact in 2003 as compared to partial year impact in 2002), partially offset by a decrease in Merchandise Mart showroom occupancy of .1% from 2002 and lower rents for 270 square feet of office space relet in 2003.  Initial rents for the 1,157 square feet of showroom space relet in 2003 was $23.43, a 0.6% increase over prior escalated rent.  Initial rents for the 270 square feet of office space relet in 2003 was $21.24, a 5.3% decrease over prior escalated rent.  For further details of Merchandise Mart leasing activity see page 54.

(6)Reflects higher reimbursements from tenants resulting primarily from increases in real estate taxes.  The increases in Office and Retail were $19,383 and $3,247, before reductions of $2,215 and $1,407 in the current quarter relating to the true-up of prior year’s billings.

(7)Results primarily from a $3,444 decrease in CESCR third party leasing revenue from $7,100 in 2002 to $3,656 in 2003 as a result of the closing of one of the CESCR leasing offices.

74

Expenses

The Company’s expenses were $917,086,000 for the year ended December 31, 2003, compared to $850,071,000 in the prior year, an increase of $67,015,000.  Below are the details of the increase (decrease) by segment:

(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Other
Operating:
Acquisitions:
BMS	$	19,789		$	19,789		$	—		$	—		$	—
Las Catalinas (acquisition of remaining 50% and consolidation vs. equity method accounting for 50%)	3,007			—			3,007			—			—
Crystal Gateway One	1,742			1,742			—			—			—
Bergen Mall	399			—			399			—			—
2101 L Street	1,531			1,531			—			—			—
435 Seventh Avenue	503			—			503			—			—
424 Sixth Avenue	98			—			98			—			—
Hotel activity	2,769			—			—			—			2,769		(1)
Trade Shows activity	1,487			—			—			1,487		(2)	—
Operations	32,267		(3)	23,752		(3)	4,955		(3)	3,524		(3)	36		(3)
	63,592			46,814			8,962			5,011			2,805
Depreciation and amortization:
Acquisitions	5,966			4,026			1,940			—			—
Operations	10,009			4,900		(4)	1,938			3,409		(4)	(238		)
	15,975			8,926			3,878			3,409			(238		)
General and administrative:
Acquisitions	4,915			4,274			641			—			—
Operations	16,907		(5)	(364		)	1,502			(167		)	15,936
	21,822			3,910			2,143			(167		)	15,936
Costs of acquisitions and development not consummated	(6,874		)	—			—			—			(6,874		)
Amortization of officer’s deferred compensation expense	(27,500		)	—			—			—			(27,500		)
Total increase (decrease) in expenses	$	67,015		$	59,650		$	14,983		$	8,253		$	(15,871	)

See notes on following page.

75

Notes to preceding tabular information:

(1)The increase in Hotel Pennsylvania’s operating expenses was primarily due to a $1,700 increase in real estate taxes and a $500 increase in utility costs over the prior year.

(2)Results primarily from the rescheduling of two trade shows from the fourth quarter of 2002, in which they were previously held to the first quarter of 2003, and due to a new trade show held for the first time in 2003.

(3)Below are the details of the increases (decreases) in operating expenses by segment:

	Total			Office			Retail			Merchandise Mart			Other
Real estate taxes	$	26,935		$	20,904	(a)	$	1,245		$	4,724		$	62
Utilities	(946		)	(906		)	364			(483		)	79
Maintenance	5,286			2,997			2,302			(33		)	20
Ground rent	950			1,005			(55		)	—			—
Bad debt expense	(29		)	(1,541		)	1,238			274			—
Other	71			1,293			(139		)	(958		)	(125		)
	$	32,267		$	23,752		$	4,955		$	3,524		$	36

(a) Relates primarily to an increase in New York Office.

(4)Increases in depreciation and amortization for the Office and Merchandise Mart segments are primarily due to additions to buildings and improvements.

(5)The increase in general and administrative expenses results from:

Increase in professional fees in connection with information technology, corporate governance, insurance, and other projects	$	4,675
Severance payments in 2003 to two senior executives ($3,211) and the non-cash charge related to the accelerated vesting of their restricted stock ($1,626)	4,837
Other severance	860
Increase in corporate payroll and fringe benefits of which $755 is due to a decrease in capitalized development payroll and $407 is due to the Company’s deferred compensation plan (offset by an equal amount of investment income)	2,872
Costs in connection with the relocation of CESCR’s back office operations to the Company’s administrative headquarters in New Jersey	1,123
Stock compensation expense (see below)	1,898
Other	642
	$	16,907

As part of the 2002 annual compensation review, in lieu of stock options, on January 28, 2003 the Company granted 166,990 restricted shares at $34.50 per share (the then closing stock price on the NYSE) to employees of the Company.  These awards vest over a 5-year period.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period.  In the year ended December 31, 2003, the Company recognized stock-based compensation expense of $1,898,000 (excluding severance charges), of which $1,020,000 related to January 2003 restricted stock awards.

76

Income Applicable to Alexander’s

Income applicable to Alexander’s (interest income, management, leasing, development and commitment fees, and equity in income) was $15,574,000 for the year ended December 31, 2003, compared to $29,653,000 in the prior year, a decrease of $14,079,000.  This decrease resulted primarily from (i) Alexander’s stock appreciation rights compensation expense of which the Company’s share was $14,868,000 in 2003 compared to zero in 2002, partially offset by (ii) Alexander’s gain on the sale of its Third Avenue property of which the Company’s share was $3,524,000 in 2002, and (iii) income resulting from the commencement of the lease with Bloomberg (87% of the space) on November 15, 2003 at Alexander’s 731 Lexington Avenue property of which the Company’s share was $1,589,000.

Income from Partially-Owned Entities

Below are the condensed statements of operations of the Company’s unconsolidated subsidiaries as well as the increase (decrease) in income from these partially-owned entities for the years ended December 31, 2003 and 2002:

(Amounts in thousands) For the year ended:	Total		Newkirk MLP			Temperature Controlled Logistics			Monmouth Mall			Partially- Owned Office Buildings			Starwood Ceruzzi Joint Venture			Las Catalinas Mall			Other
December 31, 2003:
Revenues			$	273,500		$	119,605		$	24,121		$	99,590		$	4,394
Expenses:
Operating, general and administrative			(15,357		)	(6,905		)	(10,520		)	(39,724		)	(3,381		)
Depreciation			(51,777		)	(56,778		)	(4,018		)	(18,491		)	(998		)
Interest expense			(97,944		)	(41,117		)	(6,088		)	(27,548		)	—
Other, net			43,083			5,710			(3,220		)	2,516			(866		)
Net income (loss)			$	151,505		$	20,515		$	275		$	16,343		$	(851	)
Vornado’s interest			22.6		%	60		%	50		%	15		%	80		%
Equity in net income (loss)	$	51,057	$	33,243	(1)	$	12,869	(2)	$	138		$	2,426		$	(681	)				$	3,062
Interest and other income	10,292		7,002			—			3,290		(3)	—			—						—
Fee income	6,552		—			5,547			1,005			—			—						—
Income (loss) from partially-owned entities	$	67,901	$	40,245		$	18,416		$	4,433		$	2,426		$	(681	)	N/A		(4)	$	3,062
December 31, 2002:
Revenues			$	295,369		$	117,663		$	5,760		$	50,205		$	695		$	10,671
Expenses:
Operating, general and administrative			(8,490		)	(7,904		)	(2,510		)	(21,827		)	(2,265		)	(3,102		)
Depreciation			(34,010		)	(59,328		)	(943		)	(9,094		)	(1,430		)	(1,482		)
Interest expense			(121,219		)	(42,695		)	(1,520		)	(11,354		)	—			(3,643		)
Other, net			(9,790		)	(2,150		)	48			389			(200		)	(802		)
Net income (loss)			$	121,860		$	5,586		$	835		$	8,319		$	(3,200	)	$	1,642
Vornado’s interest			21.7		%	60		%	50		%	24		%	80		%	50		%
Equity in net income (loss)	$	30,664	$	26,500		$	4,144		$	791	(3)	$	1,966		$	(2,560	)	$	851		$	(1,028	)
Interest and other income	8,000		8,000			—			—			—			—			—			—
Fee income	5,794		—			5,563			231			—			—			—			—
Income (loss) from partially-owned entities	$	44,458	$	34,500		$	9,707		$	1,022		$	1,966		$	(2,560	)	$	851		$	(1,028	)
Increase (decrease) in income from partially-owned entities	$	23,443	$	5,745	(1)	$	8,709	(2)	$	3,411	(3)	$	460		$	1,879		$	(851	)(4)	$	4,090

See notes on following page.

77

Notes to preceding tabular information:

(1)The increase reflects the Company’s share of the following items from the Newkirk MLP in 2003 including (i) $7,200 of net gains on the sale of 11 properties, (ii) a gain of $1,600 on the early extinguishment of debt, partially offset by, (iii) a charge of $538 in connection with a litigation claim, (iv) a charge of $353 for an asset impairment and (v) $930 in Federal and state taxes.

(2)The Company reflects its 60% share of Vornado Crescent Portland Partnership’s (the “Landlord”) rental income it receives from AmeriCold Logistics, its tenant, which leases the underlying temperature controlled warehouses used in its business.  The Company’s joint venture does not recognize rental income unless earned and collection is assured or cash is received.  The Company did not recognize $25,087 of rent it was due for the year ended December 31, 2003, which together with previously deferred rent was $49,436 at December 31, 2003.  The following summarizes the increase in income for the year ended December 31, 2003 over the prior year:

Increase in rent from Tenant	$	1,220
Decrease in general and administrative expenses	544
Gain on sale of real estate in 2003 ($486) as compared to a loss on sale of real estate in 2002 ($2,026)	2,512
Income tax refund received in 2003	1,345
Decrease in depreciation and interest expense and other	3,088
	$	8,709

(3)The Company acquired a 50% interest in the Monmouth Mall on October 10, 2002.  Equity in net income of the Monmouth Mall includes the Company’s preferred return of $3,290 and $748 for the years ended December 31, 2003 and 2002.

(4)On September 23, 2002, the Company acquired the remaining 50% of the Mall and 25% of the Kmart anchor store it did not previously own.  Accordingly, the operations of Las Catalinas are consolidated into the accounts of the Company subsequent to September 23, 2002.

78

Interest and Other Investment Income

Interest and other investment income (interest income on mortgage loans receivable, other interest income and dividend income) was $25,397,000 for the year ended December 31, 2003, compared to $31,678,000 in the year ended December 31, 2002, a decrease of $6,281,000.  This decrease resulted primarily from (i) lower average investments at lower yields, partially offset by (ii) $5,655,000 of contingent interest income recognized in connection with the repayment of the Dearborn Center loan and (iii) $5,028,000 of interest income recognized on the $225,000,000 GM Building mezzanine loans, for the period from October 20, 2003 through December 31, 2003.

Interest and Debt Expense

Interest and debt expense was $228,860,000 for the year ended December 31, 2003, compared to $232,891,000 in the year ended December 31, 2002, a decrease of $4,031,000.  This decrease was primarily comprised of a $11,285,000 savings from a 77 basis point reduction in weighted average interest rates of the Company’s variable rate debt, partially offset by (i) the consolidation as of September 2002 of the Las Catalinas operations which were previously included in income from partially-owned entities, (ii) a full year of interest expense on the Company’s $500,000,000 Senior Unsecured Notes due 2007 which were issued in June 2002 and (iii) a reduction in interest capitalized in connection with development projects.

Net (Loss) Gain on Disposition of Wholly-owned and Partially-owned Assets other than Depreciable Real Estate

The following table sets forth the details of net (loss) gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate for the years ended December 31, 2003 and 2002:

	For the Year Ended December 31,
(Amounts in thousands)	2003			2002
Wholly-owned Assets:
Net gain on sale of marketable securities	$	2,950		$	12,346
Loss on settlement of Primestone guarantees (2003) and foreclosure and impairment losses (2002)	(1,388		)	(35,757		)
Gain on sale of land parcels	499			—
Gain on sale of residential condominiums units	282			2,156
Gain on transfer of mortgages	—			2,096
Net gain on sale of air rights	—			1,688
	$	2,343		$	(17,471	)

Primestone Foreclosure and Impairment Losses

On September 28, 2000, the Company made a $62,000,000 loan to Primestone Investment Partners, L.P. (“Primestone”).  The loan bore interest at 16% per annum.  Primestone defaulted on the repayment of this loan on October 25, 2001. The loan was subordinate to $37,957,000 of other debt of the borrower that liened the Company’s collateral. On October 31, 2001, the Company purchased the other debt for its face amount.  The loans were secured by 7,944,893 partnership units in Prime Group Realty, L.P., the operating partnership of Prime Group Realty Trust (NYSE:PGE) and the partnership units are exchangeable for the same number of common shares of PGE.  The loans were also guaranteed by affiliates of Primestone.

On November 19, 2001, the Company sold, pursuant to a participation agreement with a subsidiary of Cadim inc., a Canadian pension fund, a 50% participation in both loans at par for approximately $50,000,000 reducing the Company’s net investment in the loans at December 31, 2001 to $56,768,000 including unpaid interest and fees of $6,790,000.  The participation did not meet the criteria for “sale accounting” under SFAS 140 because Cadim was not free to pledge or exchange the assets.

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On April 30, 2002, the Company and Cadim acquired the 7,944,893 partnership units at a foreclosure auction.   The price paid for the units by application of a portion of Primestone’s indebtedness to the Company and Cadim was $8.35 per unit, the April 30, 2002 closing price of shares of PGE on the New York Stock Exchange.  On June 28, 2002, pursuant to the terms of the participation agreement, the Company transferred 3,972,447 of the partnership units to Cadim.

In the second quarter of 2002, in accordance with foreclosure accounting, the Company recorded a loss on the Primestone foreclosure of $17,671,000 calculated based on (i) the acquisition price of the units and (ii) its valuation of the amounts realizable under the guarantees by affiliates of Primestone, as compared with the net carrying amount of the investment at April 30, 2002.   In the third quarter of 2002, the Company recorded a $2,229,000 write-down on its investment based on costs expended to realize the value of the guarantees.  Further, in the fourth quarter of 2002, the Company recorded a $15,857,000 write-down of its investment in Prime Group consisting of (i) $14,857,000 to adjust the carrying amount of the Prime Group units to $4.61 per unit, the closing price of PGE shares on the New York Stock Exchange at December 31, 2002 and (ii) $1,000,000 for estimated costs to realize the value of the guarantees.  The Company considered the decline in the value of the units which are convertible into stock to be other than temporary as of December 31, 2002, based on the fact that the market value of the stock had been less than its cost for more than six months, the severity of the decline, market trends, the financial condition and near-term prospects of Prime Group and other relevant factors.

At December 31, 2002, the Company’s carrying amount of the investment was $23,908,000, of which $18,313,000 represents the carrying amount of the 3,972,447 partnership units owned by the Company ($4.61 per unit), $6,100,000 represents the amount expected to be realized under the guarantees, partially offset by $1,005,000 representing the Company’s share of Prime Group’s net loss through September 30, 2002, as the Company recorded its share of Prime Group’s earnings on a one-quarter lag basis.

On June 11, 2003, the Company exercised its right to exchange the 3,972,447 units it owned in Prime Group Realty L.P. for 3,972,447 common shares in Prime Group Realty Trust.  Prior to the exchange, the Company accounted for its investment in the partnership on the equity method.  Subsequent to the exchange, the Company is accounting for its investment in PGE as a marketable equity security-available for sale, as the Company’s shares represent less than a 20% ownership interest in PGE (which is not a partnership), the Company does not have significant influence and the common shares have a readily determinable fair value.  Accordingly, the carrying amount previously included in Investments and Advances to Partially-Owned Entities was reclassified to Marketable Securities on the Company’s consolidated balance sheet.  The Company is also required to mark these securities to market based on the closing price of the PGE shares on the NYSE at the end of each reporting period.  For the period from June 11, 2003 through December 31, 2003, the Company recorded a $6,623,000 unrealized gain, which is not included in the Company’s net income, but is reflected as a component of Accumulated Other Comprehensive Income in the Partners’ Capital section of the consolidated balance sheet.  From the date of exchange, income recognition is limited to dividends received on the PGE shares.

On June 13, 2003, the Company received its $5,000,000 share of a settlement with affiliates of Primestone Investment Partners of the amounts due under the guarantees of the Primestone loans.  In connection therewith, the Company recognized a $1,388,000 loss on settlement of the guarantees, which has been reflected as a component of “net gains on disposition of wholly-owned and partially-owned assets” in the Company’s 2003 consolidated statement of income.

Gain on Transfer of Mortgages

In the year ended December 31, 2002, the Company recorded a net gain of $2,096,000 resulting from payments to the Company by third parties that assumed certain of the Company’s mortgages.  Under these transactions the Company paid to the third parties that assumed the Company’s obligations the outstanding amounts due under the mortgages and the third parties paid the Company for the benefit of assuming the mortgages.  The Company has been released by the creditors underlying these loans.

Net Gain on Sale of Air Rights

In 2002, the Company constructed a $16.3 million community facility and low-income residential housing development (the “30th Street Venture”), in order to receive 163,728 square feet of transferable development rights, generally referred to as “air rights”.  The Company donated the building to a charitable organization.  The Company sold 106,796 square feet of these air rights to third parties at an average price of $120 per square foot.  An additional 28,821 square feet of air rights was sold to Alexander’s at a price of $120 per square foot for use at Alexander’s 59th Street development project (the “59th Street Project”).  In each case, the Company received cash in exchange for air rights.  The Company identified third party buyers for the remaining 28,111 square feet of air rights of the 30th Street Venture.  These third party buyers wanted to use the air rights

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for the development of two projects located in the general area of 86th Street which was not within the required geographical radius of the construction site nor in the same Community Board as the low-income housing and community facility project.  The 30th Street Venture asked Alexander’s to sell 28,111 square feet of the air rights it already owned to the third party buyers (who could use them) and the 30th Street Venture would replace them with 28,111 square feet of air rights.  In October 2002, the Company sold 28,111 square feet of air rights to Alexander’s for an aggregate sales price of $3,059,000 (an average of $109 per square foot).   Alexander’s then sold an equal amount of air rights to the third party buyers for an aggregate sales price of $3,339,000 (an average of $119 per square foot).

NetGains on Sale of Residential Condominium Units

The Company recognized net gains of $282,000 and $2,156,000 during 2003 and 2002, from the sale of residential condominiums.

Discontinued Operations

Assets related to discontinued operations consist primarily of real estate, net of accumulated depreciation.  The following table sets forth the balances of the assets related to discontinued operations as of December 31, 2003 and 2002.

	December 31,
(Amounts in thousands)	2003		2002
Palisades (sold on June 29, 2004)	$	138,629	$	142,333
400 North LaSalle	80,685		27,600
Arlington Plaza	36,109		36,666
Baltimore (Dundalk) (sold on August 12, 2004)	2,167		2,050
Vineland	908		978
Two Park Avenue (sold on October 10, 2003)	—		123,076
Baltimore (sold on January 9, 2003)	—		2,218
Hagerstown (sold on November 3, 2003)	—		1,013
	$	258,498	$	335,934

The following table sets forth the balances of the liabilities related to discontinued operations (primarily mortgage notes payable) as of December 31, 2003 and 2002.

	December 31,
(Amounts in thousands)	2003		2002
Palisades (sold on June 29, 2004)	$	120,000	$	100,000
Arlington Plaza	16,487		17,054
400 North LaSalle	3,038		—
	$	139,525	$	117,054

The combined results of operations of the assets related to discontinued operations for the years ended December 31, 2003 and 2002 are as follows:

	December 31,
(Amounts in thousands)	2003		2002
Total Revenues	$	47,770	$	48,283
Total Expenses	33,171		36,468
Net income	14,599		11,815
Net gains on sales of real estate	161,789		—
Income from discontinued operations	$	176,388	$	11,815

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On January 9, 2003, the Company sold its Baltimore, Maryland shopping center for $4,752,000, which resulted in a net gain after closing costs of $2,644,000.

On October 10, 2003, the Company sold Two Park Avenue, a 965,000 square–foot office building, for $292,000,000, which resulted in a net gain on the sale after closing costs of $156,433,000.

On November 3, 2003, the Company sold its Hagerstown, Maryland shopping center for $3,100,000, which resulted in a net gain on sale after closing costs of $1,945,000.

Cumulative Effect of Change in Accounting Principle

In September 2001, the Financial Accounting Standards Board issued SFAS No. 142, Goodwill and Other Intangible Assets (effective January 1, 2002).  SFAS No. 142 specifies that goodwill and some intangible assets will no longer be amortized but instead be subject to periodic impairment testing.  In the first quarter of 2002, the Company wrote-off goodwill of approximately $30,129,000 of which (i) $15,490,000 represents its share of the goodwill arising from the Company’s investment in Temperature Controlled Logistics and (ii) $14,639,000 represents goodwill arising from the Company’s acquisition of the Hotel Pennsylvania.  The write-off was reflected as a cumulative effect of a change in accounting principle in the 2002 consolidated statement income.

EBITDA

Below are the details of the changes by segment in EBITDA.

(Amounts in thousands)	Total		Office			Retail			Merchandise Mart			Temperature Controlled Logistics			Other
Year ended December 31, 2002	$	964,058	$	610,531		$	114,498		$	110,327		$	69,798		$	58,904
2003 Operations:
Same store operations(1)			5,670			5,086			4,445			3,517		(3)
Acquisitions, dispositions and non-same store income and expenses			164,488			24,535			3,115			4,650
Year ended December 31, 2003	$	1,215,744	$	780,689		$	144,119		$	117,887		$	77,965		$	95,084
% increase in same store operations			1.0		%(2)	4.5		%	4.1		%	4.8		%(3)

(1)Represents operations which were owned for the same period in each year and excludes non-recurring income and expenses which are included in acquisitions, dispositions and non-same store income and expenses above.

(2)EBITDA and the same store percentage increase (decrease) were $488,419 ($331,886 excluding gains on sale of real estate of $156,533) and 3.3% (excluding such gains) for the New York office portfolio and $292,270 and (1.7%) for the CESCR portfolio.  36% of the same store decrease at CESCR reflects a reduction in third party net leasing fees.

(3)The Company reflects its 60% share of Vornado Crescent Portland Partnership’s (the “Landlord”) rental income it receives from AmeriCold Logistics, its tenant, which leases the underlying temperature controlled warehouses used in its business.  The Company’s joint venture does not recognize rental income unless earned and collection is assured or cash is received.  The Company did not recognize $25,087 of rent it was due for the year ended December 31, 2003, which together with previously deferred rent is $49,436.  The tenant has advised the Landlord that (i) its revenue for the year ended December 31, 2003 from the warehouses it leases from the Landlord, is lower than last year by 1.3%, and (ii) its gross profit before rent at these warehouses for the corresponding period is higher than last year by $607 (a 0.4% increase).  In addition, in 2003, the tenant and the Landlord had lower general and administrative expenses and the Landlord received $885 of EBITDA from its investment in the quarries it acquired in December 2002 which was reflected in the gross profit of the tenant in the prior year.

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Supplemental Information

Three Months Ended December 31, 2004 and December 31, 2003

Below is a summary of Net Income and EBITDA(1) by segment for the three months ended December 31, 2004 and 2003.

	For The Three Months Ended December 31, 2004
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	326,684		$	208,933		$	45,025		$	54,787		$	—		$	17,939
Straight-line rents:
Contractual rent increases	9,795			7,332			1,280			1,092			—			91
Amortization of free rent	7,507			3,312			2,366			1,828			—			1
Amortization of acquired below market leases, net	3,268			1,928			1,340			—			—			—
Total rentals	347,254			221,505			50,011			57,707			—			18,031
Expense reimbursements	49,381			28,545			18,488			1,434			—			914
Temperature Controlled Logistics	87,428			—			—			—			87,428			—
Fee and other income:
Tenant cleaning fees	8,606			8,606			—			—			—			—
Management and leasing fees	3,560			3,278			296			5			—			(19		)
Other	8,485			4,814			50			3,607			—			14
Total revenues	504,714			266,748			68,845			62,753			87,428			18,940
Operating expenses	223,575			102,016			20,561			23,094			67,989			9,915
Depreciation and amortization	70,521			42,300			7,410			9,898			7,968			2,945
General and administrative	55,062			9,863			3,681			6,744			4,264			30,510
Total expenses	349,158			154,179			31,652			39,736			80,221			43,370
Operating income (loss)	155,556			112,569			37,193			23,017			7,207			(24,430		)
Income applicable to Alexander’s	4,203			88			174			—			—			3,941
Income from partially-owned entities	9,739			749			556			64			37			8,333
Interest and other investment income	167,331			361			180			22			220			166,548
Interest and debt expense	(65,883		)	(31,212		)	(14,144		)	(2,799		)	(6,379		)	(11,349		)
Net gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate	18,999			369			—			—			—			18,630
Minority interest	(158		)	—			—			—			(158		)	—
Income from continuing operations	289,787			82,924			23,959			20,304			927			161,673
Income (loss) from discontinued operations	201			252			(189		)	—			—			138
Net income	289,988			83,176			23,770			20,304			927			161,811
Interest and debt expense (2)	78,474			32,473			15,022			3,025			7,326			20,628
Depreciation and amortization(2)	78,378			43,409			8,690			10,031			8,601			7,647
Income taxes	829			113			—			573			79			64
EBITDA(1)	$	447,669		$	159,171		$	47,482		$	33,933		$	16,933		$	190,150

See notes on page 85.

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	For The Three Months Ended December 31, 2003
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)		Other (4)
Property rentals	$	309,598		$	205,493		$	35,442		$	51,906		$	—	$	16,757
Straight-line rents:
Contractual rent increases	7,740			5,102			173			2,504			—		(39		)
Amortization of free rent	2,423			237			1,415			780			—		(9		)
Amortization of acquired below market leases, net	2,189			1,640			549			—			—		—
Total rentals	321,950			212,472			37,579			55,190			—		16,709
Expense reimbursements	45,476			27,893			14,275			2,949			—		359
Fee and other income:
Tenant cleaning fees	7,300			7,300			—			—			—		—
Management and leasing fees	3,031			2,620			347			—			—		64
Other	7,592			2,292			326			5,026			—		(52		)
Total revenues	385,349			252,577			52,527			63,165			—		17,080
Operating expenses	147,766			92,839			17,153			26,391			—		11,383
Depreciation and amortization	58,892			39,969			6,322			8,924			—		3,677
General and administrative	35,324			10,426			2,177			5,872			—		16,849
Total expenses	241,982			143,234			25,652			41,187			—		31,909
Operating income (loss)	143,367			109,343			26,875			21,978			—		(14,829		)
Income applicable to Alexander’s	3,233			—			161			—			—		3,072
Income (loss) from partially-owned entities	13,736			358			847			(253		)	7,213		5,571
Interest and other investment income	9,176			1,066			211			10			—		7,889
Interest and debt expense	(58,575		)	(33,288		)	(14,780		)	(3,637		)	—		(6,870		)
Net gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate	2,950			—			—			—			—		2,950
Minority interest	8			—			—			—			—		8
Income (loss) from continuing operations	113,895			77,479			13,314			18,098			7,213		(2,209		)
Income (loss) from discontinued operations	158,541			157,468			1,998			—			—		(925		)
Net income (loss)	272,436			234,947			15,312			18,098			7,213		(3,134		)
Interest and debt expense(2)	72,841			34,555			15,583			3,854			6,158		12,691
Depreciation and amortization(2)	78,270			40,871			6,796			9,282			8,722		12,599
Income taxes	1,627			45			—			—			—		1,582
EBITDA(1)	$	425,174		$	310,418		$	37,691		$	31,234		$	22,093	$	23,738

See notes on following page.

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Notes to preceding tabular information:

(1)EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.”  EBITDA should not be considered a substitute for net income.  EBITDA may not be comparable to similarly titled measures employed by other companies.

(2)Interest and debt expense and depreciation and amortization included in the reconciliation of net income to EBITDA reflects amounts which are netted in income from partially-owned entities.

(3)Operating results for the year ended December 31, 2004, reflect the consolidation of the Company’s investment in Americold beginning on November 18, 2004.  Previously, this investment was accounted for on the equity method.  See page 88 for condensed proforma operating results of Americold for the three months ended December 31, 2004 and 2003, giving effect to the acquisition of its tenant, AmeriCold Logistics, as if it had occurred on January 1, 2003.

(4)Other EBITDA is comprised of:

	For the Three Months Ended December 31,
(Amounts in thousands)	2004			2003
Newkirk:
Equity in income of MLP	$	13,746		$	15,119
Interest and other income	2,540			2,311
Alexander’s	8,839			5,896
Hotel Pennsylvania	7,680			4,023
Industrial warehouses	1,506			1,365
Student Housing	186			494
	34,497			29,208
Minority interest expense	—			8
Corporate general and administrative expenses	(29,488		)	(16,758		)
Investment income and other (a)	184,311			7,069
Discontinued Operations:
Palisades	(7		)	1,697
400 North LaSalle	837			(436		)
Gains on sale of marketable securities	—			2,950
	$	190,150		$	23,738

(a)The three months ended December 31, 2004 includes (i) $81,730 of income from the mark-to-market of the Sears’ option position, (ii) $29,452 of net gain on exercise of GMH warrants for limited partnership units, (iii) $24,190 of income from the mark-to-market of the remaining GMH warrants, (iv) $11,081 of interest income on $159,000 GMH commitment, (v) $22,187 of interest income on the GM building mezzanine loans and (vi) $4,771 of interest income on the repayment of the Company’s loan to Vornado Operating.

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In comparing the financial results of the Company’s segments on a sequential quarterly basis, the following should be noted:

•The third quarter of the Office and Merchandise Mart segments have historically been impacted by higher net utility costs than in each other quarter of the year;

•The fourth quarter of the Retail segment has historically been higher than each of the first three quarters due to the recognition of percentage rental income; and

•The second and fourth quarter of the Merchandise Mart segment have historically been higher than the first and third quarters due to major trade shows occurring in those quarters.

Below are the details of the changes by segment in EBITDA for the three months ended December 31, 2004 compared to the three months ended December 31, 2003.

(Amounts in thousands)	Total		Office			Retail			Merchandise Mart			Temperature Controlled Logistics			Other
Three months ended December 31, 2003	$	425,174	$	310,418		$	37,691		$	31,234		$	22,093		$	23,738
2004 Operations:
Same store operations(1)			2,872			2,223			2,829		(3)	—
Acquisitions, dispositions and non-recurring income and expenses			(154,119		)	7,568			(130		)	(5,160		)
Three months ended December 31, 2004	$	447,669	$	159,171		$	47,482		$	33,933		$	16,933		$	190,150
% increase in same store operations			1.9		%(2)	6.2		%	9.7		%(3)	N/A		%(4)

(1)Represents operations, which were owned for the same period in each year.

(2)EBITDA and same store percentage increase (decrease) was $87,445 and 4.8% for the New York City office portfolio and $71,726 and (1.2%) for the CESCR portfolio.

(3)EBITDA and the same store percentage increase reflect the commencement of leases with WPP Group (228,000 square feet) in the third quarter of 2004 and the Chicago Sun Times (127,000 square feet) in the second quarter of 2004.  EBITDA for the year ended December 31, 2004, exclusive of the incremental impact of these leases was $31,844, representing a 2.5% same store percentage increase.

(4)Not comparable because prior to November 4, 2004, (date the operations of AmeriCold Logistics were combined with Americold), the Company reflected its equity in the rent Americold received from AmeriCold Logistics.  Subsequent thereto, the Company reflects its equity in the operations of the combined company.  See page 88 for condensed proforma operating results of Americold for the three months ended December 31, 2004 and 2003, giving effect to the acquisition of its tenant, AmeriCold Logistics, as if it had occurred on January 1, 2003.

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Below are the details of the changes by segment in EBITDA for the three months ended December 31, 2004 compared to the three months ended September 30, 2004:

(Amounts in thousands)	Total		Office			Retail			Merchandise Mart			Temperature Controlled Logistics			Other
Three months ended September 30, 2004	$	297,209	$	165,704		$	52,148		$	30,591		$	19,191		$	29,575
2004 Operations:
Same store operations(1)			1,948			3,721			1,998		(4)	—
Acquisitions, dispositions and non-recurring income and expenses			(8,481		)	(8,387		)(3)	1,344			(2,258		)
Three months ended December 31, 2004	$	447,669	$	159,171		$	47,482		$	33,933		$	16,933		$	190,150
% increase in same store operations			1.3		%(2)	9.0		%	6.7		%(4)	N/A		(5)

(1)Represents operations, which were owned for the same period in each year.

(2)EBITDA and same store percentage increase (decrease) was $87,445 and 4.7% for the New York City office portfolio and $71,726 and (2.4%) for the CESCR portfolio.

(3)EBITDA for the three months ended September 30, 2004 includes a gain on the sale of the Company’s Dundalk Shopping Center of $9,850.

(4)Primarily due to seasonality of trade shows operations.

(5)Not comparable because prior to November 4, 2004, (date the operations of AmeriCold Logistics were combined with Americold), the Company reflected its equity in the rent Americold received from AmeriCold Logistics.  Subsequent thereto, the Company reflects its equity in the operations of the combined company.  See page 88 for condensed proforma operating results of Americold for the three months ended December 31, 2004 and 2003, giving effect to the acquisition of its tenant, AmeriCold Logistics, as if it had occurred on January 1, 2003.

Below is a reconciliation of net income and EBITDA for the three months ended September 30, 2004.

(Amounts in thousands)	Total		Office		Retail		Merchandise Mart		Temperature Controlled Logistics		Other
Net income for the three months ended September 30, 2004	$	141,973	$	88,666	$	29,648	$	19,299	$	2,781	$	1,579
Interest and debt expense	80,335		34,092		15,720		3,013		7,796		19,714
Depreciation and amortization	74,294		42,673		6,780		8,000		8,614		8,227
Income taxes	607		273		—		279		—		55
EBITDA for the three months ended September 30, 2004	$	297,209	$	165,704	$	52,148	$	30,591	$	19,191	$	29,575

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Investment in Americold Realty Trust

Prior to November 18, 2004, the Company owned a 60% interest in Vornado Crescent Portland Partnership (“VCPP”) which owned Americold Realty Trust (“Americold”).  Americold owns 88 temperature controlled warehouses, all of which were leased to AmeriCold Logistics.  On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  On November 18, 2004, the Company and its 40% partner, Crescent Real Estate Equities Company (“CEI”) collectively sold 20.7% of Americold’s common shares to The Yucaipa Companies (“Yucaipa”) for $145,000,000, which resulted in a gain, of which the Company’s share was $18,789,000. The sale price was based on a $1.450 billion valuation for Americold before debt and other obligations.  Yucaipa is a private equity firm with significant expertise in the food distribution, logistics and retail industries.  Upon closing of the sale to Yucaipa on November 18, 2004, Americold is owned 47.6% by the Company, 31.7% by CEI and 20.7% by Yucaipa. Pursuant to the sales agreement: (i) Yucaipa may earn a promote of 20% of the increase in the value of Americold through December 31, 2007, limited to 10% of the Company’s and CEI’s remaining interest in Americold; (ii) the annual asset management fee payable by CEI to the Company has been reduced from approximately $5,500,000 to $4,548,000, payable quarterly through October 30, 2027.  CEI, at its option, may terminate the payment of this fee at any time after November 2009, by paying the Company a termination fee equal to the present value of the remaining payments through October 30, 2007, discounted at 10%.  In addition, CEI is obligated to pay a pro rata portion of the termination fee to the extent it sells a portion of its equity interest in Americold; and (iii) VCPP was dissolved.  The Company has the right to appoint three of the five members to Americold’s Board of Trustees.  Consequently, the Company is deemed to exercise control over Americold and, on November 18, 2004, the Company began to consolidate the operations and financial position of Americold into its accounts and no longer accounts for its investment on the equity method.

The following is a pro forma presentation of the results of operations of Americold for the three months and years ended December 31, 2004 and 2003, giving effect to the acquisition of AmeriCold Logistics as if it had occurred on January 1, 2003.

(Amounts in thousands)	For the Year Ended December 31,						For the Three Months Ended December 31,
	2004			2003			2004			2003
Revenue	$	701,707		$	655,286		$	191,595		$	176,610
Cost of operations	545,971			482,284			146,694			128,390
Gross margin	155,736			173,002			44,901			48,220
Depreciation, depletion and amortization	72,059			71,860			17,666			17,950
Interest expense	52,285			41,634			13,799			10,440
General and administrative expense	32,940			35,355			6,946			10,426
Other expense (income), net	11,137			(601		)	5,879			(1,778		)
Net (loss) income	(12,685		)	24,754			611			11,182
Depreciation and amortization	71,622			71,386			17,567			17,836
Interest expense	52,285			41,634			13,799			10,440
Income taxes	4,640			1,989			775			(1,344		)
EBITDA	$	115,862		$	139,763		$	32,752		$	38,114
Same store % increase (decrease)	(5.3		)%				.8		%

Revenue was $701,707,000 for the year ended December 31, 2004, compared to $655,286,000 for the year ended December 31, 2003, an increase of $46,421,000.  The increase in revenue for the year ended December 31, 2004 was primarily due to (i) $36,406,000 from Americold’s transportation management services business from both new and existing customers, (ii) $6,692,000 from new managed warehouse contracts, net of a contract termination in the fourth quarter of 2004 and (iii) an increase in handling and accessorial services.

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Gross margin from owned warehouses was $150,515,000 or 34.4%, for the year ended December 31, 2004, compared to $159,909,000, or 36.9%, for the year ended December 31, 2003, a decrease of $9,394,000.  This decrease was primarily attributable to (i) lower productivity related to new business at the Atlanta warehouses, (ii) lower average occupancy at the Carthage warehouse and (iii) a change in revenue mix as higher margin storage revenues declined and lower margin handling revenues increased.

Gross margin from other operations (i.e., transportation, management services and managed warehouses) was $5,221,000 for the year ended December 31, 2004, compared to $13,093,000 for the year ended for the year ended December 31, 2003, a decrease of $7,872,000.  This decrease was primarily the result of (i) a $5,062,000 change in the estimate of unbilled transportation revenue, (ii) lower margins in the transportation management services business due to tightened truck supply in 2004 as a result of new legislation reducing the hours that drivers are permitted to drive in a day, partially offset by (iii) an increase in gross margin from new and existing managed warehouse customers.

Interest expense was $52,285,000 for the year ended December 31, 2004, compared to $41,634,000 for the year ended December 31, 2003, an increase of $10,651,000.  The increase was primarily due to higher average debt outstanding as Americold obtained a mortgage financing on 28 of its unencumbered properties in February 2004.

General and administrative expense was $32,940,000 for the year ended December 31, 2004, compared to $35,355,000 for the prior year, a decrease of $2,415,000.  This decrease resulted primarily from a lower bonus provision.

Other expense, net, was $11,137,000 for the year ended December 31, 2004, compared to other income, net, of $601,000 for the year ended December 31, 2003, a decrease of $11,738,000.  This decrease resulted primarily from (i) $7,569,000 for the write-off of the remaining net book value of two vacant warehouse facilities and assets related to a managed warehouse contract that was terminated 2004, (ii) $2,241,000 of income in 2003 resulting from a tax refund, and (iii) a gain of $850,000 in 2003 resulting from a sale of warehouse.

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Related Party Transactions

Loan and Compensation Agreements

In accordance with the terms of the employment arrangement with Steven Roth, Vornado’s Chief Executive Officer, and subject to a letter agreement dated November 1999, Mr. Roth may draw up to $15,000,000 of loans on a revolving basis.  Each loan bears interest, payable quarterly, at the applicable Federal rate on the date the loan is made and matures on the sixth anniversary of such loan.  Loans are collateralized by assets with a value of not less than two times the amount outstanding.  At December 31, 2004, the outstanding balance under this arrangement was $13,122,500 (of which $4,704,500 is shown as a reduction in partners’ capital).  The amount outstanding matures in January 2006 and bears interest at a weighted average rate of 4.49% per annum.

At December 31, 2004, the balance of the loan due from Michael Fascitelli, Vornado’s President, in accordance with his employment agreement was $8,600,000.  The loan matures in December 2006 and bears interest, payable quarterly, at a weighted average rate of 3.97% (based on the applicable Federal rate).

Effective January 1, 2002, the Company extended its employment agreement with Mr. Fascitelli for a five-year period through December 31, 2006.  Pursuant to the extended employment agreement, Mr. Fascitelli is entitled to receive a deferred payment on December 31, 2006 of 626,566 Vornado common shares which are valued for compensation purposes at $27,500,000 (the value of the shares on March 8, 2002, the date the extended employment agreement was executed).  The shares are held in a rabbi trust for the benefit of Mr. Fascitelli and vested 100% on December 31, 2002.  The extended employment agreement does not permit diversification, allows settlement of the deferred compensation obligation by delivery of these shares only, and permits the deferred delivery of these shares.  The value of these shares was amortized ratably over the one-year vesting period as compensation expense.

Pursuant to the Company’s annual compensation review in February 2002 with Joseph Macnow, Vornado’s Chief Financial Officer, the Compensation Committee approved a $2,000,000 loan to Mr. Macnow, bearing interest at the applicable federal rate of 4.65% per annum and due in June 2007.  The loan was funded on July 23, 2002 and is collateralized by assets with a value of not less than two times the loan amount.

On March 11, 2004, the Company loaned $2,000,000 to Melvyn Blum, an executive officer of Vornado, pursuant to the revolving credit facility contained in his January 2000 employment agreement.  The loan bears interest at 1.57% per annum (the Federal rate) and is due in March 2007.

On February 22, 2005, Vornado and Sandeep Mathrani, Executive Vice President – Retail Division, entered into a new employment agreement.  Pursuant to the agreement, the Company granted Mr. Mathrani (i) 16,836 restricted shares of  Vornado’s stock, (ii) stock options to acquire 300,000 of Vornado’s common shares at an exercise price of $71.275 per share and (iii) the right to receive 200,000 stock options over the next two years at the then prevailing market price.  In addition, Mr. Mathrani repaid the $500,000 loan the Company provided him under his prior employment agreement.

Transactions with Affiliates and Officers and Trustees of Vornado

Alexander’s

The Company owns 33% of Alexander’s.  Mr. Roth and Mr. Fascitelli are Officers and Directors of Alexander’s, the Company provides various services to Alexander’s in accordance with management, development and leasing agreements and the Company has made loans to Alexander’s aggregating $124,000,000 at December 31, 2004.  These agreements and the loans are described in Note 5 - Investments in Partially-Owned Entities to the Company’s consolidated financial statements in this annual report on Form 10-K.  In addition, in 2002, the Company sold air rights to Alexander’s, details of which are provided in Note 3 – Acquisitions and Dispositions to the Company’s consolidated financial statements  in this annual report on Form 10-K.

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Interstate Properties

As of December 31, 2004, Interstate Properties and its partners beneficially owned approximately 10.8% of the common shares of beneficial interest of the Company and 27.4% of Alexander’s common stock.  Interstate Properties is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the partners.  Mr. Roth is the Chairman of the Board and Chief Executive Officer of the Company, the managing general partner of Interstate Properties, and the Chief Executive Officer and a director of Alexander’s.  Messrs. Mandelbaum and Wight are trustees of Vornado and also directors of Alexander’s.

The Company manages and leases the real estate assets of Interstate Properties pursuant to a management agreement for which the Company receives an annual fee equal to 4% of base rent and percentage rent.  The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on sixty days’ notice at the end of the term. The Company believes based upon comparable fees charged by other real estate companies that its terms are fair to the Company.  The Company earned $726,000, $703,000 and $747,000 of management fees under the management agreement for the years ended December 31, 2004, 2003 and 2002.  In addition, during fiscal years 2003 and 2002, as a result of a previously existing leasing arrangement with Alexander’s, Alexander’s paid to Interstate $587,000 and $703,000, respectively, for the leasing and other services actually rendered by the Company.  Upon receipt of these payments, Interstate promptly paid them over to the Company without retaining any interest therein.  This arrangement was terminated at the end of 2003 and all payments by Alexander’s thereafter for these leasing and other services are made directly to the Company.

Vornado Operating Company (“Vornado Operating”)

In October 1998, Vornado Operating was spun off from the Company in order to own assets that the Company could not itself own and conduct activities that the Company could not itself conduct.  Vornado Operating’s primary asset was its 60% investment in AmeriCold Logistics, which leased 88 refrigerated warehouses from Americold, owned 60% by the Company.  The Company granted Vornado Operating a $75,000,000 unsecured revolving credit facility that was to expire on December 31, 2004.  Borrowings under the revolving credit facility bore interest at LIBOR plus 3%.  The Company received a commitment fee equal to 1% per annum on the average daily unused portion of the facility.  At the time of its dissolution referred to below, Vornado Operating had outstanding 4,068,924 shares and its operating partnership had outstanding 447,017 units.  At such time, trustees and officers of the Company held approximately 24.3% of the common shares and units of Vornado Operating.  In addition, Messrs. Roth, Fascitelli, Macnow, Wight and West each served as an officer and/or director of Vornado Operating.

On December 31, 2002, the Company and Crescent Real Estate Equities formed a joint venture to acquire the Carthage, Missouri and Kansas City, Kansas quarries from AmeriCold Logistics for $20,000,000 in cash (appraised value).  The Company contributed cash of $8,800,000 to the joint venture representing its 44% interest.  AmeriCold Logistics used the proceeds from the sale to repay a portion of a loan to Vornado Operating.  Vornado Operating then repaid $9,500,000 of the amount outstanding under the Company’s revolving credit facility.   In addition, during 2004 and 2003, this joint venture acquired $21,930,000 and $5,720,000 of trade receivables from AmeriCold Logistics for $21,500,000 and $5,606,000, respectively.  These receivables were subsequently collected in full.

On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  As part of this transaction, Vornado Operating repaid the $21,989,000 balance of the loan to the Company as well as $4,771,000 of unpaid interest.  Because the Company fully reserved for the interest income on this loan beginning in January 2002, it recognized $4,771,000 of income upon collection in the fourth quarter 2004.

In November 2004, a class action shareholder derivative lawsuit was brought in the Delaware Court of Chancery against Vornado Operating Company (“Vornado Operating”), its directors and the Company.  The lawsuit sought to enjoin the dissolution of Vornado Operating, rescind the previously completed sale of AmeriCold Logistics (owned 60% by Vornado Operating) to Americold Realty Trust (owned 60% by the Company) and damages.  In addition, the plaintiffs claimed that the Vornado Operating directors breached their fiduciary duties.  On November 24, 2004, a stipulation of settlement was entered into under which the Company agreed to settle the lawsuit with a payment of approximately $4.5 million or about $1 per Vornado Operating share or partnership unit before litigation expenses. The proposed settlement payment would be in addition to the liquidation distribution of $2 per Vornado Operating share or unit that Vornado Operating made to its equityholders when it dissolved on December 29, 2004.  On January 20, 2005, the Delaware Court of Chancery postponed deciding upon the proposed settlement and requested further but limited information before holding an additional hearing regarding the settlement, which has been scheduled for March 2005.  The Company has accrued the proposed settlement payment and related legal costs as part of “general and administrative expense” in the fourth quarter of 2004.  The Company believes that the ultimate outcome of this matter will not have a material effect on the Company’s consolidated financial statements.

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Other

On January 1, 2003, the Company acquired BMS, a company which provides cleaning and related services principally to the Company’s Manhattan office properties, for $13,000,000 in cash from the estate of Bernard Mendik and certain other individuals including David R. Greenbaum, an executive officer of the Company.  The Company paid BMS $53,024,000, for the year ended December 31, 2002 for services rendered to the Company’s Manhattan office properties.  Although the terms and conditions of the contracts pursuant to which these services were provided were not negotiated at arms length, the Company believes based upon comparable amounts charged to other real estate companies that the terms and conditions of the contracts were fair to the Company.

On August 4, 2003, the Company completed the acquisition of 2101 L Street, a 370,000 square foot office building located in Washington D.C.  The consideration for the acquisition consisted of approximately 1.1 million newly issued Operating Partnership units (valued at approximately $49,517,000) and the assumption of existing mortgage debt and transaction costs totaling approximately $32,000,000.  Robert H. Smith and Robert P. Kogod, trustees of Vornado, together with family members owned approximately 24 percent of the limited partnership that sold the building and Mr. Smith was a general partner.  On August 5, 2003, the Company repaid the mortgage of $29,056,000.

On October 7, 2003, the Company acquired a 2.5% interest in the planned redevelopment of Waterfront, located at 401 M Street, a mixed-use project in Washington D.C. for $2,171,000, of which the Company paid $1,545,000 in cash and issued 12,500 Vornado Realty L.P. partnership units valued at $626,000.  The partnership units were issued to Mitchell N. Schear, one of the partners in the Waterfront interest, and the President of the Company’s CESCR division.

On July 1, 2004, the Company acquired the Marriott hotel located in its Crystal City office complex from a limited partnership in which Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members own approximately 67 percent.  The purchase price of $21,500,000 was paid in cash.  The hotel contains 343 rooms and is leased to an affiliate of Marriott International, Inc. until July 31, 2015, with one 10-year extension option.  The land under the hotel was acquired in 1999.

On October 1, 2004, the Company increased its ownership interest in the Investment Building in Washington, D.C. to 5% by acquiring an additional 2.8% interest for $2,240,000 in cash.  The Company’s original interest in the property was acquired in connection with the acquisition of the Kaempfer Company in April 2003.  Mitchell N. Schear, President of the Company’s CESCR division and other former members of Kaempfer management were also partners in the Investment Building partnership.

During 2002, the Company paid approximately $147,000 for legal services to a firm in which one of Vornado’s trustees is a member.

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Liquidity and Capital Resources

The Company anticipates that cash from continuing operations over the next twelve months will be adequate to fund its business operations, dividends to shareholders and distributions to unitholders of the Operating Partnership and recurring capital expenditures, and together with existing cash balances will be greater than its anticipated cash requirements including development and redevelopment expenditures and debt amortization.  Capital requirements for significant acquisitions may require funding from borrowings or equity offerings.

As at December 31, 2004, the Company and Vornado have an effective shelf registration under which Vornado can offer an aggregate of approximately $397,990,000 of equity securities and Vornado Realty L.P. can offer an aggregate of $1,550,770,000 of debt securities.  On January 26, 2005, the Company and Vornado filed a registration statement to increase the amount of equity and debt securities that can be offered to up to $2.5 billion and $5.0 billion, respectively.  On February 3, 2005, the registration statement was declared effective.

Certain Future Cash Requirements

For 2005 the Company has budgeted approximately $180,000,000 for capital expenditures excluding acquisitions as follows:

(Amounts in millions except square foot data)	Total		New York Office		CESCR Office		Retail		Merchandise Mart		Other (1)
Expenditures to maintain assets	$	57.5	$	16.0	$	21.0	$	4.0	$	10.0	$	6.5
Tenant improvements	101.5		22.0		60.5		6.0		13.0		—
Leasing commissions	24.5		7.0		13.0		1.5		3.0		—
Total Tenant Improvements and Leasing Commissions	126.0		29.0		73.5		7.5		16.0		—
Per square foot			$	40.00	$	28.25	$	9.10	$	13.60	$	—
Per square foot per annum			$	4.20	$	5.65	$	0.90	$	2.25	$	—
Total Capital Expenditures and Leasing Commissions	$	183.5	$	45.0	$	94.5	$	11.5	$	26.0	$	6.5
Square feet budgeted to be leased  (in thousands)			725		2,600		825		1,175
Weighted average lease term			9.5		5.0		10.0		6.0

(1)Hotel Pennsylvania, Paramus Office and Warehouses.

During the year ended December 31, 2004, actual cash basis capital expenditures and leasing commissions were $186,850,000, as compared to a budget of $194,200,000.

In addition to the capital expenditures reflected above, the Company is currently engaged in certain development and redevelopment projects for which it has budgeted approximately $470,000,000.  Of this amount $310,000,000 is estimated to be expended in 2005.

The table above excludes Americold’s 2005 budget of $23,000,000 for capital expenditures as Americold is expected to fund these expenditures without contributions from the Company.  In addition, no cash requirements have been budgeted for the capital expenditures of Alexander’s, Newkirk MLP, or any other entity that is partially owned by the Company.  These investees are also expected to fund their own cash requirements.

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Financing Activities and Contractual Obligations

Below is a schedule of the Company’s contractual obligations and commitments at December 31, 2004.

(Amounts in thousands)	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		Thereafter
Contractual Cash Obligations:
Mortgages and Notes Payable (principal and interest)	$	5,464,579	$	402,556	$	1,302,976	$	1,405,875	$	2,353,172
Senior Unsecured Notes due 2007	544,916		12,850		532,066		—		—
Senior Unsecured Notes due 2009	302,026		11,250		22,500		268,276		—
Senior Unsecured Notes due 2010	256,779		9,500		19,000		19,000		209,279
Operating leases	1,030,448		20,427		40,902		40,900		928,219
Purchase obligations, primarily construction  commitments	49,200		49,200		—		—		—
Capital lease obligations	69,658		17,722		18,288		13,741		19,907
Total Contractual Cash Obligations	$	7,717,606	$	523,505	$	1,935,732	$	1,747,792	$	3,510,577
Commitments:
Capital commitments to partially-owned entities	$	9,696	$	9,696	$	—	$	—	$	—
Standby Letters of Credit	32,306		31,986		320		—		—
Other Guarantees	—		—		—		—		—
Total Commitments	$	42,002	$	41,682	$	320	$	—	$	—

At December 31, 2004, the Company has $567,851,000 available under its $600,000,000 revolving credit facility ($32,149,000 was utilized for letters of credit), which matures in July 2006.  Further, the Company has a number of properties that are unencumbered.

The Company’s credit facility contains customary conditions precedent to borrowing such as the bring down of customary representations and warranties as well as compliance with financial covenants such as minimum interest coverage and maximum debt to market capitalization.  The facility provides for higher interest rates in the event of a decline in the Company’s ratings below Baa3/BBB.  This facility also contains customary events of default that could give rise to acceleration and include such items as failure to pay interest or principal and breaches of financial covenants such as maintenance of minimum capitalization and minimum interest coverage.

The Company carries comprehensive liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002 which expires in 2005 and (v) rental loss insurance) with respect to its assets.  In April 2004, the Company reviewed its all risk policies and increased its coverage for Acts of Terrorism for each of its New York Office, CESCR Office, Retail and Merchandise Mart divisions.  Below is a summary of the all risk property insurance and terrorism risk insurance for each of the Company’s business segments:

	Coverage Per Occurrence
	All Risk (1)		Sub-Limits for Acts of Terrorism
New York Office	$	1,400,000,000	$	750,000,000
CESCR Office	1,400,000,000		750,000,000
Retail	500,000,000		500,000,000
Merchandise Mart	1,400,000,000		750,000,000
Temperature Controlled Logistics	225,000,000		225,000,000

(1)Limited as to terrorism insurance by the sub-limit shown in the adjacent column.

In addition to the coverage above, the Company carries lesser amounts of coverage for terrorist acts not covered by the Terrorism Risk Insurance Act of 2002.

The Company’s debt instruments, consisting of mortgage loans secured by its properties (which are generally non-recourse to the Company), its senior unsecured notes due 2007, 2009 and 2010 and its revolving credit agreement, contain customary covenants requiring the Company to maintain insurance. Although the Company believes that it has adequate insurance coverage under these agreements, the Company may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.  Further if lenders insist on greater coverage than the Company is able to obtain, or if the Terrorism Risk Insurance Act of 2002 is not extended; it could adversely affect the Company’s ability to finance and/or refinance its properties and expand its portfolio.

In conjunction with the closing of Alexander’s Lexington Avenue construction loan on July 3, 2002, the Company agreed to guarantee to the construction lender, the lien free, timely completion of the construction of the project and funding of all project costs in excess of a stated budget, as defined in the loan agreement, if not funded by Alexander’s.

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Cash Flows for the Year Ended December 31, 2004

Cash and cash equivalents were $599,282,000 at December 31, 2004, as compared to $320,542,000 at December 31, 2003, an increase of $278,740,000.

Cash flows provided by operating activities of $661,573,000 was primarily comprised of (i) net income of $750,115,000, (ii) a net change in operating assets and liabilities of $14,957,000, partially offset by (iii) adjustments for non-cash items of $104,974,000.  The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $253,822,000, (ii) minority interest of $110,000, partially offset by (iii) net gains on mark-to-market of derivatives of $135,372,000 (Sears option shares and GMH warrants), (iv) net gains on sale of real estate of $75,755,000, (v) net gains on dispositions of wholly-owned and partially-owned assets other than real estate of $19,775,000, (vi) the effect of straight-lining of rental income of $61,473,000, (vii) equity in net income of partially-owned entities and income applicable to Alexander’s of $51,961,000, and (viii) amortization of below market leases, net of $14,570,000.

Net cash used in investing activities of $350,729,000 was primarily comprised of (i) capital expenditures of $117,942,000, (ii) development and redevelopment expenditures of $139,669,000, (iii) investment in notes and mortgages receivable of $330,101,000, (iv) investments in partially-owned entities of $158,467,000, (v) acquisitions of real estate and other of $286,310,000, (vi) purchases of marketable securities of $59,714,000, partially offset by (vii) proceeds from the sale of real estate of $233,005,000, (viii) distributions from partially-owned entities of $303,745,000, (ix) repayments on notes receivable of $174,276,000, (x) cash received upon consolidation of Americold Realty Trust of $21,694,000 and (xi) cash restricted primarily for mortgage escrows of $8,754,000.

Net cash used in financing activities of $32,104,000 was primarily comprised of (i) distributions to Class A unitholders of $435,345,000, (ii) distributions to preferred unitholders of $94,077,000, (iii) repayments of borrowings of $702,823,000, (iv) redemption of perpetual preferred units of $112,467,000, partially offset by proceeds from (v) borrowings of $745,255,000, (vi) proceeds from the issuance of preferred units of $510,439,000 and (vii) the exercise of employee unit options of $61,935,000.

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2004.  See page 54 for per square foot data.

(Amounts in thousands)	Total			New York Office			CESCR			Retail			Merchandise Mart			Other
Capital Expenditures (Accrual basis):
Expenditures to maintain the assets:
Recurring	$	50,963		$	11,673		$	16,272		$	2,344		$	18,881		$	1,793
Non-recurring	—			—			—			—			—			—
	50,963			11,673			16,272			2,344			18,881			1,793
Tenant improvements:
Recurring	101,026			41,007			22,112			3,346			34,561			—
Non-recurring	7,548			—			7,548			—			—			—
Total	108,574			41,007			29,660			3,346			34,561			—
Leasing Commissions:
Recurring	33,118			18,013			6,157			671			8,277			—
Non-recurring	1,706						1,706			—			—			—
	34,824			18,013			7,863			671			8,277			—
Total Capital Expenditures and Leasing Commissions (accrual basis)	194,361			70,693			53,795			6,361			61,719			1,793
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods	61,137			29,660			26,463			1,518			3,496			—
Expenditures to be made in future periods for the current period	(68,648		)	(27,562		)	(22,186		)	(2,172		)	(16,728		)	—
Total Capital Expenditures and Leasing Commissions (Cash basis)	$	186,850		$	72,791		$	58,072		$	5,707		$	48,487		$	1,793

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(Amounts in thousands)	Total		New York Office		CESCR		Retail		Merchandise Mart		Other
Development and Redevelopment: Expenditures:
Crystal Plazas (PTO)	$	10,993	$	—	$	10,993	$	—	$	—	$	—
640 Fifth Avenue	15,067		15,067		—		—		—		—
4 Union Square South	28,536		—		—		28,536		—		—
Crystal Drive Retail	25,465		—		25,465		—		—		—
Other	59,608		4,027		220		33,851		21,262		248
	$	139,669	$	19,094	$	36,678	$	62,387	$	21,262	$	248

Capital expenditures are categorized as follows:

Recurring — capital improvements expended to maintain a property’s competitive position within the market and tenant improvements and leasing commissions for costs to re-lease expiring leases or renew or extend existing leases.

Non-recurring — capital improvements completed in the year of acquisition and the following two years which were planned at the time of acquisition and tenant improvements and leasing commissions for space which was vacant at the time of acquisition of a property.

Development and redevelopment expenditures include all hard and soft costs associated with the development or redevelopment of a property, including tenant improvements, leasing commissions and capitalized interest and operating costs until the property is substantially complete and ready for its intended use.

Cash Flows for the Year Ended December 31, 2003

Cash and cash equivalents were $320,542,000 at December 31, 2003, as compared to $208,200,000 at December 31, 2002, an increase of $112,342,000.

Cash flow provided by operating activities of $528,951,000 was primarily comprised of (i) net income of $638,551,000, partially offset by, (ii) adjustments for non-cash items of $77,863,000, and (iii) the net change in operating assets and liabilities of $31,737,000.  The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $219,911,000, (ii) minority interest of $827,000, partially offset by, (iii) gains on sale of real estate of $161,789,000, (iv) the effect of straight-lining of rental income of $41,947,000, (v) equity in net income of partially-owned entities and Alexander’s of $83,475,000 and (vi) amortization of below market leases, net of $9,047,000.

Net cash used in investing activities of $130,292,000 was comprised of (i) investment in notes and mortgages receivable of $230,375,000, (ii) acquisitions of real estate of $216,361,000, (iii) development and redevelopment expenditures of $123,436,000, (iv) capital expenditures of $120,593,000, (v) investments in partially-owned entities of $15,331,000, (vi) purchases of marketable securities of $17,356,000, partially offset by, (vii) proceeds received from the sale of real estate of $299,852,000, (viii) distributions from partially-owned entities of $154,643,000, (ix) restricted cash, primarily mortgage escrows of $101,292,000, (x) repayments on notes receivable of $29,421,000 and (xi) proceeds from the sale of marketable securities of $7,952,000.

Net cash used in financing activities of $286,317,000 was primarily comprised of (i) repayments of borrowings of $752,422,000, (ii) distributions to Class A unitholders of $390,139,000, (iii) distributions to preferred unitholders of $116,619,000, (iv) redemption of perpetual preferred units of $103,243,000, partially offset by (v) proceeds from borrowings of $812,487,000, (vi) proceeds from the issuance of preferred units of $119,967,000, and (vii) proceeds from the exercise of employee unit options of $145,152,000.

96

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures for the year ended December 31, 2003.

(Amounts in thousands)	Total			New York Office			CESCR			Retail			Merchandise Mart			Other
Capital Expenditures (Accrual basis):
Expenditures to maintain the assets:
Recurring	$	31,421		$	14,201		$	6,125		$	592		$	10,071		$	432
Non-recurring	13,829			—			4,907			—			8,922			—
	45,250			14,201			11,032			592			18,993			432
Tenant improvements:
Recurring	67,436			23,415			23,850			3,360			16,811			—
Non-recurring	7,150			—			7,150			—			—			—
	74,586			23,415			31,000			3,360			16,811			—
Leasing Commissions:
Recurring	19,931			10,453			6,054			273			3,151			—
Non-recurring	1,496			—			1,496			—			—			—
	21,427			10,453			7,550			273			3,151			—
Total Capital Expenditures and Leasing Commissions (accrual basis):
Recurring	118,788			48,069			36,029			4,225			30,033			432
Nonrecurring	22,475			—			13,553			—			8,922			—
Total	141,263			48,069			49,582			4,225			38,955			432
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods	47,174			10,061			17,886			11,539			7,688			—
Expenditures to be made in future periods for the current period	(56,465		)	(21,172		)	(26,950		)	(1,830		)	(6,513		)	—
Total Capital Expenditures and Leasing Commissions (Cash basis)	$	131,972		$	36,958		$	40,518		$	13,934		$	40,130		$	432

(1)Includes reimbursements from tenants for expenditures incurred in the prior year.

(Amounts in thousands)	Total		New York Office		CESCR		Retail		Merchandise Mart		Other
Development and Redevelopment: Expenditures:
400 North LaSalle	$	42,433	$	—	$	—	$	—	$	—	$	42,433
640 Fifth Avenue	29,138		29,138		—		—		—		—
4 Union Square South	14,009		—		—		14,009		—		—
Crystal Drive Retail	12,495		—		12,495		—		—		—
Other	25,361		5,988		—		18,851		143		379
	$	123,436	$	35,126	$	12,495	$	32,860	$	143	$	42,812

97

Cash Flows for the Year Ended December 31, 2002

Cash flow provided by operating activities of $499,825,000 was primarily comprised of (i) net income of $370,302,000, (ii) adjustments for non-cash items of $166,470,000, partially offset by, (iii) the net change in operating assets and liabilities of $36,947,000.  The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $205,826,000, (ii) minority interest of $3,534,000, (iii) net loss on dispositions of wholly-owned and partially-owned assets other than depreciable real estate of $17,471,000, (iv) a cumulative effect of change in accounting principle of $30,129,000, (v) amortization of officer’s deferred compensation of $27,500,000, (vi) costs of acquisitions not consummated of $6,874,000, partially offset by (vii) the effect of straight-lining of rental income of $38,119,000, (viii) equity in net income of partially-owned entities and Alexander’s of $74,111,000, and (ix) amortization of below market leases, net of $12,634,000.

Net cash used in investing activities of $24,117,000 was primarily comprised of (i) capital expenditures of $96,018,000, (ii) development and redevelopment expenditures of $91,199,000, (iii) investment in notes and mortgages receivable of $56,935,000, (iv) investments in partially-owned entities of $73,242,000, (v) acquisitions of real estate of $23,665,000, (vi) restricted cash, primarily mortgage escrows of $21,471,000, partially offset by (vii) proceeds from the repayment of notes and mortgage loans receivable of $124,500,000, (viii) distributions from partially-owned entities of $126,077,000, and (ix) proceeds from sales of marketable securities of $87,836,000.

Net cash used in financing activities of $533,092,000 was primarily comprised of (i) repayments on borrowings of $731,238,000, (ii) distributions to Class A unitholders of $364,730,000, (iii) distributions to preferred unitholders of $119,214,000, (iv) redemptions of perpetual preferred units of $25,000,000, partially offset by (v) proceeds from borrowings of $628,335,000, (vi) proceeds from the issuance of Class A units of $56,453,000 and (vii) proceeds from employee unit option exercises of $26,272,000.

Below are the details of 2002 capital expenditures, leasing commissions and development and redevelopment expenditures.

(Amounts in thousands)	Total		New York City Office		CESCR		Retail			Merchandise Mart		Other
Capital Expenditures:
Expenditures to maintain the assets:
Recurring	$	27,881	$	9,316	$	13,686	$	1,306		$	2,669	$	904
Non-recurring	35,270		6,840		16,455		—			11,975		—
	$	63,151	$	16,156	$	30,141	$	1,306		$	14,644	$	904
Tenant improvements:
Recurring	$	24,847	$	12,017	$	5,842	$	2,309		$	4,679	—
Non-recurring	6,957		2,293		4,664		—			—		—
	$	31,804	$	14,310	$	10,506	$	2,309		$	4,679	—
Leasing Commissions:
Recurring	$	14,345	$	8,854	$	4,416	$	353		$	614	$	108
Non-recurring	4,205		2,067		2,138		—			—		—
	$	18,550	$	10,921	$	6,554	$	353		$	614	$	108
Total Capital Expenditures and Leasing Commissions:
Recurring	$	67,073	$	30,187	$	23,944	$	3,968		$	7,962	$	1,012
Non-recurring	46,432		11,200		23,257		—			11,975		—
	$	113,505	$	41,387	$	47,201	$	3,968		$	19,937	$	1,012
Development and Redevelopment Expenditures:
400 North LaSalle	$	27,600	$	—	$	—	$	—		$	—	$	27,600
Palisades-Fort Lee, NJ	16,750		—		—		—			—		16,750
640 Fifth Avenue	16,749		16,749		—		—			—		—
435 7th Avenue	12,353		—		—		12,353			—		—
4 Union Square South	2,410		—		—		2,410			—		—
Other	15,337		10,234		1,496		(596		)	1,529		2,674
	$	91,199	$	26,983	$	1,496	$	14,167		$	1,529	$	47,024

98

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has exposure to fluctuations in market interest rates.  Market interest rates are highly sensitive to many factors, beyond the control of the Company.  Various financial vehicles exist which would allow management to mitigate the impact of interest rate fluctuations on the Company’s cash flows and earnings.

As of December 31, 2004, the Company has an interest rate swap as described in footnote 1 to the table below.  In addition, during 2003 the Company purchased two interest rate caps with notional amounts aggregating $295,000,000, and simultaneously sold two interest rate caps with the same aggregate notional amount on substantially the same terms as the caps purchased.  As the significant terms of these arrangements are the same, the effects of a revaluation of these instruments are expected to substantially offset one another.  Management may engage in additional hedging strategies in the future, depending on management’s analysis of the interest rate environment and the costs and risks of such strategies.

The Company’s exposure to a change in interest rates on its consolidated and non-consolidated debt (all of which arises out of non-trading activity) is as follows:

	2004						2003
($ in thousands, except per unit amounts)	December 31, Balance		Weighted Average Interest Rate		Effect of 1% Change In Base Rates		December 31, Balance		Weighted Average Interest Rate
Consolidated debt:
Variable rate (1)	$	1,114,981	3.45	%	$	11,150	$	1,270,899	2.22	%
Fixed rate	3,841,530		6.68	%	—		2,906,566		7.19	%
	$	4,956,511	5.95	%	11,150		$	4,177,465	5.68	%
Debt of non-consolidated entities:
Variable rate	$	122,007	4.67	%	1,220		$	153,140	3.64	%
Fixed rate	547,935		6.73	%	—		777,427		7.07	%
	$	669,942	6.36	%	1,220		$	930,567	6.51	%
Total change in the Company’s annual net income					$	12,370
Per Class A unit-diluted					$	.08

(1)Includes $512,791 and $525,279, respectively, for the Company’s senior unsecured notes due 2007, as the Company entered into interest rate swap agreements that effectively converted the interest rate from a fixed rate of 5.625% to a floating rate of LIBOR plus ..7725%, based upon the trailing 3 month LIBOR rate (2.57% at December 31, 2004).  In accordance with SFAS No. 133: Accounting for Derivative Instruments and Hedging Activities, as amended, accounting for these swaps requires the Company to fair value the debt at each reporting period.  At December 31, 2004 and 2003, the fair value adjustment was $13,148 and $25,780, and is included in the balance of the senior unsecured notes above.

The fair value of the Company’s debt, based on discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt, exceeds the aggregate carrying amount by approximately $256,518,000 at December 31, 2004.

As of December 31, 2004, the Company has mezzanine loans receivable of $440,186,000.  The Company receives interest on these loans based on a floating rate (a fixed spread plus 30, 60 or 90 day LIBOR).  The Company believes that a portion of its exposure to a change in interest rates on its floating rate debt, as illustrated above, is mitigated by the outstanding balances of these loans receivable.

99

Derivative Instruments

As of December 31, 2004, the Company has the following derivative instruments that do not qualify for hedge accounting treatment:

The Company has an economic interest in 7,916,900 Sears common shares through a series of privately negotiated transactions with a financial institution pursuant to which the Company purchased a call option and simultaneously sold a put option at the same strike price on Sears common shares.  These call and put options have an initial weighted-average strike price of  $39.82 per share, or an aggregate of $315,250,000, expire in April 2006 and provide for net cash settlement.  Under these agreements, the strike price for each pair of options increases at an annual rate of LIBOR plus 45 basis points and is credited for the dividends received on the shares.  The options provide the Company with the same economic gain or loss as if it had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points.  Because these options are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  During the year ended December 31, 2004, the Company recorded net income of $81,730,000, comprised of (i) $88,782,000 from the mark-to-market of the options on December 31, 2004, based on Sears’ closing stock price of $51.03 per share and (ii) $2,295,000 for accrued dividends, partially offset by (i) $5,972,000 for a performance-based participation, (ii) $2,371,000 for the increase in strike price resulting from the LIBOR charge and (iii) $1,004,000 of professional fees.

Under a warrant agreement with GMH Communities L.P., the Company holds 5.6 million warrants to purchase partnership units of GMH at an adjusted exercise price of $8.99 per share.  Because these warrants are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the warrants at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  In the quarter ended December 31, 2004, the Company recognized income of $24,190,000 from the mark-to-market of these warrants based on GCT’s closing stock price on the NYSE of $14.10 per share on December 31, 2004.

100

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	102
Consolidated Balance Sheets at December 31, 2004 and 2003	103
Consolidated Statements of Income for the years ended December 31, 2004, 2003, and 2002	104
Consolidated Statements of Partners’ Capital for the years ended December 31, 2004, 2003, and 2002	105
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002	107
Notes to Consolidated Financial Statements	109

101

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Partners

Vornado Realty L.P.

New York, New York

We have audited the accompanying consolidated balance sheets of Vornado Realty L.P. (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2004.  Our audits also included the financial statement schedules included in Item 15.  These financial statements and financial statement schedules are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty L.P. at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, on January 1, 2002, the Company applied the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 7, 2005

102

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

	December 31,
(Amounts in thousands, except unit and per unit amounts)	2004			2003
ASSETS
Real estate, at cost:
Land	$	1,681,792		$	1,488,255
Buildings and improvements	7,548,425			5,936,786
Development costs and construction in progress	180,968			132,668
Leasehold improvements and equipment	307,660			72,027
Total	9,718,845			7,629,736
Less accumulated depreciation and amortization	(1,404,441		)	(867,177		)
Real estate, net	8,314,404			6,762,559
Cash and cash equivalents, including U.S. government obligations under repurchase agreements of $23,110 and $30,310	599,282			320,542
Escrow deposits and restricted cash	229,193			161,833
Marketable securities	185,394			81,491
Investments and advances to partially-owned entities, including Alexander’s of $204,762 and $207,872	605,300			900,600
Due from officers	21,735			19,628
Accounts receivable, net of allowance for doubtful accounts of $17,339 and $15,246	164,524			83,913
Notes and mortgage loans receivable	440,186			285,965
Receivable arising from the straight-lining of rents, net of allowance of $6,787 and $2,830	324,266			267,269
Other assets	577,574			376,630
Assets related to discontinued operations	118,659			258,498
	$	11,580,517		$	9,518,928
LIABILITIES AND PARTNERS’ CAPITAL
Notes and mortgages payable	$	3,974,537		$	3,314,522
Senior unsecured notes	962,096			725,020
Accounts payable and accrued expenses	408,889			226,023
Officers compensation payable	32,506			23,349
Deferred credit	102,387			72,728
Other liabilities	113,402			18,902
Liabilities related to discontinued operations	21,054			139,525
Total liabilities	5,614,871			4,520,069
Minority interest	286,265			3,055
Commitments and contingencies
Partners’ Capital:
Equity	5,458,649			5,037,919
Earnings in excess (less than) distributions	182,203			(38,497		)
	5,640,852			4,999,422
Class A units issued to officer’s trust	(65,753		)	(65,753		)
Deferred compensation units earned but not yet delivered	70,727			70,610
Deferred compensation units issued but not yet earned	(9,523		)	(7,295		)
Accumulated other comprehensive income	47,782			3,524
Due from officers for purchase of Class A units of beneficial interest	(4,704		)	(4,704		)
Total Partners’ Capital	5,679,381			4,995,804
	$	11,580,517		$	9,518,928

See notes to consolidated financial statements.

103

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
(Amounts in thousands, except per unit amounts)	2004			2003			2002
Revenues:
Property rentals	$	1,344,812		$	1,256,073		$	1,204,349
Tenant expense reimbursements	191,059			179,115			154,727
Temperature Controlled Logistics	87,428			—			—
Fee and other income	83,963			62,795			27,718
Total revenues	1,707,262			1,497,983			1,386,794
Expenses:
Operating	679,790			581,550			517,958
Depreciation and amortization	242,914			213,679			197,704
General and administrative	145,218			121,857			100,035
Amortization of officer’s deferred compensation expense	—			—			27,500
Costs of acquisitions and development not consummated	1,475			—			6,874
Total expenses	1,069,397			917,086			850,071
Operating income	637,865			580,897			536,723
Income applicable to Alexander’s	8,580			15,574			29,653
Income from partially-owned entities	43,381			67,901			44,458
Interest and other investment income	203,995			25,397			31,678
Interest and debt expense (including amortization of deferred financing costs of $7,072, $5,893 and $8,339)	(241,968		)	(228,860		)	(232,891		)
Net gain (loss) on disposition of wholly-owned and partially-owned assets other than depreciable real estate	19,775			2,343			(17,471		)
Minority interest	(110		)	(1,089		)	(3,534		)
Income from continuing operations	671,518			462,163			388,616
Income from discontinued operations	78,597			176,388			11,815
Cumulative effect of change in accounting principle	—			—			(30,129		)
Net income	750,115			638,551			370,302
Preferred unit distributions	(94,070		)	(116,619		)	(119,214		)
NET INCOME applicable to Class A units	$	656,045		$	521,932		$	251,088
INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations	$	4.01		$	2.63		$	2.12
Income from discontinued operations	.55			1.34			.09
Cumulative effect of change in accounting principle	—			—			(.24		)
Net income per Class A unit	$	4.56		$	3.97		$	1.97
INCOME PER CLASS A UNIT – DILUTED
Income from continuing operations	$	3.84		$	2.58		$	2.06
Income from discontinued operations	.52			1.23			.09
Cumulative effect of change in accounting principle	—			—			(.23		)
Net income per Class A unit	$	4.36		$	3.81		$	1.92

See notes to consolidated financial statements.

104

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(Amounts in thousands, except per unit amounts)	Preferred Units			Limited Partners Units			General Partner’s Units			Earnings in Excess (less than) Distributions			Accumulated Other Comprehensive Income (Loss)			Other			Partners’ Capital			Comprehensive Income (Loss)
Balance, January 1, 2002	468,977			1,453,863			2,194,262			(95,647		)	7,484			(4,704		)	4,024,235			$	391,027
Net Income	—			—			—			370,302			—			—			370,302			$	370,302
Distributions paid on Preferred Units:
Series A Preferred Units ($3.25 per unit)	—			—			—			(6,167		)	—			—			(6,167		)	—
Series B and C Preferred Units ($2.125 per unit)	—			—			—			(17,000		)	—			—			(17,000		)	—
Other Preferred Units	—			—			—			(96,047		)	—			—			(96,047		)	—
Redemption of perpetual preferred units	—			(25,000		)	—			—			—			—			(25,000		)	—
Net proceeds from issuance of Class A units	—			625,234			56,453			—			—			—			681,687			—
Conversion of Series A Preferred units to Limited Partners units	(203,489		)	—			203,489			—			—			—			—			—
Deferred compensation units	—			—			30,129			—			—			(1,722		)	28,407			—
Distributions paid on Class A units ($2.97 per unit, including $.31 for 2001)	—			—			—			(364,405		)	—			—			(364,405		)	—
Reversal of distributions payable on Class A units in 2001 ($.31 per unit)	—			—			—			32,506			—			—			32,506			—
Class A units issued under employees’ unit plan	—			—			24,385			—			—			—			24,385			—
Conversion of Limited Partners units for General Partner units	—			(30,418		)	30,418			—			—			—			—			—
Class A units issued in connection with dividend reinvestment plan	—			—			1,887			—			—			—			1,887			—
Change in unrealized net loss on securities available for sale	—			—			—			—			(8,936		)	—			(8,936		)	(8,936		)
Other non-cash changes, primarily pension obligations	—			—			—			—			(1,648		)	—			(1,648		)	(1,648		)
Balance, December 31, 2002	265,488			2,023,679			2,541,023			(176,458		)	(3,100		)	(6,426		)	4,644,206			$	359,718
Net Income	—			—			—			638,551			—			—			638,551			$	638,551
Distributions paid on Preferred Units:
Series A Preferred Units ($3.25 per unit)	—			—			—			(3,473		)	—			—			(3,473		)	—
Series B and C Preferred Units ($2.125 per units)	—			—			—			(17,000		)	—			—			(17,000		)	—
Series D-10 Preferred Units ($1.75 per unit)	—			—			—			(342		)	—			—			(342		)	—
Other Preferred Units	—			—			—			(96,289		)	—			—			(96,289		)	—
Proceeds from issuance of Series D-10 Preferred Units	40,000			80,000			—			—			—			—			120,000			—
Class A units issued in connection with acquisitions	—			53,192			—			—			—			—			53,192			—
Redemption of perpetual preferred units	—			(87,500		)	—			—			—			—			(87,500		)	—
Redemption of Class A units	—			(16,080		)	—			—			—			—			(16,080		)	—
Reclass of Series F-1 units to Other Liabilities in connection with the adoption of SFAS 150	—			(9,750		)	—			—			—			—			(9,750		)	—
Conversion of Series A Preferred units to General Partner units	(54,496		)	—			54,496			—			—			—			—			—
Deferred compensation units	—			—			5,400			—			—			—			5,400
Distributions paid on Class A units ($2.91 per unit, including $.16 special cash distribution)	—			—			—			(383,486		)	—			—			(383,486		)	—
Class A units issued under employees’ unit option plan	—			—			141,219			—			—			—			141,219			—
Redemption of Limited Partners units for General Partner units	—			(144,431		)	144,431			—			—			—			—			—
Class A units issued in connection with dividend reinvestment plan	—			—			1,998			—			—			—			1,998			—
Change in unrealized net gain on securities available for sale	—			—			—			—			5,517			—			5,517			5,517
Shelf registration costs	—			—			(750		)	—			—			—			(750		)	—
Other - primarily increase in value of Officers deferred compensation plan	—			—			—			—			1,107			(716		)	391			1,107
Balance, December 31, 2003	$	250,992		$	1,899,110		$	2,887,817		$	(38,497	)	$	3,524		$	(7,142	)	$	4,995,804		$	645,175

See notes to consolidated financial statements.

105

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL - CONTINUED

(Amounts in thousands, except per unit amounts)	Preferred Units			Limited Partners Units			General Partner’s Units		Earnings in Excess (less than) Distributions			Accumulated Other Comprehensive Income (Loss)		Other			Partners’ Capital			Comprehensive Income (Loss)
Balance, December 31, 2003	$	250,992		$	1,899,110		$	2,887,817	$	(38,497	)	$	3,524	$	(7,142	)	$	4,995,804		$	645,175
Net Income	—			—			—		750,115			—		—			750,115			$	750,115
Distributions to Preferred Unitholders:
Series A Preferred Units ($3.25 per unit)	—			—			—		(1,066		)	—		—			(1,066		)	—
Series B Preferred Units ($2.125 per unit)	—			—			—		(1,525		)	—		—			(1,525		)	—
Series C Preferred Units ($2.125 per unit)	—			—			—		(9,775		)	—		—			(9,775		)	—
Series D-10 preferred units ($1.75 per unit)	—			—			—		(2,800		)	—		—			(2,800		)	—
Series E Preferred Units ($1.75 per unit)	—			—			—		(1,925		)	—		—			(1,925		)	—
Series F Preferred Units ($1.6875 per unit)	—			—			—		(1,266		)	—		—			(1,266		)	—
Series G Preferred Units ($1.65625 per unit)	—			—			—		(368		)	—		—			(368		)	—
Other preferred units	—			—			—		(71,450		)	—		—			(71,450		)	—
Redemption of perpetual preferred units	(81,805		)	(26,766		)	—		(3,895		)	—		—			(112,466		)	—
Proceeds from issuance of preferred units	410,272			53,698			—		—			—		—			463,970			—
Class A units issued in connection with acquisitions	—			626			—		—			—		—			626			—
Conversion of Series A Preferred units to limited partnership units	(2,005		)	—			2,005		—			—		—			—			—
Deferred compensation units	—			—			6,859		—			—		—			6,859			—
Distributions to Class A unitholders ($3.05 per unit, including $.16 special cash distribution)	—			—			—		(435,345		)	—		—			(435,345		)	—
Common units issued under employees’ unit option plan	—			—			55,109		—			—		—			55,109			—
Conversion of limited partnership units to general partnership units	—			(308,332		)	308,332		—			—		—			—			—
Common units issued in connection with dividend reinvestment plan	—			—			2,111		—			—		—			2,111			—
Change in unrealized net gain on securities available for sale	—			—			—		—			43,643		—			43,643			43,643
Shelf registration costs	—			—			626		—			—		—			626			—
Other – changes in deferred compensation plan	—			—			—		—			615		(2,111		)	(1,496		)	615
Balance, December 31, 2004	$	577,454		$	1,618,336		$	3,262,859	$	182,203		$	47,782	$	(9,253	)	$	5,679,381		$	794,373

See notes to consolidated financial statements.

106

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(Amounts in thousands)	2004			2003			2002
Cash Flows from Operating Activities:
Net income	$	750,115		$	638,551		$	370,302
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including debt issuance costs)	253,822			219,911			205,826
Minority interest	110			827			3,534
Net gains on mark-to-market of derivatives (Sears option shares and GMH Communities L.P. warrants)	(105,920		)	—			—
Net gains on sale of real estate	(75,755		)	(161,789		)	—
Straight-lining of rental income	(61,473		)	(41,947		)	(38,119		)
Equity in income of partially-owned entities, including Alexander’s	(51,961		)	(83,475		)	(74,111		)
Net gain on exercise of GMH Communities L.P. warrants	(29,452		)	—			—
Net (gain) loss on dispositions of wholly-owned and partially-owned assets other than real estate	(19,775		)	(2,343		)	17,471
Amortization of below market leases, net	(14,570		)	(9,047		)	(12,634		)
Costs of acquisitions and development not consummated	1,475			—			6,874
Cumulative effect of change in accounting principle	—			—			30,129
Amortization of officer’s deferred compensation	—			—			27,500
Changes in operating assets and liabilities	14,957			(31,737		)	(36,947		)
Net cash provided by operating activities	661,573			528,951			499,825
Cash Flows from Investing Activities:
Investments in notes and mortgage loans receivable	(330,101		)	(230,375		)	(56,935		)
Distributions from partially-owned entities	303,745			154,643			126,077
Acquisitions of real estate and other	(286,310		)	(216,361		)	(23,665		)
Proceeds from sale of real estate	233,005			299,852			—
Repayment of notes and mortgage loans receivable	174,276			29,421			124,500
Investments in partially-owned entities	(158,467		)	(15,331		)	(73,242		)
Development costs and construction in progress	(139,669		)	(123,436		)	(91,199		)
Additions to real estate	(117,942		)	(120,593		)	(96,018		)
Purchases of marketable securities	(59,714		)	(17,356		)	—
Cash received upon consolidation of Americold Realty Trust	21,694			—			—
Cash restricted, primarily mortgage escrows	8,754			101,292			(21,471		)
Proceeds from sale of securities available for sale	—			7,952			87,836
Net cash used in investing activities	(350,729		)	(130,292		)	(24,117		)
Cash Flows from Financing Activities:
Proceeds from borrowings	745,255			812,487			628,335
Repayments of borrowings	(702,823		)	(752,422		)	(731,238		)
Proceeds from issuance of preferred units	510,439			119,967			—
Distributions to Class A unitholders	(435,345		)	(390,139		)	(364,730		)
Distributions to preferred unitholders	(94,077		)	(116,619		)	(119,214		)
Redemption of perpetual preferred units	(112,467		)	(103,243		)	(25,000		)
Exercise of unit options	61,935			145,152			26,272
Costs of refinancing debt	(5,021		)	(1,500		)	(3,970		)
Proceeds from issuance of Class A units	—			—			56,453
Net cash used in financing activities	(32,104		)	(286,317		)	(533,092		)
Net increase (decrease) in cash and cash equivalents	278,740			112,342			(57,384		)
Cash and cash equivalents at beginning of year	320,542			208,200			265,584
Cash and cash equivalents at end of year	$	599,282		$	320,542		$	208,200

See notes to consolidated financial statements.

107

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

	Year Ended December 31,
(Amounts in thousands)	2004		2003		2002
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (including capitalized interest of $8,718, $5,407, and $6,677)	$	253,791	$	245,668	$	247,048
Non-Cash Transactions:
Increases in assets and liabilities on November 18, 2004 resulting from the consolidation of the Company’s investment in Americold Realty Trust:
Real estate, net	$	1,177,160	$	—	$	—
Accounts receivable, net	74,657		—		—
Other assets	68,735		—		—
Notes and mortgages payable	733,740		—		—
Accounts payable and accrued expenses	100,554		—		—
Other liabilities	47,362		—		—
Minority interest	284,764		—		—
Financing assumed in acquisitions	34,100		29,056		1,596,903
Class A units issued in connection with acquisitions	—		53,589		625,234
Unrealized gain on securities available for sale	45,003		5,517		860

See notes to consolidated financial statements.

108

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization and Business

Vornado Realty L.P. (the “Operating Partnership” and/or the “Company”) is a Delaware limited partnership. Vornado Realty Trust (“Vornado”), a fully-integrated real estate investment trust (“REIT”), is the sole general partner of, and owned approximately 87% of the common limited partnership interest in, the Operating Partnership at December 31, 2004. All references to “We,” “Us,” and “Company” refer to the Operating Partnership and its consolidated subsidiaries.

The Company currently owns directly or indirectly:

Office Properties (“Office”):

(i)all or portions of 86 office properties aggregating approximately 27.6 million square feet in the New York City metropolitan area (primarily Manhattan) and in the Washington D.C. and Northern Virginia area;

Retail Properties (“Retail”):

(ii)94 retail properties in seven states and Puerto Rico aggregating approximately 14.2 million square feet, including 2.8 million square feet built by tenants on land leased from the Company;

Merchandise Mart Properties:

(iii)8.6 million square feet of showroom and office space, including the 3.4 million square foot Merchandise Mart in Chicago;

Temperature Controlled Logistics:

(iv)a 47.6% interest in Americold Realty Trust which owns and operates 88 cold storage warehouses nationwide;

Other Real Estate Investments:

(v)33% of the outstanding common stock of Alexander’s, Inc. (“Alexander’s”) which has six properties in the greater New York metropolitan area;

(vi)the Hotel Pennsylvania in New York City consisting of a hotel portion containing 1.0 million square feet with 1,700 rooms and a commercial portion containing 0.4 million square feet of retail and office space;

(vii)a 22.4% interest in The Newkirk Master Limited Partnership (“Newkirk MLP”) which owns office, retail and industrial properties net leased primarily to credit rated tenants, and various debt interests in such properties;

(viii)seven dry warehouse/industrial properties in New Jersey containing approximately 1.7 million square feet;

(ix)mezzanine loans to real estate related companies; and

(x)interests in other real estate including a 12.25% interest in GMH Communities L.P. (which owns and manages student and military housing properties throughout the United States), other investments and marketable securities.

109

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2.Summary of Significant Accounting Policies

Basis of Presentation:  The accompanying consolidated financial statements include the accounts of Vornado Realty L.P and its consolidated subsidiaries.  All significant intercompany amounts have been eliminated.  The Company accounts for its unconsolidated partially-owned entities on the equity method of accounting.  See below for further details of the Company’s accounting policies regarding partially-owned entities.

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Reclassifications:  Certain prior year balances have been reclassified in order to conform to current year presentation.  The Company has also adjusted certain prior year balances to separately present Class A units issued to officer’s trust.

Real Estate:  Real estate is carried at cost, net of accumulated depreciation and amortization.  Betterments, major renewals and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized.  Maintenance and repairs are charged to operations as incurred.  For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete.  If the cost of the redeveloped property, including the undepreciated net book value of the property carried forward, exceeds the estimated fair value of redeveloped property, the excess is charged to expense.  Depreciation is provided on a straight-line basis over the assets’ estimated useful lives which range from 7 to 40 years.  Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximates the useful lives of the assets.  Additions to real estate include interest expense capitalized during construction of $8,718,000 and $5,407,000, for the years ended December 31, 2004 and 2003, respectively.

Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, and identified intangibles such as above and below market leases and acquired in-place leases and customer relationships) and acquired liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141: Business Combinations and SFAS No. 142: Goodwill and Other Intangible Assets, and allocates purchase price based on these assessments.  The Company assesses 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 the historical operating results, known trends, and market/economic conditions that may affect the property.  The Company’s properties, including any related intangible assets, are reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable.

Partially-Owned Entities:The Company considers APB 18: The Equity Method of Accounting for Investments in Common Stock, SOP 78-9: Accounting for Investments in Real Estate Ventures, Emerging Issues Task Force (“EITF”) 96-16: Investors Accounting for an Investee When the Investor has the Majority of the Voting Interest but the Minority Partners have Certain Approval or Veto Rights and FASB Interpretation No. 46 (Revised 2003): Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51 (“FIN 46R”), to determine the method of accounting for each of its partially-owned entities.  In determining whether the Company has a controlling interest in a partially-owned entity and the requirement to consolidate the accounts of that entity, it considers factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both.  The Company has concluded that it does not control a partially-owned entity, despite an ownership interest of 50% or greater, if the entity is not considered a variable interest entity and the approval of all of the partners/members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the hiring of a chief executive officer, the commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing secured by assets of the venture.  This is the case with respect to the Company’s 80% interest in Starwood Ceruzzi Venture, and 50% interests in Monmouth Mall, MartParc Wells, MartParc Orleans, and 825 Seventh Avenue.

110

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2.Summary of Significant Accounting Policies - continued

Identified Intangible Assets and Goodwill:  Upon an acquisition of a business the Company records intangible assets acquired at their estimated fair value separate and apart from goodwill.  The Company amortizes identified intangible assets that are determined to have finite lives which are based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the business acquired.  Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill.  Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  An impairment loss for an asset group is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, unless the fair value of specific components of the reporting group are determinable without undue cost and effort.

As of December 31, 2004 and 2003, the carrying amounts of the Company’s identified intangible assets are $176,314,000 and $130,875,000 and the carrying amounts of goodwill are $10,425,000 and $4,345,000, respectively.  Such amounts are included in “other assets” on the Company’s consolidated balance sheets.  In addition, the Company has $71,272,000 and $47,359,000 of identified intangible liabilities as of December 31, 2004 and 2003, which are included in “deferred credit” on the Company’s consolidated balance sheets.

Upon adoption of SFAS No. 142 on January 1, 2002, the Company tested the goodwill related to the Hotel Pennsylvania acquisition and the Temperature Controlled Logistics business for impairment.  As the carrying amounts of the respective goodwill exceeded the fair values, the Company wrote-off all of the goodwill as an impairment loss totaling $30,129,000 and has reflected the write-off  as a cumulative effect of change in accounting principle on the Company’s consolidated statement of income for the year ended December 31, 2002.

Cash and Cash Equivalents:  Cash and cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Cash and cash equivalents do not include cash escrowed under loan agreements and cash restricted in connection with an officer’s deferred compensation payable.

Allowance for Doubtful Accounts:  The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease agreements.  The Company also maintains an allowance for receivables arising from the straight-lining of rents.  This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements.  Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates.

Marketable Securities:  The Company has classified debt and equity securities which it intends to hold for an indefinite period of time as securities available-for-sale; equity securities it intends to buy and sell on a short term basis as trading securities; and mandatory redeemable preferred stock investments as securities held to maturity.  Unrealized gains and losses on trading securities are included in earnings.  Unrealized gains and losses on securities available-for-sale are included as a component of partners’ capital and other comprehensive income.  Realized gains or losses on the sale of securities are recorded based on specific identification.  A portion of the Company’s preferred stock investments are accounted for in accordance with EITF 99-20: Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.  Income is recognized by applying the prospective method of adjusting the yield to maturity based on an estimate of future cash flows.  If the value of the investment based on the present value of the future cash flows is less than the Company’s carrying amount, the investments will be written-down to fair value through earnings.  Investments in securities of non-publicly traded companies are reported at cost, as they are not considered marketable under SFAS No. 115: Accounting For Certain Investments in Debt and Equity Securities.

At December 31, 2004 and 2003, marketable securities had an aggregate cost of $135,382,000 and $75,114,000 and an aggregate fair value of $185,394,000 and $81,491,000 (of which $0 represents trading securities; $178,999,000 and $43,527,000 represents securities available for sale; and $6,395,000 and $37,964,000 represent securities held to maturity).  Unrealized gains and losses were $50,012,000 and $0 at December 31, 2004 and $6,377,000 and $0 at December 31, 2003.

111

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2.Summary of Significant Accounting Policies - continued

Notes and Mortgage Loans Receivable: The Company’s policy is to record notes and mortgage loans receivable at the stated principal amount less any discount or premium.  The Company accretes or amortizes any discounts or premiums over the life of the related loan receivable utilizing the straight-line method which approximates the effective interest method.  The Company evaluates the collectibility of both interest and principal of each of its loans, if circumstances warrant, to determine whether it is impaired. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or, as a practical expedient, to the value of the collateral if the loan is collateral dependent.

Deferred Charges: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest expense. Direct costs related to leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate.

Fair Value of Financial Instruments: The Company has estimated the fair value of all financial instruments reflected in the accompanying consolidated balance sheets at amounts which are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt).  The fair value of the Company’s debt is approximately $256,518,000 and $94,953,000 in excess of the aggregate carrying amounts at December 31, 2004 and 2003, respectively.  Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of the Company’s financial instruments.

Derivative Instruments And Hedging Activities:  SFAS No. 133: Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.  As required by SFAS No. 133, the Company records all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings.  The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

112

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2.Summary of Significant Accounting Policies - continued

Revenue Recognition:  The Company has the following revenue sources and revenue recognition policies:

Base Rents — income arising from tenant leases.  These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases.

Percentage Rents — income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold.  These rents are recognized in accordance with Staff Accounting Bulletin No. 104: Revenue Recognition, which states that this income is to be recognized only after the contingency has been removed (i.e. sales thresholds have been achieved).

Hotel Revenues — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and beverage revenue, and banquet revenue.  Income is recognized when rooms are occupied.  Food and beverage and banquet revenue is recognized when the services have been rendered.

Trade Show Revenues — income arising from the operation of trade shows, including rentals of booths.  This revenue is recognized in accordance with the booth rental contracts when the trade shows have occurred.

Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property.  This revenue is accrued in the same periods as the expenses are incurred.  Contingent rents are not recognized until realized.

Temperature Controlled Logistics revenue – income arising from the Company’s investment in Americold.  Storage and handling revenue is recognized as services are provided.  Transportation fees are recognized upon delivery to customers.

Management, Leasing and Other Fees – income arising from contractual agreements with third parties or with partially-owned entities.  This revenue is recognized as the related services are performed under the respective agreements.

Income Taxes:  No provision for income taxes has been made in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the partners.  The Company owns stock in corporations that have elected to be treated as taxable REIT subsidiaries (“TRS”) for Federal income tax purposes.  The value of the combined TRS stock cannot and does not exceed 20% of the value of the Company’s total assets.  A TRS is taxed on its net income at regular corporate tax rates.  Total income taxes paid for the 2004, 2003 and 2002 tax years was $1,867,000, $2,048,000 and $1,430,000.

The net basis of the Company’s assets and liabilities for tax purposes is approximately $3,189,273,000 lower than the amount reported for financial statement purposes.

113

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2.Summary of Significant Accounting Policies - continued

Income Per Class A Unit:  Basic income per Class A unit is computed based on weighted average units outstanding.  Diluted income per Class A Unit considers the effect of outstanding options, restricted units, warrants and convertible or redeemable securities.

Stock-Based Compensation:  In 2002 and prior years, the Company accounted for employee unit options using the intrinsic value method. Under the intrinsic value method compensation cost is measured as the excess, if any, of the quoted market price of Vornado’s stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period.  The Company’s policy is to grant options with an exercise price equal to 100% of the market price of Vornado’s stock on the grant date. Accordingly, no compensation cost has been recognized for the Company’s unit option grants.  Effective January 1, 2003, the Company adopted SFAS No. 123: Accounting for Stock-Based Compensation, as amended by SFAS No. 148: Accounting for Stock-Based Compensation - Transition and Disclosure.  The Company adopted SFAS No. 123 prospectively by valuing and accounting for employee unit options granted in 2003 and thereafter.  The Company utilizes a binomial valuation model and appropriate market assumptions to determine the value of each grant.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period for all grants subsequent to 2002.  See Note 10. Stock-Based Compensation, for pro forma net income and pro forma net income per Class A unit for the years ended December 31, 2004, 2003 and 2002, assuming compensation costs for grants prior to 2003 were recognized as compensation expense based on the fair value at the grant dates.

In addition to employee stock option grants, the Company has also granted Vornado restricted shares to certain of its employees that vest over a three to five year period.  The Company records the value of each restricted share award as stock-based compensation expense based on Vornado’s closing stock price on the NYSE on the date of grant on a straight-line basis over the vesting period.  As of December 31, 2004, the Company has 290,478 restricted units or rights to receive restricted units outstanding to employees of the Company, excluding 626,566 units issued to the Company’s President in connection with his employment agreement.  The Company recognized $4,200,000, $3,239,000 and $914,000 of stock-based compensation expense in the years ended December 31, 2004, 2003 and 2002 for the portion of these shares that vested during each year.  Dividends on both vested and unvested shares are charged to retained earnings and amounted to $938,700, $777,700 and $210,100 for the years ended December 31, 2004, 2003 and 2002, respectively.  Dividends on shares that are canceled or terminated prior to vesting are charged to compensation expense in the period they are cancelled or terminated.

Recently Issued Accounting Literature

On December 16, 2004, the FASB issued SFAS No. 153:Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have “commercial substance.” SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe the adoption of SFAS No. 153 on June 15, 2005 will have a material effect on the Company’s consolidated financial statements.

On December 16, 2004, the FASB issued SFAS No. 123: (Revised 2004) - Unit-Based Payment (“SFAS No. 123R”).  SFAS 123R replaces SFAS No. 123, which the Company adopted on January 1, 2003. SFAS No. 123R requires that the compensation cost relating to unit-based payment transactions be recognized in financial statements and be measured based on the fair value of the equity or liability instruments issued. SFAS No. 123R is effective as of the first interim or annual reporting period that begins after June 15, 2005.  The Company does not believe that the adoption of SFAS No. 123R will have a material effect on the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

3.Acquisitions and Dispositions

Acquisitions:

The Company completed approximately $328,600,000 of real estate acquisitions and investments in 2004 and $530,400,000 in 2003.  In addition, the Company made $183,400,000 of mezzanine loans during 2004 (see Note 6. Notes and Mortgage Loans Receivable).  These acquisitions were consummated through subsidiaries of the Company.  The related assets, liabilities and results of operations are included in the Company’s consolidated financial statements from their respective dates of acquisition.  The pro forma effect of the individual acquisitions and in the aggregate were not material to the Company’s historical results of operations.

Acquisitions of individual properties are recorded as acquisitions of real estate assets.  Acquisitions of businesses are accounted for under the purchase method of accounting. The purchase price for property acquisitions and businesses acquired is allocated to acquired assets and assumed liabilities using their relative fair values as of the acquisition date based on valuations and other studies. Initial valuations are subject to change until such information is finalized no later than 12 months from the acquisition date.

Office:

Building Maintenance Service Company (“BMS”)

On January 1, 2003, the Company acquired for $13,000,000 in cash BMS, which provides cleaning, security and engineering services principally to the Company’s Manhattan office properties.  This company was previously owned by the estate of Bernard Mendik and certain other individuals including David R. Greenbaum, one of the Company’s executive officers.  This acquisition was recorded as a business combination under the purchase method of accounting.  Accordingly, the operations of BMS are consolidated into the accounts of the Company beginning January 1, 2003.

Kaempfer Company (“Kaempfer”)

On April 9, 2003, the Company acquired Kaempfer which owns partial interests in six Class “A” office properties in Washington D.C. containing 1.8 million square feet, manages and leases these properties and four others for which it receives customary fees and has options to acquire certain other real estate interests, including the Waterfront project discussed below.  Kaempfer’s equity interest in the properties approximates 5.0%.  The aggregate purchase price for the equity interests and the management and leasing business was $32,200,000 (consisting of $28,600,000 in cash and approximately 99,300 Operating Partnership units valued at $3,600,000) and may be increased by up to $9,000,000 based on the performance of the management company.  This acquisition was recorded as a business combination under the purchase method of accounting.  Accordingly, the operations of Kaempfer are consolidated into the accounts of the Company beginning April 9, 2003.

On October 7, 2003, the Company acquired a 2.5% interest in the planned redevelopment of Waterfront, located at 401 M Street, a mixed-use project in Washington D.C. (the “Waterfront interest”) for $2,171,000, of which the Company paid $1,545,000 in cash and issued 12,500 Operating Partnership units valued at $626,000.  The partnership units were issued to Mitchell N. Schear, one of the partners in the Waterfront interest, who became the President of the Company’s CESCR division.

20 Broad Street

On May 2, 2003, the Company acquired the remaining 40% of a 78-year leasehold interest in 20 Broad Street it did not already own.  The purchase price was approximately $30,000,000 in cash.  20 Broad Street contains 466,000 square feet of office space, of which 348,000 square feet is leased to the New York Stock Exchange.  Prior to the acquisition of the remaining 40%, the Company consolidated the operations of this property and reflected the 40% interest that it did not own as a component of minority interest.  Subsequent to this acquisition, the Company no longer reflects the 40% minority interest.

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3.Acquisitions and Dispositions - continued

2101 L Street

On August 4, 2003, the Company completed the acquisition of 2101 L Street, a 370,000 square foot office building located in Washington D.C.  The consideration for the acquisition consisted of approximately 1.1 million newly issued Operating Partnership units (valued at approximately $49,517,000) and the assumption of existing mortgage debt and transaction costs totaling approximately $32,000,000.  Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members owned approximately 24 percent of the limited partnership that sold the building and Mr. Smith was a general partner.  On August 5, 2003, the Company repaid the mortgage of $29,056,000.

Crystal City Marriott

On July 1, 2004, the Company acquired the Marriott hotel located in its Crystal City office complex from a limited partnership in which Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members own approximately 67 percent.  The purchase price of $21,500,000 was paid in cash as part of a Section 1031 tax-free, “like-kind” exchange with a portion of the proceeds from the Company’s sale of the Palisades Residential Complex (see Dispositions).  The hotel contains 343 rooms and is leased to an affiliate of Marriott International, Inc. until July 31, 2015, with one 10-year extension option.  The land under the hotel was acquired in 1999.

Retail:

Bergen Mall

On December 12, 2003, the Company acquired the Bergen Mall for approximately $145,000,000 in cash as part of a Section 1031 tax-free “like-kind” exchange with a portion of the proceeds from the sale of the Company’s Two Park Avenue property (see Dispositions).  The Bergen Mall is a 903,000 square foot shopping center located on Route 4 East in Paramus, New Jersey.  The Company intends to expand, re-tenant and redevelop the center in order to reposition the asset.  On January 27, 2004, the Company entered into an agreement to modify the Value City lease to give the Company a one-year option to terminate the lease no earlier than one year after notification and upon payment of $12,000,000 to the tenant.  The present value of this option is reflected in the acquisition price and is included in other liabilities in the Company’s consolidated balance sheets.

Forest Plaza Shopping Center

On February 3, 2004, the Company acquired the Forest Plaza Shopping Center for approximately $32,500,000, of which $14,000,000 was paid in cash, and $18,500,000 was debt assumed.  The purchase was funded as part of Section 1031 tax-free “like kind” exchange with the remaining portion of the proceeds from the sale of the Company’s Two Park Avenue property (see Dispositions).  Forest Plaza is a 165,000 square foot shopping center located in Staten Island, New York.

25 W. 14^th Street

On March 19, 2004, the Company acquired a 62,000 square foot free-standing retail building located at 25 W. 14^th Street in Manhattan for $40,000,000 in cash.  This acquisition was paid in cash as part of a Section 1031 tax-free, “like-kind” exchange with a portion of the proceeds from the Company’s sale of the Palisades Residential Complex (see Dispositions).

Southern California Supermarkets

On July 29, 2004, the Company acquired a real estate portfolio containing 25 supermarkets for $65,000,000.  These properties, all of which are all located in Southern California and contain an aggregate of approximately 766,000 square feet, were purchased from the Newkirk MLP, in which the Company currently owns a 22.4% interest.  The supermarkets are net leased to Stater Brothers for an initial term expiring in 2008, with six 5-year extension options.  Stater Brothers is a Southern California regional grocery chain that operates 158 supermarkets and has been in business since 1936.  This acquisition was paid in cash as part of a Section 1031 tax-free, “like-kind” exchange with a portion of the proceeds from the Company’s sale of the Palisades Residential Complex (see Dispositions).  The Company’s share of gain recognized by Newkirk MLP on this transaction was $7,119,000 and was reflected as an adjustment to the Company’s basis in its investment in Newkirk MLP and not recognized as income.

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3.Acquisitions and Dispositions - continued

Queens Boulevard

On August 30, 2004, the Company acquired 99-01 Queens Boulevard, a 68,000 square foot free-standing building in Forest Hills, New York for $26,500,000 in cash as part of a Section 1031 tax-free, “like-kind” exchange with a portion of the proceeds from the Company’s sale of the Palisades Residential Complex (see Dispositions).

Broome Street and Broadway

On November 2, 2004, the Company acquired a 50% joint venture interest in a 92,500 square foot property located at Broome Street and Broadway in New York City.  The Company contributed $4,462,000 of equity and provided a $24,000,000 bridge loan with interest at 10% per annum.  Upon the refinancing of the bridge loan, which is expected to close in the second quarter of 2005, the Company will be repaid $15,106,000 and the balance of $8,894,000 will remain in the venture as additional equity.

Lodi and Burnside Shopping Centers

On November 12, 2004 and December 1, 2004, the Company acquired two shopping centers aggregating 185,000 square feet, in Lodi, New Jersey and Long Island (Inwood), New York, for a total purchase of $36,600,000 in cash plus $10,900,000 of assumed debt as part of a Section 1031 tax-free, “like-kind” exchange with a portion of the proceeds from the Company’s sale of the Palisades Residential Complex (see Dispositions).

Other Retail

In December 2004, the Company acquired two retail condominiums aggregating 12,000 square feet, located at 386 and 387 West Broadway in New York City for $16,900,000 in cash plus $4,700,000 of assumed debt.

Other Investments:

Investment in GMH Communities L.P.

On July 20, 2004, the Company committed to make up to a $159,000,000 convertible preferred investment in GMH Communities L.P. (“GMH”), a partnership focused on the student and military housing sectors.  Distributions accrued on the full committed balance of the investment, whether or not drawn, from July 20, 2004, at a rate of 16.27%.  In connection with this commitment, the Company received a placement fee of $3,200,000.  The Company also purchased for $1,000,000, warrants to acquire GMH common equity.  These warrants entitle the Company to acquire (i) 6,666,667 limited partnership units in GMH at an exercise price of $7.50 per unit and (ii) 5,496,724 limited partnership units, through May 6, 2006, at an exercise price of $9.10 per unit.  As of November 3, 2004, the Company had funded a total of $113,777,000 of the commitment.

On November 3, 2004, GMH Communities Trust (“GCT”) closed its initial public offering (“IPO”)  at a price of $12.00 per unit.  GCT is a real estate investment trust that conducts its business through GMH, of which it is the sole general partner.  In connection with the IPO, the $113,777,000 previously funded by the Company under the $159,000,000 commitment was repaid, together with accrued distributions of $13,381,000.  The Company also exercised warrants to purchase 6,666,667 limited partnership units at a price of $7.50 per unit, or $50,000,000 in total, which resulted in a gain of $29,500,000.  The Company accounts for its interest in the partnership units on the equity method based on its 12.25% ownership interest and right to appoint one of its executive officers to GCT’s Board of Trustees.  The Company records its pro-rata share of GMH’s net income or loss on a one-quarter lag basis as the Company files its financial statements on Form 10-K or 10-Q prior to the time GMH files its financial statements.

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3.Acquisitions and Dispositions - continued

Under the warrant agreement, the number of GMH partnership units or GCT common units underlying the warrants is adjusted for dividends declared by GCT.  On December 16, 2004, GCT declared a dividend of $.16 per common unit, which increased the number of units underlying the warrants from 5,496,724 to 5,563,417 and the exercise price was decreased from $9.10 to $8.99 per unit.   Because these warrants are derivatives and do not qualify for hedge accounting treatment, the gains and losses resulting from the mark-to-market of the warrants at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  In the quarter ended December 31, 2004, the Company recognized income of $24,190,000 from the mark-to-market of these warrants, which were valued using a trinomial option pricing model based on GCT’s closing stock price on the NYSE of $14.10 per unit on December 31, 2004.

Further, in connection with the IPO, the Company contributed its 90% interest in Campus Club Gainesville, which it acquired in 2000, in exchange for an additional 671,190 GMH limited partnership units.

Of the Company’s GMH units, 6,666,667 may be converted into an equivalent number of common units of GCT commencing on May 2, 2005 and 671,190 units may be converted commencing on November 2, 2005.  The Company has agreed not to sell any common units or units it owns or may acquire until May 2, 2005.

Investment in Sears, Roebuck and Co.

In July and August 2004, the Company acquired an aggregate of 1,176,600 common shares of Sears, Roebuck and Co. (“Sears”) for $41,945,000, an average price of $35.65 per share. Included in the cost is $1,361,000 for a performance-based participation.  These shares are recorded as marketable securities on the Company’s consolidated balance sheet and are classified as “available for sale.”  Appreciation or depreciation in the fair market value of these shares is recorded as an increase or decrease in “accumulated other comprehensive income” in the partners’ capital section of the Company’s consolidated balance sheet and not recognized in income.  At December 31, 2004, based on Sears’ closing stock price of $51.03 per share, $18,105,000 of appreciation in the value of these shares was included in “accumulated other comprehensive income.”

In August and September 2004, the Company acquired an economic interest in an additional 7,916,900 Sears common shares through a series of privately negotiated transactions with a financial institution pursuant to which the Company purchased a call option and simultaneously sold a put option at the same strike price on Sears common shares.  These call and put options have an initial weighted-average strike price of  $39.82 per share, or an aggregate of $315,250,000, expire in April 2006 and provide for net cash settlement.  Under these agreements, the strike price for each pair of options increases at an annual rate of LIBOR plus 45 basis points and is credited for the dividends received on the shares.  The options provide the Company with the same economic gain or loss as if it had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points.  Because these options are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  During the year ended December 31, 2004, the Company recorded net income of $81,730,000, comprised of (i) $88,782,000 from the mark-to-market of the options on December 31, 2004, based on Sears’ closing stock price of $51.03 per share and (ii) $2,295,000 for accrued dividends, partially offset by (i) $5,972,000 for a performance-based participation, (ii) $2,371,000 for the increase in strike price resulting from the LIBOR charge and (iii) $1,004,000 of professional fees.

On November 16, 2004, Kmart Holding Corporation (“Kmart”) and Sears entered into an Agreement and Plan of Merger.  Upon the effective date of the merger, each share of Sears common stock will be converted into the right to receive, at the election of the holder, (i) $50.00 in cash or (ii) 0.50 shares of common stock of the merged company, subject to proration so that 55% of the Sears shares are exchanged for shares of the merged company.

Based on Sears’ most recent filing with the Securities and Exchange Commission, the Company’s aggregate investment in Sears represents 4.2% of Sears’ outstanding common shares.

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3.Acquisitions and Dispositions - continued

Dispositions:

The following sets forth the details of sales, dispositions, write-offs and other similar transactions for the years ended December 31, 2004, 2003 and 2002:

Net Gains on Sales of Real Estate:

On January 9, 2003, the Company sold its Baltimore, Maryland shopping center for $4,752,000, which resulted in a net gain on the sale after closing costs of $2,644,000.

On October 10, 2003, the Company sold Two Park Avenue, a 965,000 square foot office building, for $292,000,000, which resulted in a net gain on the sale after closing costs of $156,433,000.  Substantially all of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments pursuant to Section 1031 of the Internal Revenue Code (“Section 1031”).

On November 3, 2003, the Company sold its Hagerstown, Maryland shopping center property for $3,100,000, which resulted in a net gain on sale after closing costs of $1,945,000.

On June 29, 2004, the Company sold its Palisades Residential Complex for $222,500,000, which resulted in a net gain on sale after closing costs of $65,905,000.  Substantially all of the proceeds from the sale were reinvested in tax-free “like kind” exchange investments pursuant to Section 1031.  On February 27, 2004, the Company had acquired the remaining 25% interest in the Palisades venture it did not previously own for approximately $17,000,000 in cash.

On August 12, 2004, the Company sold its Dundalk, Maryland shopping center for $12,900,000, which resulted in a net gain on sale after closing costs of $9,850,000.  Substantially all of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments pursuant to Section 1031.

Net gains (losses) on disposition of wholly-owned and partially-owned assets other than depreciable real estate:

	For the Years Ended December 31,
(Amounts in thousands)	2004			2003			2002
Wholly-owned:
Gain on sale of residential condominium units	$	776		$	282		$	2,156
Net (loss) gain on sale of marketable securities	(159		)	2,950			12,346
Primestone loss on settlement of guarantees (2003) and foreclosure and impairment losses (2002)	—			(1,388		)	(35,757		)
Gains on sale of land parcels	—			499			—
Gain on transfer of mortgages	—			—			2,096
Net gain on sale of air rights	—			—			1,688
Partially-owned:
Net gain on sale of a portion of investment in Americold to Yucaipa	18,789			—			—
Other	369			—			—
Net gain (loss) on disposition of wholly-owned and partially-owned assets other than depreciable real estate	$	19,775		$	2,343		$	(17,471	)

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3.Acquisitions and Dispositions - continued

Primestone Settlement of Guarantees (2003) and Foreclosure and Impairment Losses (2002)

On September 28, 2000, the Company made a $62,000,000 loan to Primestone Investment Partners, L.P. (“Primestone”).  The loan bore interest at 16% per annum.  Primestone defaulted on the repayment of this loan on October 25, 2001.  The loan was subordinate to $37,957,000 of other debt of the borrower that liened the Company’s collateral.  On October 31, 2001, the Company purchased the other debt for its face amount.  The loans were secured by 7,944,893 partnership units in Prime Group Realty, L.P., the operating partnership of Prime Group Realty Trust (NYSE:PGE) and the partnership units were exchangeable for the same number of common units of PGE.  The loans were also guaranteed by affiliates of Primestone.

On November 19, 2001, the Company sold, pursuant to a participation agreement with a subsidiary of Cadim inc. (“Cadim”), a Canadian pension fund, a 50% participation in both loans at par for approximately $50,000,000 reducing the Company’s net investment in the loans at December 31, 2001 to $56,768,000 including unpaid interest and fees of $6,790,000.  The participation did not meet the criteria for “sale accounting” under SFAS 140 because Cadim was not free to pledge or exchange the assets.

On April 30, 2002, the Company and Cadim acquired the 7,944,893 partnership units at a foreclosure auction.  The price paid for the units by application of a portion of Primestone’s indebtedness to the Company and Cadim was $8.35 per unit, the April 30, 2002 closing price of units of PGE on the New York Stock Exchange.  On June 28, 2002, pursuant to the terms of the participation agreement, the Company transferred 3,972,447 of the partnership units to Cadim.

In the second quarter of 2002, in accordance with foreclosure accounting, the Company recorded a loss on the Primestone foreclosure of $17,671,000 calculated based on (i) the acquisition price of the units and (ii) its valuation of the amounts realizable under the guarantees by affiliates of Primestone, as compared with the net carrying amount of the investment at April 30, 2002.  In the third quarter of 2002, the Company recorded a $2,229,000 write-down on its investment based on costs expended to realize the value of the guarantees.  Further, in the fourth quarter of 2002, the Company recorded a $15,857,000 write-down of its investment in Prime Group consisting of  (i) $14,857,000 to adjust the carrying amount of the Prime Group units to $4.61 per unit, the closing price of PGE units on December 31, 2002 on the New York Stock Exchange and (ii) $1,000,000 for estimated costs to realize the value of the guarantees.  The Company considered the decline in the value of the units which are convertible into stock to be other than temporary as of December 31, 2002, based on the fact that the market value of the units which are convertible into stock had been less than its cost for more than six months, the severity of the decline, market trends, the financial condition and near-term prospects of Prime Group and other relevant factors.

On June 11, 2003, the Company exercised its right to exchange the 3,972,447 units it owned in Prime Group Realty L.P. for 3,972,447 common units in Prime Group Realty Trust (NYSE:PGE).  Prior to the exchange, the Company accounted for its investment in the partnership on the equity method.  Subsequent to the exchange, the Company is accounting for its investment in PGE as a marketable equity security-available for sale, as the Company’s units represent less than a 20% ownership interest in PGE (which is not a partnership), the Company does not have significant influence and the common units have a readily determinable fair value.  Accordingly, the carrying amount previously included in Investments and Advances to Partially-Owned Entities was reclassified to Marketable Securities on the Company’s consolidated balance sheet.  The Company is also required to mark these securities to market based on the closing price of the PGE units on the NYSE at the end of each reporting period.  For the period from June 11, 2003 through December 31, 2003, the Company recorded a $6,623,000 unrealized gain, which is not included in the Company’s net income, but is reflected as a component of Accumulated Other Comprehensive Income in the Partners’ Capital section of the consolidated balance sheet.  From the date of exchange, income recognition is limited to dividends received on the PGE units.

On June 13, 2003, the Company received its $5,000,000 share of a settlement with affiliates of Primestone Investment Partners of the amounts due under the guarantees of the Primestone loans.  In connection therewith, the Company recognized a $1,388,000 loss on settlement of the guarantees.

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3.    Acquisitions and Dispositions - continued

Gain on Transfer of Mortgages

In the year ended December 31, 2002, the Company recorded a net gain of approximately $2.1 million resulting from payments to the Company by third parties that assumed certain of the Company’s mortgages.  Under these transactions the Company paid to the third parties that assumed the Company’s obligations the outstanding amounts due under the mortgages and the third parties paid the Company for the benefit of assuming the mortgages.  The Company has been released by the creditors underlying these loans.

Net Gain on Sale of Air Rights

In 2002, the Company constructed a $16.3 million community facility and low-income residential housing development (the “30th Street Venture”), in order to receive 163,728 square feet of transferable development rights, generally referred to as “air rights”.  The Company donated the building to a charitable organization.  The Company sold 106,796 square feet of these air rights to third parties at an average price of $120 per square foot.  An additional 28,821 square feet of air rights was sold to Alexander’s at a price of $120 per square foot for use at Alexander’s 731 Lexington Avenue project.  In each case, the Company received cash in exchange for air rights.  The Company identified third party buyers for the remaining 28,111 square feet of air rights of the 30th Street Venture.  These third party buyers wanted to use the air rights for the development of two projects located in the general area of 86th Street which was not within the required geographical radius of the construction site nor in the same Community Board as the low-income housing and community facility project.  The 30th Street Venture asked Alexander’s to sell 28,111 square feet of the air rights it already owned to the third party buyers (who could use them) and the 30th Street Venture would replace them with 28,111 square feet of air rights.  In October 2002, the Company sold 28,111 square feet of air rights to Alexander’s for an aggregate sales price of $3,059,000 (an average of $109 per square foot).   Alexander’s then sold an equal amount of air rights to the third party buyers for an aggregate sales price of $3,339,000 (an average of $119 per square foot).

Net Gains on Sale of Residential Condominium Units

The Company recognized net gains of $776,000, $282,000 and $2,156,000 during 2004, 2003 and 2002, respectively, from the sale of residential condominiums.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

4.Discontinued Operations

SFAS No. 144 requires discontinued operations presentation for disposals of a “component” of an entity.  In accordance with SFAS No. 144, for all periods presented, the Company reclassified its consolidated statements of income to reflect income and expenses for properties which became held for sale subsequent to December 31, 2001, as discontinued operations and reclassified its consolidated balance sheets to reflect assets and liabilities related to such properties as assets related to discontinued operations and liabilities related to discontinued operations.

Assets related to discontinued operations consist primarily of real estate, net of accumulated depreciation.  The following table sets forth the balances of the assets related to discontinued operations as of December 31, 2004 and 2003:

	December 31,
(Amounts in thousands)	2004		2003
400 North LaSalle	$	82,624	$	80,685
Arlington Plaza	35,127		36,109
Vineland	908		908
Palisades (sold on June 29, 2004)	—		138,629
Baltimore (Dundalk) (sold on August 12, 2004)	—		2,167
	$	118,659	$	258,498

The following table sets forth the balances of the liabilities related to discontinued operations (primarily mortgage notes payable) as of December 31, 2004 and 2003.

	December 31,
(Amounts in thousands)	2004		2003
Arlington Plaza	$	15,867	$	16,487
400 North LaSalle	5,187		3,038
Palisades (sold on June 29, 2004)	—		120,000
	$	21,054	$	139,525

The combined results of operations of the assets related to discontinued operations for the years ended December 31, 2004, 2003 and 2002 are as follows:

	December 31,
(Amounts in thousands)	2004		2003		2002
Total revenues	$	19,799	$	47,770	$	48,283
Total expenses	16,957		33,171		36,468
Net income	2,842		14,599		11,815
Gains on sale of real estate	75,755		161,789		—
Income from discontinued operations	$	78,597	$	176,388	$	11,815

See Note 3. – Acquisitions and Dispositions for details of gains on sale of real estate related to discontinued operations in the years ended December 31, 2004 and 2003.

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VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

5.Investments in Partially-Owned Entities

The Company’s investments in partially-owned entities and income recognized from such investments are as follows:

Balance Sheet Data:

						100% of These Entities
	Company’s Investment					Total Assets				Total Liabilities				Total Equity
(Amounts in thousands)	Percentage Ownership	2004		2003		2004		2003		2004		2003		2004		2003
Investments:
Temperature Controlled Logistics (1)	47.6%	$	—	$	436,225			$	1,264,390			$	557,017			$	707,373
Alexander’s	33%	204,762		207,872		$	1,244,801	$	920,996	$	1,226,433	$	870,073	$	18,368	$	50,923
Newkirk MLP	22%	158,656		138,762		$	1,240,129	$	1,384,094	$	1,030,755	$	1,276,905	$	209,374	$	107,189
GMH Communities L.P. (2)	12.25%	84,782		—
Partially – Owned Office Buildings	0.1% - 50%	48,682		44,645
Monmouth Mall	50%	29,351		30,612
478-486 Broadway	50%	29,170		—
Starwood Ceruzzi Joint Venture	80%	19,106		23,821
Other		30,791		18,663
		$	605,300	$	900,600

(1)See page 127 for details.

(2)As of December 31, 2004, the Company owns 7.3 million limited partnership units, or 12.25% of the limited partnership interest of GMH, a partnership focused on the student and military housing sectors.  Details of this investment are provided on page 117.  The Company accounts for its interest in the partnership units on the equity-method based on its 12.25% ownership interest and right to appoint one of its executive officers to GCT’s Board of Trustees.  The Company records its prorata share of GMH’s net income or loss on a one-quarter lag basis as the Company files its financial statements on Form 10-K or 10-Q prior to the time GMH files its financial statements.  GMH’s properties were 94.2% occupied as of December 31, 2004.  GMH’s outstanding indebtedness was $359,000 as of December 31, 2004, of which the Company’s share was $44,000.

In addition, the Company holds warrants to purchase an additional 5.6 million limited partnership units of GMH or common units of GCT at a price of $8.99 per unit or unit through May 6, 2006.  Because these warrants are derivatives and do not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the warrants at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on the Company’s consolidated statement of income.  In the quarter ended December 31, 2004, the Company recognized $24,190 from the mark-to-market of these warrants, which were valued using trinomial option pricing model based on GCT’s closing stock price on the NYSE of $14.10 per unit on December 31, 2004.

123

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

5.             Investments in Partially-Owned Entities - continued

Below is a summary of the debt of partially owned entities as of December 31, 2004 and 2003, none of which is guaranteed by the Company.

	100% of Partially-Owned Entities Debt
(Amounts in thousands)	December 31, 2004		December 31, 2003
Alexander’s (33% interest):
Lexington Avenue mortgage note payable collateralized by the office space, due in February 2014, with interest at 5.33%	$	400,000	$	—
Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at 7.46% (prepayable with yield maintenance)	213,699		216,586
Due to Vornado on January 3, 2006 with interest at 9.0% (one-year treasuries plus 6.0% with a 3.0% floor for treasuries) (prepayable without penalty)	124,000		124,000
Rego Park mortgage note payable, due in June 2009, with interest at 7.25%	81,661		82,000
Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable without penalty)	68,000		68,000
Lexington Avenue construction loan payable, due in January 2006, plus two one-year extensions, with interest at 4.92% (LIBOR plus 2.50%)	65,168		240,899
Newkirk MLP (22.4% interest):
Portion of first mortgages collateralized by the partnership’s real estate, due from 2005 to 2024, with a weighted average interest rate of 7.28% at December 31, 2004 (various prepayment terms)	859,674		1,069,545
GMH Communities L.P. (12.25% interest):
Mortgage notes payable, collateralized by 27 properties, due from 2005 to 2014, with a weighted average interest rate of 5.28% at December 31, 2004	359,276		—
Monmouth Mall (50% interest):
Mortgage note payable, due in November 2005, with interest at LIBOR plus 2.05% and two one-year extension options (4.53% at December 31, 2004)	135,000		135,000
Partially-Owned Office Buildings:
Kaempfer Properties (2.1% to 10% interests in five partnerships) Mortgage notes payable, collateralized by the partnerships’ real estate, due from 2007 to 2031, with a weighted average interest rate of 6.96% at December 31, 2004 (various prepayment terms)	491,867		361,263
Fairfax Square (20% interest) mortgage note payable, due in August 2009, with interest at 7.50%	67,215		68,051
330 Madison Avenue (25% interest) mortgage note payable, due in April 2008, with interest at 6.52% (prepayable with yield maintenance)	60,000		60,000
825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014, with interest at 8.07% (prepayable with yield maintenance)	23,104		23,060
Wells/Kinzie Garage (50% interest) mortgage note payable, due in May 2009, with interest at 7.03%	15,334		15,606
Orleans Hubbard (50% interest) mortgage note payable, due in March 2009, with interest at 7.03%	9,626		9,799
Temperature Controlled Logistics (47.6% interest) (1):
Mortgage notes payable	—		509,456
Other notes payable	—		39,365

(1)   Beginning on November 18, 2004, the Company’s investment in Americold is consolidated into the accounts of the Company.

Based on the Company’s ownership interest in the partially-owned entities above, the Company’s share of the debt of these partially-owned entities was $669,942,000 and $930,567,000 as of December 31, 2004 and 2003, respectively.

124

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

5.Investments in Partially-Owned Entities - continued

Income Statement Data:

	Company’s Equity in Income (Loss) from Partially Owned Entities									100% of These Entities
										Total Revenues						Net Income (loss)
(Amounts in thousands)	2004			2003			2002			2004		2003		2002		2004			2003			2002
Alexander’s:
33% share of equity in income before stock appreciation rights compensation expense	$	13,701		$	8,614		$	7,556
33% share of stock appreciation rights compensation expense	(25,340		)	(14,868		)	—
33% share of equity in (loss) income (1)	(11,639		)	(6,254		)	7,556			$	148,895	$	87,162	$	76,800	$	(33,469	)	$	(17,742	)	$	23,584
Interest income (2)	8,642			10,554			10,401
Development and guarantee fees (2)	3,777			6,935			6,915
Management and leasing fee income (1)	7,800			4,339			4,781
	$	8,580		$	15,574		$	29,653
Temperature Controlled Logistics (3):
Equity in net income	$	606		$	12,869		$	4,144				$	119,605	$	117,663				$	20,515		$	5,586
Management fees	5,035			5,547			5,563
	5,641			18,416			9,707
Newkirk MLP:
Equity in income	24,041			33,243			26,500			$	239,496	$	273,500	$	295,369	$	136,037		$	151,505		$	121,860
Interest and other income	11,396			7,002			8,000
	35,437			40,245			34,500
Partially-Owned Office Buildings (4)	2,728			2,426			1,966
Monmouth Mall	3,741			4,433			1,022
Prime Group Realty LP (5)	—			—			(1,005		)
Other	(4,166		)	2,381			(1,732		)
	$	43,381		$	67,901		$	44,458

(1)2002 includes the Company’s $3,431 share of Alexander’s gain on sale of its Third Avenue property.

(2)Alexander’s capitalizes the fees and interest charged by the Company.  Because the Company owns 33% of Alexander’s, the Company recognizes 67% of such amounts as income and the remainder is reflected as a reduction of the Company’s carrying amount of the investment in Alexander’s.

(3)Beginning on November 18, 2004, the Company’s investment in Americold is consolidated into the accounts of the Company.

(4)Represents the Company’s interests in 330 Madison Avenue (24.8%), 825 Seventh Avenue (50%), Fairfax Square (20%) and Kaempfer equity interests in six office buildings (.1% to 10%).

(5)On June 11, 2003, the Company exercised its right to exchange the 3,972,447 units it owned in Prime Group Realty L.P. for 3,972,447 common shares in Prime Group Realty Trust (NYSE:PGE).  Prior to the exchange, the Company accounted for its investment in the partnership on the equity method.  Subsequent to the exchange, the Company is accounting for its investment in PGE as a marketable equity security-available for sale.

125

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

5.    Investments in Partially-Owned Entities - continued

Alexander’s

The Company owns 33% of the outstanding common stock of Alexander’s at December 31, 2004 and 2003.   The Company manages, leases and develops Alexander’s properties pursuant to agreements (see below) which expire in March of each year and are automatically renewable, except for the 731 Lexington Avenue development agreement which provides for a term lasting until substantial completion of the development of the property.

Management and Leasing Agreements

The Company receives an annual fee for managing all of Alexander’s properties equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Mall, and (iii) 6% of development costs with minimum guaranteed fees of $750,000 per annum.

The Company generally receives a fee of (i) 3% of lease rent for the first ten years of a lease term, 2% of lease rent for the 11^th through the 20^th years of a lease term and 1% of lease rent for the 21^st through 30^th years of a lease term, subject to the payment of rents by Alexander’s tenants and (ii) 3% of asset sales proceeds.  Such amounts are payable to the Company annually in an amount not to exceed an aggregate of $2,500,000 until the present value of such installments (calculated at a discount rate of 9% per annum) equals the amount that would have been paid at the time the transactions which gave rise to the commissions occurred.

The Company recognized $7,800,000, $4,339,000 and $4,781,000 of fee income under these agreements during the years ended December 31, 2004, 2003 and 2002, respectively.  At December 31, 2004, and 2003, $23,744,000 and $14,450,000 was due to the Company under these agreements.

731 Lexington Avenue and Other Fees

The Company is entitled to a development fee for the construction of Alexander’s 731 Lexington Avenue property of approximately $26,300,000, based on 6% of construction costs, as defined, payable on the earlier of January 3, 2006, or the date of payment in full of the construction loan encumbering the property.  The Company guaranteed to Alexander’s 731 Lexington Avenue construction lender, the lien free, timely completion of the construction of the project and funding of project costs in excess of a stated budget, if not funded by Alexander’s for which the Company is entitled to a $6,300,000 estimated fee based on 1 % of construction costs, as defined, payable upon the completion of construction.  Based upon the current status of construction, management does not anticipate the need to fund pursuant to this completion guarantee.  The Company has recognized $3,777,000, $6,935,000 and $6,915,000 as development and guarantee fee income during the years ended December 31, 2004, 2003 and 2002, respectively.  At December 31, 2004 and 2003, $24,086,000 and $19,265,000 was due under the development and guarantee agreements.

Building Maintenance Services (“BMS”), a wholly-owned subsidiary of the Company, supervises the cleaning, engineering and security at Alexander’s 731 Lexington Avenue property for an annual fee of 6% of costs for such services.  In October 2004, Alexander’s also contracted with BMS to provide the same services at the Kings Plaza Regional Shopping Center on the same terms.  On May 27, 2004, the Company entered into an agreement with Alexander’s under which it provides property management services at 731 Lexington Avenue for an annual fee of $0.50 per square foot of the tenant-occupied office and retail space.  These agreements were negotiated and approved by a special committee of directors of Alexander’s that were not affiliated with the Company.  The Company recognized $1,384,000 of fee income under these agreements during the year ended December 31, 2004.

126

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

5.    Investments in Partially-Owned Entities - continued

Debt Agreements

At December 31, 2004 and 2003, the Company has loans receivable from Alexander’s of $124,000,000, including $29,000,000 drawn under a $50,000,000 line of credit.  The maturity date of the loans is the earlier of January 3, 2006 or the date the Alexander’s Lexington Avenue construction loan is finally repaid.  Effective April 1, 2004, based on Alexander’s improved liquidity, the Company modified its term loan and line of credit to Alexander’s to reduce the spread on the interest rate it charges from 9.48% to 6%.  Accordingly, the current interest rate was reduced from 12.48% to 9%.

On February 13, 2004, Alexander’s completed a $400,000,000 mortgage financing on the office space of its Lexington Avenue development project.  The loan bears interest at 5.33%, matures in February 2014 and beginning in the third year, provides for principal payments based on a 25-year amortization schedule such that over the remaining eight years of the loan, ten years of amortization will be paid.  Of the loan proceeds, $253,529,000 was used to repay the entire amount outstanding under the construction loan.  The construction loan was modified so that the remaining availability is $237,000,000, which was approximately the amount estimated to complete the Lexington Avenue development project.  The interest rate on the construction loan is LIBOR plus 2.5% (4.92% at December 31, 2004) and matures in January 2006, with two one-year extensions.  The collateral for the construction loan is the same, except that the office space has been removed from the lien.  Further, the construction loan permits the release of the retail space for a payment of $15,000,000 and requires all proceeds from the sale of the residential condominium units to be applied to the construction loan balance until it is finally repaid.

Temperature Controlled Logistics

On February 5, 2004, Americold Realty Trust (“Americold”) completed a $254,400,000 mortgage financing for 21 of its owned and 7 of its leased temperature-controlled warehouses.  The loan bears interest at LIBOR plus 2.95% (with a LIBOR floor of 1.5% with respect to $54,400,000 of the loan) and requires principal payments of $5,000,000 annually.  The loan matures in April 2009 and is pre-payable without penalty after February 5, 2006.  The net proceeds were approximately $225,000,000 after providing for usual escrows, closing costs and the repayment of $12,900,000 of existing mortgages on two of the warehouses, of which $135,000,000 was distributed to the Company and the remainder was distributed to its partner.

Prior to November 18, 2004, the Company owned a 60% interest in Vornado Crescent Portland Partnership (“VCPP”) which owned Americold.  Americold owns 88 temperature controlled warehouses, all of which were leased to AmeriCold Logistics.  On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  On November 18, 2004, the Company and its 40% partner, Crescent Real Estate Equities Company (“CEI”) collectively sold 20.7% of Americold’s common units to The Yucaipa Companies (“Yucaipa”) for $145,000,000, which resulted in a gain, of which the Company’s share was $18,789,000. The sale price was based on a $1.450 billion valuation for Americold before debt and other obligations.  Yucaipa is a private equity firm with significant expertise in the food distribution, logistics and retail industries.  Upon closing of the sale to Yucaipa on November 18, 2004, Americold is owned 47.6% by the Company, 31.7% by CEI and 20.7% by Yucaipa. Pursuant to the sales agreement: (i) Yucaipa may earn a promote of 20% of the increase in the value of Americold through December 31, 2007, limited to 10% of the Company’s and CEI’s remaining interest in Americold; (ii) the annual asset management fee payable by CEI to the Company has been reduced from approximately $5,500,000 to $4,548,000, payable quarterly through October 30, 2027.  CEI, at its option, may terminate the payment of this fee at any time after November 2009, by paying the Company a termination fee equal to the present value of the remaining payments through October 30, 2027, discounted at 10%.  In addition, CEI is obligated to pay a pro rata portion of the termination fee to the extent it sells a portion of its equity interest in Americold; and (iii) VCPP was dissolved.  The Company has the right to appoint three of the five members to Americold’s Board of Trustees.  Consequently, the Company is deemed to exercise control over Americold and, on November 18, 2004, the Company began to consolidate the operations and financial position of Americold into its accounts and no longer accounts for its investment on the equity method.

127

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

6.    Notes and Mortgage Loans Receivable

General Motors Building Mezzanine Loans

On October 20, 2003, the Company made a $200,000,000 mezzanine loan secured by partnership interests in the General Motors Building.  The Company’s loan is subordinate to $900,000,000 of other debt.  The loan is based on a rate of LIBOR plus 8.685% (with a LIBOR floor of 1.5%) and currently yields 10.185%.  On October 30, 2003, the Company made an additional $25,000,000 loan, as part of a $50,000,000 loan, the balance of which was funded by an affiliate of Soros Fund Management LLC.  This loan, which is junior to the $1,100,000,000 of loans noted above, is based on a rate of LIBOR plus 12.81% (with a LIBOR floor of 1.5%) and currently yields 14.31%.

On September 1, 2004, the Company acquired a $50,000,000 participation in an existing $200,000,000 loan on the General Motors Building made by an affiliate of Soros Fund Management LLC.  This loan, which is subordinate to $1.15 billion of other debt, is secured by partnership interests in the building and additional guarantees and collateral.  The $50,000,000 participation bears interest at 16%, matures on March 25, 2005 and is prepayable at any time.

On January 7, 2005, all of the outstanding General Motors Building loans aggregating $275,000,000 were repaid.  In connection therewith, the Company received a $4,500,000 prepayment premium and $1,996,000 of accrued interest and fees through January 14, 2005, which will be recognized in the first quarter of 2005.

Loan to Commonwealth Atlantic Properties (“CAPI”)

On March 4, 1999, the Company made an additional $242,000,000 investment in CESCR by contributing to CESCR the land under certain CESCR office properties in Crystal City, Arlington, Virginia and partnership interests in certain CESCR subsidiaries.  The Company acquired these assets from CAPI, an affiliate of Lazard Freres Real Estate Investors L.L.C., for $242,000,000, immediately prior to the contribution to CESCR. In addition, the Company acquired from CAPI for $8,000,000 the land under a Marriott Hotel located in Crystal City.  The Company paid the $250,000,000 purchase price to CAPI by issuing 4,998,000 of the Company’s Series E-1 convertible preferred units.  In connection with these transactions, the Company agreed to make a five-year $41,200,000 loan to CAPI with interest at 8%, increasing to 9% ratably over the term.  On March 1, 2004, the balance of the loan of $38,500,000 was repaid.

Loan to Vornado Operating Company (“Vornado Operating”)

At December 31, 2003, the amount outstanding under the revolving credit agreement with Vornado Operating was $21,989,000.  Beginning January 1, 2002, the Company had fully reserved for the interest income on the debt under this facility.  On November 4, 2004, in connection with the sale of AmeriCold Logistics to Americold Realty Trust, Vornado Operating repaid the outstanding balance of the loan together with all unpaid interest totaling $4,771,000.  In connection with the above, the revolving credit agreement was terminated.

Dearborn Center Mezzanine Construction Loan

On March 19, 2003, the outstanding amount of $29,401,000 was received from Dearborn Center representing the full satisfaction of the mezzanine construction loan.  The loan bore interest at 12% per annum plus additional interest of $5,655,000 which was received upon repayment.

Extended Stay America Mezzanine Loan

On May 12, 2004, the Company made an $83,000,000 mezzanine loan secured by ownership interests in a subsidiary of Extended Stay America, Inc., which was recently acquired for approximately $3.1 billion by an affiliate of the Blackstone Group. The loan is part of a $166,000,000 facility, the balance of which was funded by Soros Credit LP, and is subordinate to $2.3 billion of other debt. The loan bears interest at LIBOR plus 5.50% (7.90% at December 31, 2004) and matures in May 2007, with two one-year extensions.  Extended Stay America owns and operates 485 hotels in 42 states.

Charles Square Mezzanine Loan

On November 17, 2004, the Company made a $43,500,000 mezzanine loan secured by Charles Square in Howard Square in Cambridge, Massachusetts.  The property consists of a 293–room hotel, 140,000 square feet of office and retail space and a 568-car parking facility.  This loan is subordinate to $82,500,000 of other debt, bears interest 7.56% and matures in September 2009.

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VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

6.       Notes and Mortgage Loans Receivable - continued

Other

On June 1, 2004 and September 24, 2004, the Company acquired Verde Group LLC (“Verde”) convertible subordinated debentures for $14,350,000 and $8,150,000, in cash, increasing the Company’s investment in Verde at December 31, 2004 to $25,000,000.  Verde invests, operates and develops residential communities, among others, primarily on the Texas-Mexico border.  The debentures yield a fixed rate of 4.75% per annum and matures on December 31, 2018.

On June 1, 2004, the Company invested $5,000,000 in a senior mezzanine loan, and $3,050,000 in senior preferred equity of 3700 Associates, LLC which owns 3700 Las Vegas Boulevard, a development land parcel located in Las Vegas, Nevada.  The loan bears interest at 12% and matures on March 31, 2007.  The preferred equity yields a 10% per annum cumulative preferred return.

On December 10, 2004, the Company acquired a $6,776,000 mezzanine loan which is subordinate to $61,200,000 of other loans, and secured by The Gallery at Military Circle, a 943,000 square foot mall in Norfolk, Virginia.  The loan bears interest at 8.4% per annum and matures in August 2014 .

7.       Identified Intangible Assets and Goodwill

The following summarizes the Company’s identified intangible assets, intangible liabilities (deferred credit) and goodwill as of December 31, 2004 and December 31, 2003.

(Amounts in thousands)	December 31, 2004			December 31, 2003
Identified intangible assets (included in other assets):
Gross amount	$	238,428		$	171,842
Accumulated amortization	(62,114		)	(40,967		)
Net	$	176,314		$	130,875
Goodwill (included in other assets):
Gross amount	$	10,425		$	4,345
Identified intangible liabilities (included in deferred credit):
Gross amount	$	123,241		$	79,146
Accumulated amortization	(51,969		)	(31,787		)
Net	$	71,272		$	47,359

Amortization of acquired below market leases net of acquired above market leases resulted in an increase to rental income of $38,616,000 for the year ended December 31, 2004, and $23,639,000 for the year ended December 31, 2003.  The estimated annual amortization of acquired below market leases net of acquired above market leases for each of the five succeeding years is as follows:

(Amounts in thousands)
2005	$	8,932
2006	6,314
2007	5,806
2008	4,770
2009	4,066

The estimated annual amortization of all other identified intangible assets (a component of depreciation and amortization expense) including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years is as follows:

(Amounts in thousands)
2005	$	15,592
2006	13,777
2007	12,780
2008	12,240
2009	11,920

129

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

8.    Debt

Following is a summary of the Company’s debt:

			Interest Rate as at December 31, 2004
					Balance as of
(Amounts in thousands)	Maturity				December 31, 2004		December 31, 2003
Notes and Mortgages Payable:
Fixed Interest:
Office:
NYC Office:
Two Penn Plaza (1)	02/11		4.97%		$	300,000	$	151,420
888 Seventh Avenue	02/06		6.63%		105,000		105,000
Eleven Penn Plaza (1)	12/14		5.20%		219,777		49,304
866 UN Plaza	05/07		8.39%		48,130		33,000
CESCR Office:
Crystal Park 1-5	07/06-08/13		6.66%-7.08%		253,802		258,733
Crystal Gateway 1-4 Crystal Square 5	07/12-01/25		6.75%-7.09%		212,643		214,323
Crystal Square 2, 3 and 4	10/10-11/14		6.82%-7.08%		141,502		143,854
Skyline Place	08/06-12/09		6.60%-6.93%		132,427		135,955
1101 17th, 1140 Connecticut, 1730 M and 1150 17th	08/10		6.74%		94,409		95,860
Courthouse Plaza 1 and 2	01/08		7.05%		77,427		78,848
Reston Executive I, II and III	01/06		6.75%		71,645		72,769
Crystal Gateway N and 1919 S. Eads	11/07		6.77%		55,524		56,623
Crystal Plaza 1-6		(2)		(2)	—		68,654
One Skyline Tower	06/08		7.12%		63,814		64,818
Crystal Malls 1-4	12/11		6.91%		55,228		60,764
1750 Pennsylvania Avenue	06/12		7.26%		48,876		49,346
One Democracy Plaza	02/05		6.75%		26,121		26,900
Retail:
Cross collateralized mortgages payable on 42 shopping centers	03/10		7.93%		476,063		481,902
Green Acres Mall	02/08		6.75%		145,920		148,386
Las Catalinas Mall	11/13		6.97%		65,696		66,729
Montehiedra Town Center	05/07		8.23%		57,941		58,855
Forest Plaza	05/09		4.00%		20,924		—
Lodi Shopping Center	06/14		5.12%		12,228		—
386 West Broadway	05/13		5.09%		5,083		—
Merchandise Mart:
Washington Design Center	11/11		6.95%		47,496		48,012
Market Square Complex	07/11		7.95%		45,287		46,816
Furniture Plaza	02/13		5.23%		44,497		45,775
Washington Office Center		(2)		(2)	—		43,166
Other	10/10-06/28		7.52%-7.71%		18,156		18,434
Temperature Controlled Logistics:
Cross collateralized mortgages payable on 57 properties (5)	05/08		6.89%		483,533		—
Other:
Industrial Warehouses	10/11		6.95%		48,385		48,917
Student Housing Complex		(2)		(2)	—		18,777
Total Fixed Interest Notes and Mortgages Payable			6.95%		3,377,534		2,691,940

See notes on page 132.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

8.    Debt - continued

		Spread over LIBOR		Interest Rate as at December 31, 2004		Balance as of
(Amounts in thousands)	Maturity					December 31, 2004		December 31, 2003
Notes and Mortgages Payable:
Variable Interest:
Office:
NYC Office:
One Penn Plaza (1)						$	—	$	275,000
770 Broadway (3)	06/06		L+105	3.55	%	170,000		170,000
909 Third Avenue (4)	08/06		L+70	3.14	%	125,000		125,000
CESCR Office:
Commerce Executive III, IV and V	07/05		L+150	3.78	%	41,796		42,582
Commerce Executive III, IV and V B	07/05		L+85	3.13	%	10,000		10,000
Temperature Controlled Logistics:
Cross collateralized mortgages payable on 28 properties (5)	04/09		L+295	5.35	%	250,207		—
Total Variable Interest Notes and Mortgages Payable				4.23	%	597,003		622,582
Total Notes and Mortgages Payable				6.54	%	$	3,974,537	$	3,314,522
Senior Unsecured Notes:
Senior unsecured notes due 2007 at fair value (accreted carrying amount of $499,643 and $499,499) (6)	06/07		L+77	2.57	%	$	512,791	$	525,279
Senior unsecured notes due 2009  (7)	08/09			4.50	%	249,526		—
Senior unsecured notes due 2010 (8)	12/10			4.75	%	199,779		199,741
Total senior unsecured notes				3.52	%	$	962,096	$	725,020
Unsecured revolving credit facility (9)	07/06		L+65	N/A		$	—	$	—
Mortgage Notes Payable related to discontinued operations:
Arlington Plaza	11/07			6.77	%	$	14,691	$	14,885
400 North LaSalle	08/05		L+250	4.75	%	5,187		3,038
Palisades construction loan						—		120,000
						$	19,878	$	137,923

See notes on the following page.

131

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

8.    Debt - continued

(1)On February 5, 2004, the Company completed a $300,000 refinancing of Two Penn Plaza.  The loan bears interest at 4.97% and matures in February 2011.  The Company retained net proceeds of $39,000 after repaying the existing $151,000 loan, $75,000 of the $275,000 mortgage loan on its One Penn Plaza property and the $33,000 mortgage loan on 866 U.N. Plaza.  On November 15, 2004, the Company completed a $220,000,000 refinancing of Eleven Penn Plaza.  This loan bears interest at 5.20% and matures on December 1, 2014.  Of the loan proceeds, $200,000,000 was used to repay the remainder of the loan on One Penn Plaza.

(2)Repaid at maturity or upon sale of the related real estate during 2004.

(3)On June 9, 2003, the Company completed a $170,000 financing of its 770 Broadway property.  The loan bears interest at LIBOR plus 1.05% is pre-payable after one year without penalty and matures in June 2006 with two-one year extension options.  The proceeds of the new loan were used primarily to repay (i) a $18,926 mortgage loan on 33 North Dearborn, (ii) a $69,507 mortgage loan on Tysons Dulles Plaza, and (iii) $40,000 of borrowing under the Company’s unsecured revolving credit facility.  In connection with the closing of the 770 Broadway loan, the Company purchased an interest rate cap, and simultaneously sold an interest rate cap with the same terms.  Since these instruments do not reduce the Company’s net interest rate risk exposure, they do not qualify as hedges and changes in their respective values are charged to earnings.  As the significant terms of these arrangements are the same, the effects of a revaluation of these instruments is expected to substantially offset one another.  Simultaneously with the completion of the 770 Broadway loan, the Company used cash from its mortgage escrow account to repay $133,659 of the $153,659 of debt previously cross-collateralized by its 770 Broadway and 595 Madison Avenue properties.

(4)On August 4, 2003, the Company completed a refinancing of its 909 Third Avenue mortgage loan.  The new $125,000 mortgage loan is for a term of three years and bears interest at LIBOR plus .70% and has two one-year extension options.  Simultaneously with the completion of the 909 Third Avenue loan, the Company used cash from its mortgage escrow account to repay the balance of $20,000 of debt previously cross-collateralized by its 770 Broadway and 595 Madison Avenue properties.  In connection with the closing of the 909 Third Avenue loan, the Company purchased an interest rate cap and simultaneously sold an interest rate cap with the same terms.  Since these instruments do not reduce the Company’s net interest rate risk exposure, they do not qualify as hedges and changes in their respective values are charged to earnings.  As the significant terms of these arrangements are the same, the effects of a revaluation of these instruments is expected to substantially offset one another.

(5)Beginning on November 18, 2004, the Company’s investment in Americold is consolidated into the accounts of the Company.

(6)On June 27, 2002, the Company entered into interest rate swaps that effectively converted the interest rate on the $500,000 senior unsecured notes due 2007 from a fixed rate of 5.625% to a floating rate of LIBOR plus .7725%, based upon the trailing 3 month LIBOR rate (2.57% if set on December 31, 2004).  The swaps were designated and effective as fair value hedges with a fair value of $13,148 and $25,780 at December 31, 2004 and 2003, respectively, and included in “Other Assets” on the Company’s consolidated balance sheet.  Accounting for these swaps requires the Company to recognize the changes in the fair value of the debt during each period.  At December 31, 2004 and 2003, the fair value adjustment to the principal amount of the debt was $13,148 and $25,780, based on the fair value of the swap assets, and is included in the balance of the Senior Unsecured Notes.  Because the hedging relationship qualifies for the “short-cut” method, no hedge ineffectiveness on these fair value hedges was recognized in 2004 and 2003.

(7)On August 16, 2004, the Company completed a public offering of $250,000, aggregate principal amount of 4.50% senior unsecured notes due August 15, 2009.  Interest on the notes is payable semi-annually on February 15 and August 15 commencing, February 15, 2005.  The notes were priced at 99.797% of their face amount to yield 4.546%. The notes are subject to the same financial covenants as the Company’s previously issued senior unsecured notes.  The net proceeds of approximately $247,700 were used for general corporate purposes.

(8)On November 25, 2003, the Company completed an offering of $200,000, aggregate principal amount of 4.75% senior unsecured notes due December 1, 2010.  Interest on the notes is payable semi-annually on June 1st and December 1st, commencing in 2004.  The notes were priced at 99.869% of their face amount to yield 4.772%. The notes contain the same financial covenants that are in the Company’s notes issued in June 2002, except the maximum ratio of secured debt to total assets is now 50% (previously 55%).  The net proceeds of approximately $198,500 were used primarily to repay existing mortgage debt.

(9)On July 3, 2003, the Company entered into a new $600,000 unsecured revolving credit facility which has replaced its $1 billion unsecured revolving credit facility which was to mature in July 2003.  The new facility has a three-year term, a one-year extension option and bears interest at LIBOR plus .65%.  The Company also has the ability under the new facility to seek up to $800,000 of commitments during the facility’s term.  The new facility contains financial covenants similar to the prior facility.

132

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

8.    Debt - continued

The net carrying amount of properties collateralizing the notes and mortgages amounted to $4,918,302,000 at December 31, 2004.  As at December 31, 2004, the principal repayments required for the next five years and thereafter are as follows:

(Amounts in thousands)
Year Ending December 31,	Amount
2005	$	157,393
2006	614,141
2007	759,806
2008	929,190
2009	398,054
Thereafter	2,097,927

133

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

9.    Partners’ Capital

	Outstanding Units at		Per Unit Liquidation Preference		Preferred or Annual Distribution Rate		Conversion Rate Into Class A Units
Units Series	December 31, 2004	December 31, 2003
Preferred Units:
Series A	320,604	360,705	$	50.00	$	3.25	1.38504
8.5% Series B (1)	—	3,400,000	$	25.00	$	2.125	—
8.5% Series C (2)	4,600,000	4,600,000	$	25.00	$	2.125	—
7.0% Series D–10	1,600,000	1,600,000	$	25.00	$	1.75	—
7.0% Series E (3)	3,000,000	—	$	25.00	$	1.75	—
6.75% Series F (4)	6,000,000	—	$	25.00	$	1.6875	—
6.625% Series G (5)	8,000,000	—	$	25.00	$	1.65625	—
5.0% Series B-1	563,263	844,894	$	50.00	$	2.50	.914
8.0% Series B-2	304,761	445,576	$	50.00	$	4.00	.914
6.5% Series E-1 (6)	—	4,998,000	$	50.00	$	3.25	1.1364
9.00% Series F-1 (7)	400,000	400,000	$	25.00	$	2.25	(3	)
8.375% D-2 Cumulative Redeemable Preferred (8)	—	549,336	$	50.00	$	4.1875	N/A
8.25% D-3 Cumulative Redeemable Preferred (9)	8,000,000	8,000,000	$	25.00	$	2.0625	N/A
8.25% D-4 Cumulative Redeemable Preferred (9)	5,000,000	5,000,000	$	25.00	$	2.0625	N/A
8.25% D-5 Cumulative Redeemable Preferred (9)	6,480,000	6,480,000	$	25.00	$	2.0625	N/A
8.25% D-6 Cumulative Redeemable Preferred (9)	840,000	840,000	$	25.00	$	2.0625	N/A
8.25% D-7 Cumulative Redeemable Preferred (9)	7,200,000	7,200,000	$	25.00	$	2.0625	N/A
8.25% D-8 Cumulative Redeemable Preferred (9)	360,000	360,000	$	25.00	$	2.0625	N/A
8.25% D-9 Cumulative Redeemable Preferred (9)	1,800,000	1,800,000	$	25.00	$	2.0625	N/A
7.00% D-10 Cumulative Redeemable Preferred (9)	3,200,000	3,200,000	$	25.00	$	1.75	N/A
7.20% D-11 Cumulative Redeemable Preferred (9)	1,400,000	—	$	25.00	$	1.80	N/A
6.55% D-12 Cumulative Redeemable Preferred (9)	800,000	—	$	25.00	$	1.637	N/A
3.00% D-13 Cumulative Redeemable Preferred (10)	1,867,311	—	$	25.00	$	0.750	N/A
General Partnership Interest (11)
Limited Partnership Interest:
Class A (12)	145,406,599	137,754,293	—		$	2.72	N/A

See Notes on following page.

134

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

9.    Partners’ Capital - continued

Notes to preceding tabular information:

(1)On March 17, 2004, the Company redeemed all of the outstanding Series B Preferred Units at the redemption price of $25.00 per unit, aggregating $85,000,000 plus accrued distributions.  The redemption amount exceeded the carrying amount by $3,195,000, representing original issuance costs.  These costs were recorded as a reduction to earnings in arriving at net income applicable to Class A units, in accordance with the July 2003 EITF clarification of Topic D-42.

(2)On January 19, 2005, the Company redeemed all of its 8.5% Series C Cumulative Redeemable Preferred Units at the stated redemption price of $25.00 per unit plus accrued distributions.

(3)On August 17, 2004, Vornado sold $75,000,000 of Series E Cumulative Redeemable Preferred Shares in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series E preferred units to Vornado. Distributions are at an annual rate of 7.0% of the liquidation preference of $25.00 per unit, or $1.75 per unit per annum.  The distributions are cumulative and payable quarterly in arrears.  The Series E Preferred Units are not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders.  On or after August 20, 2009 (or sooner under limited circumstances), the Company, at its option, may redeem the units at a redemption price of $25.00 per unit, plus any accrued and unpaid distributions through the date of redemption.  These units have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.

(4)On November 10, 2004, Vornado sold $150,000,000 of Series F Cumulative Redeemable Preferred Shares in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series F preferred units to Vornado. Distributions are at an annual rate of 6.75% of the liquidation preference of $25.00 per unit, or $1.6875 per unit per annum.  The distributions are cumulative and payable quarterly in arrears.  The Series F Preferred Units are not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders.  On or after November 17, 2009 (or sooner under limited circumstances), the Company, at its option, may redeem the units at a redemption price of $25.00 per unit, plus any accrued and unpaid distributions through the date of redemption.  These units have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.

(5)On December 16, 2004, Vornado sold $200,000,000 of Series G Cumulative Redeemable Preferred Shares in a public offering pursuant to an effective registration statement.  Simultaneously, the Company issued an equivalent amount of Series G preferred units to Vornado. Distributions are at an annual rate of 6.625% of the liquidation preference of $25.00 per unit, or $1.656 per unit per annum.  The distributions are cumulative and payable quarterly in arrears.  The Series G Preferred Units are not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders.  On or after December 22, 2009 (or sooner under limited circumstances), the Company, at its option, may redeem the units at a redemption price of $25.00 per unit, plus any accrued and unpaid distributions through the date of redemption.  These units have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.

(6)In February 2004, all of the Series E-1 units were converted into 5,679,727 Class A units.

(7)The holders of the Series F-1 preferred units have the right to require the Company to redeem the units for cash equal to the liquidation preference or, at the Company’s option, by issuing a variable number of Vornado common units with a value equal to the liquidation value.  On July 1, 2003, upon the adoption of SFAS No. 150: Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, the Company was required to include the liquidation value of these F-1 preferred units as a liability on the consolidated balance sheet as opposed to their prior classification as minority interest because of the possible settlement of this obligation by issuing a variable number of the Company’s common units.  In addition, after July 1, 2003, distributions to the holders of the   F-1 preferred units are included as a component of interest expense as opposed to their prior classification as minority interest expense.

(8)The Company redeemed all of its 8.375% Series D-2 Cumulative Redeemable Preferred Units on January 6, 2004 at a redemption price equal to $50 per unit or an aggregate of $27.5 million.

(9)Convertible at the option of the holder for an equivalent amount of Vornado’s preferred shares and redeemable at the Company’s option after the 5th anniversary of the date of issuance (ranging from September 2004 to December 2009).

(10)On December 30, 2004, the Company sold $46.7 million of 3.0% Series D-13 Cumulative Redeemable Preferred Units. The Series D-13 units may be called without penalty at the option of the Company commencing in December 2011 or redeemed at the option of the holder commencing in December 2006 for cash equal to the liquidation preference of $25 per unit, or at the Company’s option by issuing a variable number of Vornado’s common units.  Under SFAS No. 150, the Company classifies the Series D-13 units as a liability, and related distributions as interest expense, because of the possible settlement of this obligation by issuing a variable number of the Company’s common units.

(11)Included in Class A units are 127,478,903 and 118,247,944 units owned by the General Partner as of December 31, 2004 and 2003.

(12)The Class A units are redeemable at the option of the holder for common units of Vornado Realty Trust on a one-for-one basis, or at the Company’s option for cash.

135

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

10.  Stock-based Compensation

Vornado’s Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights and performance shares to certain employees and officers of Vornado.  Upon the issuance of these shares by Vornado, the Company issues an equivalent amount of Class A units to Vornado.

Restricted stock awards are granted at the market price on the date of grant and vest over a three to five year period.  The Company recognizes the value of restricted stock as compensation expense based on Vornado’s closing stock price on the NYSE on the date of grant on a straight-line basis over the vesting period.  As of December 31, 2004, there are 290,478 restricted units outstanding, excluding 626,566 units issued to the Company’s President in connection with his employment agreement.  The Company recognized $4,200,000, $3,239,000 and $914,000 of compensation expense in 2004, 2003 and 2002, respectively, for the portion of these units that vested during each year.  Distributions paid on both vested and unvested units are charged directly to retained earnings and amounted to $938,700, $777,700 and $210,100 for 2004, 2003 and 2002, respectively.  Distributions on units that are cancelled or terminated prior to vesting are charged to compensation expense in the period of the cancellation or termination.

Stock options are granted at an exercise price equal to 100% of the market price of Vornado’s stock on the date of grant, generally vest pro-rata over three to five years and expire 10 years from the date of grant.  As of December 31, 2004 there are 12,882,014 options outstanding.  On January 1, 2003, the Company adopted SFAS 123: Accounting for Stock-Based Compensation, as amended by SFAS No. 148: Accounting for Stock-Based Compensation – Transition and Disclosure, on a prospective basis covering all grants subsequent to 2002.  Under SFAS No. 123, the Company recognizes compensation expense for the fair value of options granted on a straight-line basis over the vesting period.  For the year ended December 31, 2004, and 2003, the Company recognized $102,900 and $77,200 of compensation expense related to the options granted during 2004 and 2003, respectively.  Grants prior to 2003 are accounted for under the intrinsic value method under which compensation expense is measured as the excess, if any, of the quoted market price of Vornado’s stock at the date of grant over the exercise price of the option granted.  As the Company’s policy is to grant options with an exercise price equal to 100% of the quoted market price on the grant date, no compensation expense has been recognized for options granted prior to 2003.  If compensation cost for grants prior to 2003 were recognized as compensation expense based on the fair value at the grant dates, net income and income per Class A unit would have been reduced to the pro-forma amounts below:

	December 31,
(Amounts in thousands, except unit and per unit amounts)	2004			2003			2002
Net income applicable to Class A units:
As reported	$	656,045		$	521,932		$	251,088
Stock-based compensation cost	(4,553		)	(5,646		)	(10,343		)
Pro-forma	$	651,492		$	516,286		$	240,745
Net income per Class A unit:
Basic:
As reported	$	4.56		$	3.97		$	1.97
Pro-forma	4.53			3.92			1.89
Diluted:
As reported	$	4.36		$	3.81		$	1.92
Pro forma	4.33			3.77			1.84

136

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

10.  Stock-based Compensation - continued

The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions used for grants in the periods ending December 31, 2004, 2003 and 2002.  There were no stock option grants during 2004.  In February 2005, as part of Vornado’s annual compensation review for 2004, 1,038,800 stock options and 73,216 Vornado restricted shares were granted to certain employees.  The options were granted at an exercise price equal to 100% of the market price of Vornado common shares on the date of grant.

	December 31
	2003		2002
Expected volatility	17	%	17	%
Expected life	5 years		5 years
Risk-free interest rate	2.9	%	3.0	%
Expected dividend yield	6.0	%	6.0	%

A summary of the Plan’s status and changes during the years then ended, is presented below:

	2004					2003					2002
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Outstanding at January 1	14,153,587			$	35.84	18,796,366			$	34.60	15,453,100			$	32.25
Granted	—			—		125,000			36.46		3,655,500			42.14
Exercised	(1,228,641		)	40.43		(4,613,579		)	30.53		(114,181		)	28.17
Cancelled	(42,932		)	41.39		(154,200		)	42.57		(198,053		)	39.64
Outstanding at December 31	12,882,014			35.17		14,153,587			35.85		18,796,366			34.60
Options exercisable at December 31	11,745,973					11,821,382					13,674,177
Weighted-average fair value of options granted during the year ended December 31 (per option)	$	N/A				$	2.50				$	3.06

The following table summarizes information about options outstanding under the Plan at December 31, 2004:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding at December 31, 2004	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable at December 31, 2004	Weighted-Average Exercise Price
$12-  $19	3,817	1.0	$	18.18	3,817	$	18.18
$19-  $24	2,146,327	1.9	$	23.33	2,146,327	$	23.33
$24-  $27	42,163	2.1	$	26.13	42,163	$	26.13
$27-  $32	3,162,793	5.1	$	30.60	3,162,793	$	30.60
$32-  $36	2,143,337	4.2	$	33.39	2,143,337	$	33.39
$36-  $40	101,519	7.6	$	36.78	16,496	$	38.48
$40-  $44	2,866,774	6.8	$	42.05	1,822,378	$	42.04
$44-  $46	2,324,473	3.0	$	45.05	2,317,851	$	45.05
$46-  $49	90,811	3.0	$	48.13	90,811	$	48.13
$0-  $49	12,882,014	4.4	$	35.17	11,745,973	$	34.54

Shares available for future grant under the Plan at December 31, 2004 were 9,955,734, of which 2,500,000 are subject to Vornado shareholder approval.

137

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

11.  Retirement Plans

The Company has two defined benefit pension plans, a Vornado Realty Trust Retirement Plan (“Vornado Plan”) and a Merchandise Mart Properties Pension Plan (“Mart Plan”).  In addition, Americold Realty Trust, which is consolidated into the accounts of the Company beginning November 18, 2004, has two defined benefit pension plans (the “AmeriCold Plans” and together with the Vornado Plan and the Mart Plan “the Plans”).  The benefits under the Vornado Plan and the Mart Plan were frozen in December 1997 and June 1999, respectively.  Effective April 2005, Americold will amend its Americold Retirement Income Plan to freeze benefits for non-union participants.  Benefits under the Plans are or were primarily based on years of service and compensation during employment or on years of credited service and established monthly benefits.  Funding policy for the Plans is based on contributions at the minimal amounts required by law.  The financial results of the Plans are consolidated in the information provided below.

The Company uses a December 31 measurement date for the Vornado Plan, the Mart Plan and the Americold plans.

Obligations and Funded Status

The following table sets forth the Plans’ funded status and amounts recognized in the Company’s balance sheets:

	Pension Benefits
	Year Ended December 31,
(Amounts in thousands)	2004			2003			2002
Change in benefit obligation:
Benefit obligation at beginning of year	$	20,244		$	19,853		$	18,585
Consolidation of Americold plans	62,234			—			—
Service cost	314			—			—
Interest cost	1,708			1,244			1,260
Plan amendments (1)	(1,193		)	—			—
Actuarial loss	1,255			229			1,482
Benefits paid	(2,226		)	(1,082		)	(1,474		)
Benefit obligation at end of year	82,336			20,244			19,853
Change in plan assets:
Fair value of plan assets at beginning of year	18,527			16,909			17,667
Consolidation of Americold plans	48,014			—			—
Employer contribution	1,787			1,361			667
Benefit payments	(2,225		)	(1,082		)	(1,474		)
Actual return on assets	1,411			1,339			49
Fair value of plan assets at end of year	67,514			18,527			16,909
Funded status	(14,822		)	(1,717		)	(2,944		)
Unrecognized net actuarial loss	2,184			3,455			3,653
Unrecognized prior service cost (benefit)	—			—			—
Net Amount Recognized	$	(12,638	)	$	1,738		$	709
Amounts recognized in the consolidated balance sheets consist of:
Pre-paid benefit cost	$	305		$	633		$	86
Accrued benefit liability	(17,111		)	(2,350		)	(3,030		)
Intangible assets	—			—			—
Accumulated other comprehensive loss	4,138			3,861			3,517
Net amount recognized	$	(12,668	)	$	2,144		$	573

(1)Reflects an amendment to freeze benefits for non-union participants of Americold Retirement Income Plan effective April 2005.

138

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

11.  Retirement Plans - continued

	Pension Benefits
	Year Ended December 31,
(Amounts in thousands)	2004			2003			2002
Information for the Company’s plans with an accumulated benefit obligation in excess of plans assets:
Projected benefit obligation	$	70,943		$	9,186		$	9,018
Accumulated benefit obligation	70,040			9,186			9,018
Fair value of plan assets	55,562			6,836			5,988
Components of Net Periodic Benefit Cost:
Service cost	$	314		$	—		$	—
Interest cost	1,708			1,244			1,260
Expected return on plan assets	(1,515		)	(1,115		)	(1,142		)
Amortization of prior service cost	11			—			—
Amortization of net (gain) loss	402			203			114
Net periodic benefit cost	$	920		$	332		$	232
Assumptions:
Weighted-average assumptions used to determine benefit obligations:
Discount rate	5.75%-6.50%			6.00-6.50%			6.25%-6.50%
Rate of compensation increase Americold Plan	3.50%			N/A%			N/A
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate	5.75%-6.50%			6.25%-6.50%			6.50%-7.25%
Expected long-term return on plan assets	5.00%-8.50%			6.50%-7.00%			6.50%-7.00%
Rate of compensation increase Americold Plan	3.50%			N/A			N/A

The Company periodically reviews its assumptions for the rate of return on each Plan’s assets.  The assumptions are based primarily on the long-term historical performance of the assets of the Plans, future expectations for returns for each asset class as well as target asset allocation of Plan assets.  Differences in the rates of return in the near term are recognized as gains or losses in the periods that they occur.

Plan Assets

The Company has consistently applied what it believes to be a conservative investment strategy for the Vornado Plan, investing primarily in cash and cash equivalents and fixed income funds, including money market funds, United States treasury bills, government bonds and mortgage back securities.  Vornado Plan’s weighted-average asset allocations by asset category are as follows:

	Year Ended December 31,
	2004		2003		2002
U.S. Treasury Bills	84	%	81	%	—	%
US Government Securities	13		14		17
Money Market Funds	3		4		81
Mortgage backed-pass through securities	—		1		2
Total	100	%	100	%	100	%

139

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

11.  Retirement Plans - continued

The Company has consistently applied what it believes to be an appropriate investment strategy for the Mart Plan, by investing in mutual funds and funds held by insurance companies.  Mart Plan’s weighted average asset allocations by asset category are as follows:

	Year Ended December 31,
	2004		2003		2002
Asset Category
Mutual Funds	50	%	57	%	56	%
Funds Held By Insurance Companies	50		42		43
Other	—		1		1
Total	100	%	100	%	100	%

The Americold Plans are invested to maximize return on the Plans’ assets while minimizing risk by diversifying across a broad range of asset classes.  In accordance with the Plans’ investment strategies, assets are invested domestic equities, hedge funds, and fixed income securities.

The allocations of Americold Plan investments by fair value for the year ended December 31, 2004, are as follows:

Domestic equities	54	%
International equities	5
Fixed income securities	14
Real Estate	8
Hedge Funds	19
	100	%

Cash Flows

The Company expects to contribute $8,448,000 to the Plans in 2005.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits
2005	$	4,802,000
2006	5,440,000
2007	5,469,000
2008	6,490,000
2009	6,784,000
2010-2014	37,421,000

140

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

12. Leases

As lessor:

The Company leases space to tenants under operating leases. Most of the leases provide for the payment of fixed base rentals payable monthly in advance. Shopping center leases provide for the pass-through to tenants of real estate taxes, insurance and maintenance. Office building leases generally require the tenants to reimburse the Company for operating costs and real estate taxes above their base year costs. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants’ sales. As of December 31, 2004, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an original term of less than one year and rents resulting from the exercise of renewal options, is as follows:

(Amounts in thousands)
Year Ending December 31:
2005	$	1,107,865
2006	993,780
2007	923,145
2008	833,848
2009	723,702
Thereafter	3,631,818

These amounts do not include rentals based on tenants’ sales.  These percentage rents approximated $5,563,000, $3,662,000, and $1,832,000, for the years ended December 31, 2004, 2003, and 2002.

Except for the U.S. Government, which accounted for 12.5% of the Company’s revenue, none of the Company’s tenants represented more than 10% of total revenues for the year ended December 31, 2004.

Former Bradlees Locations

Pursuant to the Master Agreement and Guaranty, dated May 1, 1992, the Company is due $5,000,000 per annum of additional rent from Stop & Shop which was allocated to certain of Bradlees former locations.  In December 31, 2002, prior to the expiration of the leases to which the additional rent was allocated, the Company reallocated this rent to other former Bradlees leases also guaranteed by Stop & Shop.  Stop & Shop is contesting the Company’s right to reallocate and claims the Company is no longer entitled to the additional rent.  At December 31, 2004, the Company is due an aggregate of $10,497,000.  The Company believes the additional rent provision of the guaranty expires at the earliest in 2012 and is vigorously contesting Stop & Shop’s position.

141

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

12.          Leases - continued

As lessee:

The Company is a tenant under operating leases for certain properties. These leases have terms that expire during the next thirty years.  Future minimum lease payments under operating leases at December 31, 2004, are as follows:

(Amounts in thousands)
2005	$	20,427
2006	20,474
2007	20,429
2008	20,447
2009	20,454
Thereafter	928,219

Rent expense was $21,334,000, $15,593,000, and $17,157,000 for the years ended December 31, 2004, 2003, and 2002.

The Company is also a lessee under capital leases for equipment and real estate (primarily Americold).  Lease terms generally range from 5-20 years with renewal or purchase options.  Capitalized leases are recorded at the present value of future minimum lease payments or the fair market value of the property.  Capitalized leases are depreciated on a straight-line basis over the estimated life of the asset or life of the related lease, whichever is shorter.  Amortization expense on capital leases is included in “depreciation and amortization” on the Company’s consolidated statements of income.  As of December 31, 2004, future minimum lease payments under capital leases are as follows:

(Amounts in thousands)
2005	$	11,517
2006	10,738
2007	8,951
2008	7,786
2009	7,368
Thereafter	53,114
Total minimum obligations	99,474
Interest portion	(45,213		)
Present value of net minimum payments	$	54,261

At December 31, 2004 and 2003, $54,261,000 and $6,920,000 representing the present value of net minimum payments is included in “Other Liabilities” on the Company’s consolidated balance sheets.  At December 31, 2004 and 2003, property leased under capital leases had a total cost of $64,974,000 and $6,184,000 and related accumulated depreciation of $11,495,000 and $940,000, respectively.

142

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

13. Commitments and Contingencies

At December 31, 2004, the Company has $567,851,000 available under its $600,000,000 revolving credit facility ($32,149,000 was utilized for letters of credit), which matures in July 2006.

In conjunction with the closing of Alexander’s Lexington Avenue construction loan on July 3, 2002, the Company agreed to guarantee to the construction lender, the lien free, timely completion of the construction of the project and funding of all project costs in excess of a stated budget, as defined in the loan agreement, if not funded by Alexander’s (see Note 5 — Investments in Partially-Owned Entities).

Each of the Company’s properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to the Company.

The Company carries comprehensive liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002 which expires in 2005 and (v) rental loss insurance) with respect to its assets.  In April 2004, the Company renewed its all risk policies and increased its coverage for Acts of Terrorism for each of its New York Office, CESCR Office, Retail and Merchandise Mart divisions.  Below is a summary of the current all risk property insurance and terrorism risk insurance for each of the Company’s business segments:

	Coverage Per Occurrence
	All Risk (1)		Sub-Limits for Acts of Terrorism
New York Office	$	1,400,000,000	$	750,000,000
CESCR Office	1,400,000,000		750,000,000
Retail	500,000,000		500,000,000
Merchandise Mart	1,400,000,000		750,000,000
Temperature Controlled Logistics	225,000,000		225,000,000

(1)Limited as to terrorism insurance by the sub-limit shown in the adjacent column.

In addition to the coverage above, the Company carries lesser amounts of coverage for terrorist acts not covered by the Terrorism Risk Insurance Act of 2002.

The Company’s debt instruments, consisting of mortgage loans secured by its properties (which are generally non-recourse to the Company), its senior unsecured notes due 2007, 2009 and 2010 and its revolving credit agreement, contain customary covenants requiring the Company to maintain insurance.  Although the Company believes that it has adequate insurance coverage under these agreements, the Company may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.  Further, if lenders insist on greater coverage than the Company is able to obtain, or if the Terrorism Risk Insurance Act of 2002 is not extended, it could adversely affect the Company’s ability to finance and/or refinance its properties and expand its portfolio.

From time to time, the Company has disposed of substantial amounts of real estate to third parties for which, as to certain properties, it remains contingently liable for rent payments or mortgage indebtedness that cannot be quantified by the Company.

There are various legal actions against the Company in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material effect on the Company’s financial condition, results of operations or cash flow.

The Company enters into agreements for the purchase and resale of U.S. government obligations for periods of up to one week. The obligations purchased under these agreements are held in safekeeping in the name of the Company by various money center banks. The Company has the right to demand additional collateral or return of these invested funds at any time the collateral value is less than 102% of the invested funds plus any accrued earnings thereon.  The Company had $23,110,000 and $30,310,000 of cash invested in these agreements at December 31, 2004 and 2003.

143

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

14. Related Party Transactions

Loan and Compensation Agreements

In accordance with the terms of the employment arrangement with Steven Roth, Vornado’s Chief Executive Officer, and subject to a letter agreement dated November 1999, Mr. Roth may draw up to $15,000,000 of loans on a revolving basis.  Each loan bears interest, payable quarterly, at the applicable Federal rate on the date the loan is made and matures on the sixth anniversary of such loan.  Loans are collateralized by assets with a value of not less than two times the amount outstanding.  At December 31, 2004, the outstanding balance under this arrangement was $13,122,500 (of which $4,704,500 is shown as a reduction in partners’ capital).  The amount outstanding matures in January 2006 and bears interest at a weighted average rate of 4.49% per annum.

At December 31, 2004, the balance of the loan due from Michael Fascitelli, Vornado’s President, in accordance with his employment agreement was $8,600,000.  The loan matures in December 2006 and bears interest, payable quarterly, at a weighted average rate of 3.97% (based on the applicable Federal rate).

Effective January 1, 2002, the Company extended its employment agreement with Mr. Fascitelli for a five-year period through December 31, 2006.  Pursuant to the extended employment agreement, Mr. Fascitelli is entitled to receive a deferred payment on December 31, 2006 of 626,566 Vornado common shares which are valued for compensation purposes at $27,500,000 (the value of the shares on March 8, 2002, the date the extended employment agreement was executed).  The shares are held in a rabbi trust for the benefit of Mr. Fascitelli and vested 100% on December 31, 2002.  The extended employment agreement does not permit diversification, allows settlement of the deferred compensation obligation by delivery of these shares only, and permits the deferred delivery of these shares.  The value of these shares was amortized ratably over the one-year vesting period as compensation expense.  The assets of the rabbi trust are consolidated with those of the Company and the Company’s common units held in the trust are classified in partners’ capital and accounted for in a manner similar to treasury stock.

Pursuant to the Company’s annual compensation review in February 2002 with Joseph Macnow, Vornado’s Chief Financial Officer, the Compensation Committee approved a $2,000,000 loan to Mr. Macnow, bearing interest at the applicable federal rate of 4.65% per annum and due in June 2007.  The loan was funded on July 23, 2002 and is collateralized by assets with a value of not less than two times the loan amount.

On March 11, 2004, the Company loaned $2,000,000 to Melvyn Blum, an executive officer of Vornado, pursuant to the revolving credit facility contained in his January 2000 employment agreement.  The loan bears interest at 1.57% per annum (the Federal rate) and is due in March 2007.

On February 22, 2005, Vornado and Sandeep Mathrani, Executive Vice President — Retail Division, entered into a new employment agreement.  Pursuant to the agreement, the Company granted Mr. Mathrani (i) 16,836 restricted shares of Vornado’s stock, (ii) stock options to acquire 300,000 of Vornado’s common shares at an exercise price of $71.275 per share and (iii) the right to receive 200,000 stock options over the next two years at the then prevailing market price.  In addition, Mr. Mathrani repaid the $500,000 loan the Company provided him under his prior employment agreement.

144

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

14.Related Party Transactions -continued

Transactions with Affiliates and Officers and Trustees of the Company

Alexander’s

The Company owns 33% of Alexander’s.  Mr. Roth and Mr. Fascitelli are Officers and Directors of Alexander’s.  The Company provides various services to Alexander’s in accordance with management, development and leasing agreements and the Company has made loans to Alexander’s aggregating $124,000,000 at December 31, 2004.  See Note 5 — Investments in Partially-Owned Entities for details of these agreements.  In addition, in 2002, the Company sold air rights to Alexander’s, details of which are provided in Note 3 – Acquisitions and Dispositions.

Interstate Properties

As of December 31, 2004, Interstate Properties and its partners owned approximately 10.8% of the common units of beneficial interest of the Company and 27.4% of Alexander’s common stock.  Interstate Properties is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the partners.  Mr. Roth is the Chairman of the Board and Chief Executive Officer of the Company, the managing general partner of Interstate Properties, and the Chief Executive Officer and a director of Alexander’s.  Messrs. Mandelbaum and Wight are trustees of Vornado and also directors of Alexander’s.

The Company manages and leases the real estate assets of Interstate Properties pursuant to a management agreement for which the Company receives an annual fee equal to 4% of base rent and percentage rent.  The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on sixty days’ notice at the end of the term. Although the management agreement was not negotiated at arm’s length, the Company believes based upon comparable fees charged by other real estate companies that its terms are fair to the Company. The Company earned $726,000, $703,000 and $747,000 of management fees under the management agreement for the years ended December 31, 2004, 2003, and 2002.  In addition, during fiscal years 2003 and 2002, as a result of a previously existing leasing arrangement with Alexander’s, Alexander’s paid to Interstate $587,000 and $703,000, respectively, for the leasing an other services actually rendered by the Company.  Upon receipt of these payments, Interstate promptly paid them over to the Company without retaining any interest therein.  This arrangement was terminated at the end of 2003 and all payments by Alexander’s thereafter for these leasing and other services are made directly to the Company.

Vornado Operating Company (“ Vornado Operating”)

In October 1998, Vornado Operating was spun off from the Company in order to own assets that the Company could not itself own and conduct activities that the Company could not itself conduct.  Vornado Operating’s primary asset was its 60% investment in AmeriCold Logistics, which leased 88 refrigerated warehouses from Americold, owned 60% by the Company.  The Company granted Vornado Operating a $75,000,000 unsecured revolving credit facility that was to expire on December 31, 2004.  Borrowings under the revolving credit facility bore interest at LIBOR plus 3%.  The Company received a commitment fee equal to 1% per annum on the average daily unused portion of the facility.  At the time of its dissolution referred to below, Vornado Operating had outstanding 4,068,924 shares and its operating partnership had outstanding 447,017 units.  At such time, trustees and officers of the Company held approximately 24.3% of the common shares and units of Vornado Operating.  In addition, Messrs. Roth, Fascitelli, Macnow, Wight and West each served as an officer and/or director of Vornado Operating.

On December 31, 2002, the Company and Crescent Real Estate Equities formed a joint venture to acquire the Carthage, Missouri and Kansas City, Kansas quarries from AmeriCold Logistics for $20,000,000 in cash (appraised value).  The Company contributed cash of $8,800,000 to the joint venture representing its 44% interest.  AmeriCold Logistics used the proceeds from the sale to repay a portion of a loan to Vornado Operating.  Vornado Operating then repaid $9,500,000 of the amount outstanding under the Company’s revolving credit facility.   In addition, during 2004 and 2003, this joint venture acquired $21,930,000 and $5,720,000 of trade receivables from AmeriCold Logistics for $21,500,000 and $5,606,000, respectively.  These receivables were subsequently collected in full.

On November 4, 2004, Americold purchased its tenant, AmeriCold Logistics, for $47,700,000 in cash.  As part of this transaction, Vornado Operating repaid the $21,989,000 balance of the loan to the Company as well as $4,771,000 of unpaid interest.  Because the Company fully reserved for the interest income on this loan beginning in January 2002, it recognized $4,771,000 of income upon collection in the fourth quarter 2004.

145

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

14. Related Party Transactions - -continued

In November 2004, a class action shareholder derivative lawsuit was brought in the Delaware Court of Chancery against Vornado Operating Company (“Vornado Operating”), its directors and the Company.  The lawsuit sought to enjoin the dissolution of Vornado Operating, rescind the previously completed sale of AmeriCold Logistics (owned 60% by Vornado Operating) to Americold Realty Trust (owned 60% by the Company) and damages.  In addition, the plaintiffs claimed that the Vornado Operating directors breached their fiduciary duties.  On November 24, 2004, a stipulation of settlement was entered into under which the Company agreed to settle the lawsuit with a payment of approximately $4.5 million or about $1 per Vornado Operating share or partnership unit before litigation expenses. The proposed settlement payment would be in addition to the liquidation distribution of $2 per Vornado Operating share or unit that Vornado Operating made to its equity-holders when it dissolved on December 29, 2004.  On January 20, 2005, the Delaware Court of Chancery postponed deciding upon the proposed settlement and requested further but limited information before holding an additional hearing regarding the settlement, which has been scheduled for March 2005.  The Company has accrued the proposed settlement payment and related legal costs as part of “general and administrative expense” in the fourth quarter of 2004.  The Company believes that the ultimate outcome of this matter will not have a material effect on the Company’s consolidated financial statements.

Other

On January 1, 2003, the Company acquired BMS, a company which provides cleaning and related services principally to the Company’s Manhattan office properties, for $13,000,000 in cash from the estate of Bernard Mendik and certain other individuals including David R. Greenbaum, an executive officer of the Company.  The Company paid BMS $53,024,000, for the year ended December 31, 2002 for services rendered to the Company’s Manhattan office properties.  Although the terms and conditions of the contracts pursuant to which these services were provided were not negotiated at arms length, the Company believes based upon comparable amounts charged to other real estate companies that the terms and conditions of the contracts were fair to the Company.

On August 4, 2003, the Company completed the acquisition of 2101 L Street, a 370,000 square foot office building located in Washington D.C.  The consideration for the acquisition consisted of approximately 1.1 million newly issued Operating Partnership units (valued at approximately $49,517,000) and the assumption of existing mortgage debt and transaction costs totaling approximately $32,000,000.  Robert H. Smith and Robert P. Kogod, trustees of Vornado, together with family members owned approximately 24 percent of the limited partnership that sold the building and Mr. Smith was a general partner.  On August 5, 2003, the Company repaid the mortgage of $29,056,000.

On October 7, 2003, the Company acquired a 2.5% interest in the planned redevelopment of Waterfront (described in Note 3) for $2,171,000, of which the Company paid $1,545,000 in cash and issued 12,500 Operating Partnership units valued at $626,000.  The partnership units were issued to Mitchell N. Schear, one of the partners in the Waterfront interest, and the President of the Company’s CESCR division.

On July 1, 2004, the Company acquired the Marriott hotel located in its Crystal City office complex from a limited partnership in which Robert H. Smith and Robert P. Kogod, trustees of the Company, together with family members own approximately 67 percent.  The purchase price was $21,500,000.

On October 1, 2004, the Company increased its ownership interest in the Investment Building in Washington, D.C. to 5% by acquiring an additional 2.8% interest for $2,240,000 in cash.  The Company’s original interest in the property was acquired in connection with the acquisition of the Kaempfer Company in April 2003.  Mitchell N. Schear, President of the Company’s CESCR division and other former members of Kaempfer management were also partners in the Investment Building partnership.

During 2002, the Company paid $147,000 for legal services to a firm in which one of Vornado’s trustees is a member.

146

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

15. Income Per Class A Unit

The following table provides a reconciliation of both net income and the number of Class A units used in the computation of (i) basic income per Class A unit - which utilizes the weighted average number of Class A units outstanding without regard to dilutive potential Class A units, and (ii) diluted income per Class A unit - which includes the weighted average Class A units and dilutive unit equivalents.  Potential dilutive unit equivalents include the Company’s Series A Convertible Preferred units as well as Vornado Realty L.P.’s convertible preferred units.

	Year Ended December 31,
(Amounts in thousands, except per unit amounts)	2004			2003			2002
Numerator:
Income from continuing operations	$	671,518		$	462,163		$	388,616
Income from discontinued operations	78,597			176,388			11,815
Cumulative effect of change in accounting principle	—			—			(30,129		)
Net income	750,115			638,551			370,302
Preferred unit distributions	(94,070		)	(116,619		)	(119,214		)
Numerator for basic income per Class A unit – net income applicable to Class A units	656,045			521,932			251,088
Impact of assumed conversions:
Convertible preferred unit distributions	4,232			26,064			—
Numerator for diluted income per Class A unit – net income applicable to Class A units	$	660,277		$	547,996		$	251,088
Denominator:
Denominator for basic income per Class A unit – weighted average units	143,719			131,553			127,158
Effect of dilutive securities:
Employee stock options and restricted unit awards	5,515			2,786			3,780
Convertible preferred units	2,197			9,551			—
Denominator for diluted income per unit – adjusted weighted average units and assumed conversions	151,431			143,890			130,938
INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations	$	4.01		$	2.63		$	2.12
Income from discontinued operations	.55			1.34			.09
Cumulative effect of change in accounting principle	—			—			(.24		)
Net income per Class A unit	$	4.56		$	3.97		$	1.97
INCOME PER CLASS A UNIT – DILUTED:
Income from continuing operations	$	3.84		$	2.58		$	2.06
Income from discontinued operations	.52			1.23			.09
Cumulative effect of change in accounting principle	—			—			(.23		)
Net income per Class A unit	$	4.36		$	3.81		$	1.92

147

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

16.Summary of Quarterly Results (Unaudited)

The following summary represents the results of operations for each quarter in 2004, 2003 and 2002:

			Net Income Applicable to Class A Units			Income Per Class A unit(1)
(Amounts in thousands, except unit amounts)	Revenue					Basic		Diluted
2004
March 31	$	391,368	$	81,268		$	0.58	$	0.55
June 30	397,756		182,866		(3)	1.27		1.23
September 30	413,424		120,639			0.83		0.80
December 31	504,714		265,647		(2)	1.83		1.75
2003
March 31	$	363,776	$	100,525		$	0.78	$	0.75
June 30	369,916		95,833			0.74		0.72
September 30	378,942		82,916			0.63		0.61
December 31	385,349		242,658		(3)	1.80		1.69
2002
March 31	$	347,974	$	54,704		$	0.44	$	0.42
June 30	343,480		77,894			0.61		0.59
September 30	351,422		70,833			0.55		0.54
December 31	343,918		47,657			0.37		0.36

(1)The total for the year may differ from the sum of the quarters as a result of weighting.

(2)Includes (i) a net gain on mark-to-market of Sears option shares of $81,730, (ii) net gains on exercise and mark-to-market of GMH warrants of $53,642 and (iii) a net gain on sale of a portion of its investment in Americold to Yucaipa of $18,789.

(3)Includes net gains on sale of real estate of $75,755 in 2004 and $161,789 in 2003.

17.Costs of Acquisitions and Development Not Consummated

In the third quarter of 2004, the Company wrote-off $1,475,000 of costs associated with the Mervyn’s Department Stores acquisition not consummated.

In 2002, the Company had a 70% interest in a joint venture to develop an office tower over the Port Authority Bus Terminal in New York City.  Market conditions existing in 2002 resulted in the joint venture writing off $9,700,000, representing all pre-development costs capitalized to date, of which the Company’s share is $6,874,000.

148

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

18. Segment Information

The Company hasfour business segments: Office, Retail, Merchandise Mart Properties and Temperature Controlled Logistics.  In 2004, the Company revised how it presents EBITDA, a measure of performance of its segments, and has revised the disclosure for all periods presented.  EBITDA as disclosed represents “Earnings before Interest, Taxes, Depreciation and Amortization.”  This change is consistent with the Securities and Exchange Commission’s Regulation G.

	December 31, 2004
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	1,268,764		$	838,665		$	160,620		$	206,668		$	—		$	62,811
Straight-line rents:
Contractual rent increases	35,214			27,165			4,882			3,002			—			165
Amortization of free rent	26,264			10,118			10,998			5,154			—			(6		)
Amortization of acquired below market leases, net	14,570			9,697			4,873			—			—			—
Total rentals	1,344,812			885,645			181,373			214,824			—			62,970
Expense reimbursements	191,059			109,255			64,474			14,045			—			3,285
Temperature Controlled Logistics	87,428			—			—			—			87,428			—
Fee and other income:
Tenant cleaning fees	31,293			31,293			—			—			—			—
Management and leasing fees	16,754			15,501			1,084			155			—			14
Other	35,916			25,573			1,617			8,662			—			64
Total revenues	1,707,262			1,067,267			248,548			237,686			87,428			66,333
Operating expenses	679,790			396,698			77,277			92,636			67,989			45,190
Depreciation and amortization	242,914			161,381			26,327			34,025			7,968			13,213
General and administrative	145,218			38,446			13,187			22,487			4,264			66,834
Costs of acquisitions not consummated	1,475			—			—			—			—			1,475
Total expenses	1,069,397			596,525			116,791			149,148			80,221			126,712
Operating income (loss)	637,865			470,742			131,757			88,538			7,207			(60,379		)
Income applicable to Alexander’s	8,580			433			668			—			—			7,479
Income (loss) from partially-owned entities	43,381			2,728			(1,678		)	545			5,641			36,145
Interest and other investment income	203,995			994			397			105			220			202,279
Interest and debt expense	(241,968		)	(128,729		)	(58,625		)	(11,255		)	(6,379		)	(36,980		)
Net gain on disposition of wholly-owned and partially-owned assets other than depreciablereal estate	19,775			369			—			—			—			19,406
Minority interest	(110		)	—			—			—			(158		)	48
Income from continuing operations	671,518			346,537			72,519			77,933			6,531			167,998
Income from discontinued operations	78,597			1,584			10,054			—			—			66,959
Net income	750,115			348,121			82,573			77,933			6,531			234,957
Interest and debt expense(2)	313,289			133,602			61,820			12,166			30,337			75,364
Depreciation and amortization(2)	296,980			165,492			30,121			34,559			34,567			32,241
Income taxes	1,664			406			—			852			79			327
EBITDA(1)	$	1,362,048		$	647,621		$	174,514		$	125,510		$	71,514		$	342,889
Balance sheet data:
Real estate, net	$	8,314,404		$	4,899,944		$	1,109,049		$	963,053		$	1,177,190		$	165,168
Investments and advances to partially-owned entities	605,300			48,682			82,294			6,207			12,933			455,184
Capital expenditures:
Acquisitions	288,379			55,191			233,188			—			—			—
Other	290,000			160,086			67,508			60,365			—			2,041

See notes on page 152.

149

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

18. Segment Information - continued

	December 31, 2003
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)		Other (4)
Property rentals	$	1,205,822		$	819,277		$	136,490		$	197,554		$	—	$	52,501
Straight-line rents:
Contractual rent increases	34,288			27,296			3,108			3,875			—		9
Amortization of free rent	7,071			(561		)	5,390			2,251			—		(9		)
Amortization of acquired below market leases, net	8,892			7,852			1,040			—			—		—
Total rentals	1,256,073			853,864			146,028			203,680			—		52,501
Expense reimbursements	179,115			102,727			56,900			16,402			—		3,086
Fee and other income:
Tenant cleaning fees	29,062			29,062			—			—			—		—
Management and leasing fees	12,812			11,427			1,290			—			—		95
Other	20,921			8,852			4,694			7,344			—		31
Total revenues	1,497,983			1,005,932			208,912			227,426			—		55,713
Operating expenses	581,550			376,012			70,462			91,033			—		44,043
Depreciation and amortization	213,679			151,050			18,835			30,125			—		13,669
General and administrative	121,857			37,229			9,783			20,215			—		54,630
Total expenses	917,086			564,291			99,080			141,373			—		112,342
Operating income (loss)	580,897			441,641			109,832			86,053			—		(56,629		)
Income applicable to Alexander’s	15,574			—			640			—			—		14,934
Income (loss) from partially-owned entities	67,901			2,426			3,752			(108		)	18,416		43,415
Interest and other investment income	25,397			2,956			359			93			—		21,989
Interest and debt expense	(228,860		)	(133,511		)	(59,674		)	(14,788		)	—		(20,887		)
Net gain on disposition of wholly-owned and partially-owned assets other than depreciable real estate	2,343			180			—			188			—		1,975
Minority interest	(1,089		)	(1,119		)	—			—			—		30
Income (loss) from continuing operations	462,163			312,573			54,909			71,438			18,416		4,827
Income (loss) from discontinued operations	176,388			173,949			4,850			—			—		(2,411		)
Net income (loss)	638,551			486,522			59,759			71,438			18,416		2,416
Interest and debt expense (2)	296,059			138,379			62,718			15,700			24,670		54,592
Depreciation and amortization (2)	279,507			155,743			21,642			30,749			34,879		36,494
Income taxes (2)	1,627			45			—			—			—		1,582
EBITDA (1)	$	1,215,744		$	780,689		$	144,119		$	117,887		$	77,965	$	95,084
Balance sheet data:
Real estate, net	$	6,762,559		$	4,930,715		$	730,443		$	904,546		$	—	$	196,855
Investments and advances to partially-owned entities	900,600			44,645			57,317			6,063			426,773		365,802
Capital expenditures:
Acquisitions	249,954			95,420			154,534			—			—		—
Other	239,222			108,230			45,707			36,341			5,700		43,244

See notes on page 152.

150

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

18. Segment Information - continued

	December 31, 2002
(Amounts in thousands)	Total			Office			Retail			Merchandise Mart			Temperature Controlled Logistics (3)			Other (4)
Property rentals	$	1,154,206		$	789,194		$	120,451		$	191,197		$	—		$	53,364
Straight-line rents:
Contractual rent increases	30,994			27,269			1,777			1,772			—			176
Amortization of free rent	6,796			2,374			3,317			1,105			—			—
Amortization of acquired below market leases, net	12,353			12,188			165			—			—			—
Total rentals	1,204,349			831,025			125,710			194,074			—			53,540
Expense reimbursements	154,727			85,381			51,008			14,754			—			3,584
Fee and other income:
Tenant cleaning fees	—			—			—			—			—			—
Management and leasing fees	14,800			13,317			1,450			33			—			—
Other	12,918			7,783			172			4,743			—			220
Total revenues	1,386,794			937,506			178,340			213,604			—			57,344
Operating expenses	517,958			329,198			61,500			86,022			—			41,238
Depreciation and amortization	197,704			142,124			14,957			26,716			—			13,907
General and administrative	100,035			33,319			7,640			20,382			—			38,694
Amortization of officer’s deferred compensation expense	27,500			—			—			—			—			27,500
Costs of acquisitions and development not consummated	6,874			—			—			—			—			6,874
Total expenses	850,071			504,641			84,097			133,120			—			128,213
Operating income (loss)	536,723			432,865			94,243			80,484			—			(70,869		)
Income applicable to Alexander’s	29,653			—			598			—			—			29,055
Income (loss) from partially-owned entities	44,458			1,966			(687		)	(339		)	9,707			33,811
Interest and other investment income	31,678			6,465			323			507			—			24,383
Interest and debt expense	(232,891		)	(137,509		)	(56,643		)	(22,948		)	—			(15,791		)
Net (loss) gain disposition of wholly-owned and partially-owned assets other than depreciable real estate	(17,471		)	—			—			2,156			—			(19,627		)
Minority interest	(3,534		)	(3,526		)	—			—			—			(8		)
Income (loss) from continuing operations	388,616			300,261			37,834			59,860			9,707			(19,046		)
Income (loss) from discontinued operations	11,815			17,841			723			—			—			(6,749		)
Cumulative effect of change in accounting principle	(30,129		)	—			—			—			(15,490		)	(14,639		)
Net income	370,302			318,102			38,557			59,860			(5,783		)	(40,434		)
Cumulative effect of change in accounting principle	30,129			—			—			—			15,490			14,639
Interest and debt expense (2)	305,920			143,068			58,409			23,461			25,617			55,365
Depreciation and amortization (2)	257,707			149,361			17,532			27,006			34,474			29,334
EBITDA(1)	$	964,058		$	610,531		$	114,498		$	110,327		$	69,798		$	58,904
Balance sheet data:
Real estate, net	$	6,579,965		$	4,880,885		$	569,015		$	891,701		$	—		$	238,364
Investments and advances to partially-owned entities	961,126			29,421			56,375			5,912			448,295			421,123
Capital expenditures:
Acquisitions	2,739,746			2,650,298			89,448			—			—			—
Other	164,162			114,375			3,019			20,852			5,588			20,328

See notes on following page.

151

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

18. Segment Information - continued

Notes to preceding tabular information:

(1)Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments.  EBITDA should not be considered a substitute for net income.  EBITDA may not be comparable to similarly titled measures employed by other companies.

(2)Interest and debt expense and depreciation and amortization included in the reconciliation of net income to EBITDA reflects amounts which are netted in income from partially-owned entities.

(3)Operating results for the year ended December 31, 2004, reflect the consolidation of the Company’s investment in Americold beginning on November 18, 2004.  Previously, this investment was accounted for on the equity method.

(4)Other EBITDA is comprised of:

	For the Year Ended December 31,
(Amounts in thousands)	2004			2003			2002
Newkirk:
Equity in income of MLP	$	52,331		$	68,341		$	60,756
Interest and other income	18,186			8,532			8,795
Alexander’s	25,909			22,361			38,838
Industrial warehouses	5,309			6,208			6,223
Hotel Pennsylvania	15,643			4,573			7,636
Student housing	1,440			2,000			2,340
	118,818			112,015			124,588
Minority interest expense	48			30			(8		)
Corporate general and administrative expenses	(62,854		)	(51,461		)	(34,743		)
Investment income and other	215,639			28,350			22,907
Discontinued operations:
Palisades	3,792			5,006			161
400 North LaSalle	1,541			(418		)	—
Gain on sale of Palisades	65,905			—			—
Net gain on sale of marketable securities	—			2,950			12,346
Primestone foreclosure and impairment loss.	—			(1,388		)	(35,757		)
Amortization of Officer’s deferred compensation expense	—			—			(27,500		)
Write-off of 20 Times Square pre-development costs	—			—			(6,874		)
Gain on transfer of mortgages	—			—			2,096
Net gain on sale of air rights.	—			—			1,688
	$	342,889		$	95,084		$	58,904

152

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

19. Subsequent Events

On February 3, 2005, the Company supplied $135,000,000 of financing to Riley Holdco Corp, an entity formed to complete the acquisition of LNR Property Corporation (NYSE:LNR).  Riley Holdco Corp. is a wholly owned subsidiary of LNR Property Holdings, Ltd., which is 75% owned by funds and accounts managed by Cerberus Capital Management, L.P. and its real estate affiliate Blackacre Institutional Capital Management, LLC.  The terms of the financings are as follows:  (i) $60,000,000 of a $325,000,000 mezzanine tranche of a $2.4 billion credit facility which is secured by certain equity interests.  This tranche is junior to $1.9 billion of the credit facility, bears interest at LIBOR plus 5.25%, and matures in February 2008 with two one-year extensions; and (ii) $75,000,000 of $400,000,000 of unsecured notes which are subordinate to the $2.4 billion credit facility and senior to over $700,000,000 of equity contributed to finance the acquisition.  These notes mature in February 2015, provide for a 1.5% placement fee, and bear interest at 10% for the first five years and 11% for years six through ten.

On February 4, 2005, the Company acquired from JER Investors Trust a $17,000,000 participation in a $34,000,000 mezzanine loan secured by Roney Palace Phase II, in Miami Beach, Florida, a 593-room hotel to be converted to residential condominiums.  The loan, which is subordinate to $141,000,000 of other debt, bears interest at LIBOR plus 9.53%, until 25% of the loan is repaid and LIBOR plus 7.48% thereafter until maturity in October 2006.  The loan has a one-year extension option.

153

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.Controls and Procedures

Disclosure Controls and Procedures:  The Company’s management, with the participation of Vornado’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K.  Based on such evaluation, Vornado’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

Internal Control Over Financial Reporting:  There have not been any changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Vornado Realty Trust, sole general partner of Vornado Realty L.P., together with its consolidated subsidiaries (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of December 31, 2004, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Our assessment excluded the internal control over financial reporting at Americold Realty Trust, which acquired AmeriCold Logistics on November 4, 2004 and which the Company began to consolidate on November 18, 2004 and whose financial statements reflect total assets and revenues constituting 10.2 and 5.1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.  Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2004 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of trustees of the general partner of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 155 which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004.

154

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Partners

Vornado Realty L.P.

New York, New York

We have audited management’s assessment, included within this December 31, 2004 Form 10-K of Vornado Realty L.P. at Item 9A under the heading “Management’s Report on Internal Control Over Financial Reporting,” that Vornado Realty L.P., together with its consolidated subsidiaries (the “Company”) maintained effective internal control over financial reporting as of  December 31, 2004, based on criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.  As described in “Management’s Report on Internal Control Over Financial Reporting,” management excluded from their assessment the internal control over financial reporting at Americold Realty Trust, which acquired AmeriCold Logistics on November 4, 2004 and which the Company began to consolidate on November 18, 2004 and whose financial statements reflect total assets and revenues constituting 10.2 and 5.1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.  Accordingly, our audit did not include the internal control over financial reporting at Americold Realty Trust.  The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the board of trustees of the general partner of the Company, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and board of trustees of the general partner of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004 and the related consolidated statements of income, partners’ capital and cash flows for the year ended December 31, 2004 and the related financial statement schedules as of and for the year ended December 31, 2004 of the Company and our report dated March 7, 2005 expressed an unqualified opinion on those financial statements and financial statement schedules.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 7, 2005

155

Item 9B.Other Information

As of February 8, 2005, Vornado’s Compensation Committee approved a grant, pursuant to Vornado’s 2002 Omnibus Share Plan, of 1,038,800 stock options and 73,216 units of restricted stock to executive officers and certain employees of the Company.  The stock options have an exercise price of $71.275 per unit and vest over three to five years.  The units of restricted stock vest over five years.  Included with this annual report on Form 10-K as exhibits 10.77 and 10.78, respectively, are the form of stock option and restricted stock agreements and such forms are incorporated in this Item 9B.

PART III

Item 10.Directors and Executive Officers of the Registrant

Information relating to trustees of Vornado, including its audit committee and audit committee financial expert, will be contained in a definitive Proxy Statement involving the election of trustees under the caption “Election of Trustees” which Vornado will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 2004, and such information is incorporated herein by reference. Information relating to Executive Officers of Vornado, appears at page 46 of this Annual Report on Form 10-K.  Also incorporated herein by reference is the information under the caption “Other Matters — 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.

Vornado has adopted a Code of Business Conduct and Ethics that applies to, among others, Steven Roth, its principal executive officer, and Joseph Macnow, its principal financial and accounting officer.  This Code is available on Vornado’s website at www.vno.com.

Item 11.Executive Compensation

Information relating to executive compensation will be contained in the Proxy Statement referred to above in Item 10, “Directors and Executive Officers of the Registrant,” under the caption “Executive Compensation” and such information is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management

Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement referred to in Item 10, “Directors and Executive Officers of the Registrant,” under the caption “Principal Security Holders” and such information is incorporated herein by reference.

Equity compensation plan information

The following table provides information as of December 31, 2004, regarding the Company’s equity compensation plans.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the second column)
Equity compensation plans approved by security holders	13,172,492	(1)	$	34.39	6,920,465	(2)
Equity compensation awards not approved by security holders (3)	—		—		—
Total	13,172,492		$	34.39	6,920,465

(1)Includes 290,478 restricted shares which do not have an option exercise price.

(2)All of the units available for future issuance under plans approved by the security holders may be issued as restricted stock shares or performance shares.

(3)Does not include Class A units issuable in exchange for deferred stock shares pursuant to the compensation agreements described below under the heading “Material Features of Equity Compensation Arrangements Not Approved by Shareholders.”

156

Material Features of Equity Compensation Arrangements Not Approved by Unitholders

We have awarded deferred stock share of Vornado under individual arrangements with two of our employees.  Unitholder approval was not required for these awards under the current or then-existing rules of the New York Stock Exchange because the awards were made as an inducement to these employees to enter into employment contracts with us.

We awarded Melvyn Blum 148,148 deferred stock shares of Vornado pursuant to an agreement dated as of December 29, 2000.  In addition, Mr. Blum’s agreement requires the Company to provide an effective registration statement covering any common shares distributed to Mr. Blum.  Pursuant to an amendment to this agreement dated as of February 13, 2003, we agreed to pay Mr. Blum an amount in cash equal to the market value of 88,889 common shares in respect of the deferred shares that had vested under his agreement as of such date.  On January 2, 2005, all of Mr. Blum’s remaining unvested deferred stock shares vested and he received the remaining shares.  Pursuant to a requirement under his employment agreement, all of Mr. Blum’s shares received with respect to deferred stock shares were registered for sale pursuant to a registration statement filed with the Securities and Exchange Commission for which the prospectus was filed April 12, 2004.

Item 13.Certain Relationships and Related Transactions

Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item 10, “Directors and Executive Officers of the Registrant,” under the caption “Certain Relationships and Related Transactions” and such information is incorporated herein by reference.

Item 14.Principal Accountant Fees and Services

Information relating to Principal Accountant fees and services will be contained in the Proxy Statement referred to in Item 10, “Directors and Executive Officers of the Registrant” under the caption “Principal Accountant Fees and Services” and such information is incorporated herein by reference.

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)The following documents are filed as part of this report:

1.The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K.

The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this Annual Report on Form 10-K.

	Pages in this Annual Report on Form 10-K
II—Valuation and Qualifying Accounts–years ended December 31, 2004, 2003 and 2002	159
III—Real Estate and Accumulated Depreciation as of December 31, 2004	160

Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto.

The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K.

Exhibit No.
21	Subsidiaries of Registrant
23	Consent of Independent Registered Public Accounting Firm
31.1	Rule 13a-14 (a) Certification of the Chief Executive Officer
31.2	Rule 13a-14 (a) Certification of the Chief Financial Officer
32.1	Section 1350 Certification of the Chief Executive Officer
32.2	Section 1350 Certification of the Chief Financial Officer

157

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VORNADO REALTY L.P.
By:	VORNADO REALTY TRUST, sole general partner
By:	/s/  Joseph Macnow
		Joseph Macnow, Executive Vice President-
			Finance and Administration and
			Chief Financial Officer of
			Vornado Realty Trust, sole general partner
Date:  March 7, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature			Title	Date
By:	/s/   Steven Roth		Chairman of the Board of	March 7, 2005
		(Steven Roth)	Trustees (Principal Executive Officer)
By:	/s/   Michael D. Fascitelli		President and Trustee	March 7, 2005
		(Michael D. Fascitelli)
By:	/s/   Robert P. Kogod		Trustee	March 7, 2005
		(Robert P. Kogod)
By:	/s/   David Mandelbaum		Trustee	March 7, 2005
		(David Mandelbaum)
By:	/s/   Stanley Simon		Trustee	March 7, 2005
		(Stanley Simon)
By:	/s/   Robert H. Smith		Trustee	March 7, 2005
		(Robert H. Smith)
By:	/s/   Ronald G. Targan		Trustee	March 7, 2005
		(Ronald G. Targan)
By:	/s/   Richard R. West		Trustee	March 7, 2005
		(Richard R. West)
By:	/s/   Russell B. Wight		Trustee	March 7, 2005
		(Russell B. Wight, Jr.)
By:	/s/   Joseph Macnow		Executive Vice President - Finance and	March 7, 2005
		(Joseph Macnow)	Administration and Chief Financial Officer (Principal Financial and Accounting Officer)

158

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
December 31, 2004

	Column A		Column B			Column C			Column E
Description	Balance at Beginning of Year		Additions Charged Against Operations			Uncollectible Accounts Written-off			Balance at End of Year
Year Ended December 31, 2004: Allowance for doubtful accounts	$	18,076	$	16,771	(1)	$	(10,350	)	$	24,125
Year Ended December 31, 2003 Allowance for doubtful accounts	$	17,958	$	12,248		$	(12,130	)	$	18,076
Year Ended December 31, 2002: Allowance for doubtful accounts	$	9,922	$	11,634		$	(3,514	)	$	17,958

(1)Beginning on November 18, 2004, the Company consolidates its investment in Americold Realty Trust.  Accordingly, additions charged against operations includes $3,106, which represents Americold’s allowance for doubtful accounts on such date. 

159

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

(Amounts in thousands)

COLUMN A	COLUMN B		COLUMN C				COLUMN D			COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
							Costs Capitalized			Gross amount at which carried at close of period						Accumulated				Life on which depreciation in latest
			Initial cost to company (1)				subsequent					Buildings				Depreciation				income
					Buildings and		to					and				and		Date of	Date	statement
Description	Encumbrances		Land		improvements		acquisition			Land		improvements		Total (2)		amortization		construction (3)	acquired	is computed
Office Buildings
New York
Manhattan
One Penn Plaza	$	—	$	—	$	412,169	$	96,063		$	—	$	508,232	$	508,232	$	87,751	1972	1998	7 - 39 Years
Two Penn Plaza	300,000		53,615		164,903		61,513			52,689		227,342		280,031		49,610		1968	1997	7 - 39 Years
909 Third Avenue	125,000		—		120,723		22,341			—		143,064		143,064		21,604		1969	1999	7 - 39 Years
770 Broadway	170,000		52,898		95,686		76,022			52,898		171,708		224,606		30,820		1907	1998	7 - 39 Years
Eleven Penn Plaza	219,777		40,333		85,259		27,155			40,333		112,414		152,747		26,514		1923	1997	7 - 39 Years
90 Park Avenue	—		8,000		175,890		25,960			8,000		201,850		209,850		37,879		1964	1997	7 - 39 Years
888 Seventh Avenue	105,000		—		117,269		45,007			—		162,276		162,276		25,723		1980	1998	7 - 39 Years
330 West 34th Street	—		—		8,599		8,648			—		17,247		17,247		2,660		1925	1998	7 - 39 Years
1740 Broadway	—		26,971		102,890		9,338			26,971		112,228		139,199		23,537		1950	1997	7 - 39 Years
150 East 58th Street	—		39,303		80,216		17,699			39,303		97,915		137,218		16,551		1969	1998	7 - 39 Years
866 United Nations Plaza	48,130		32,196		37,534		8,266			32,196		45,800		77,996		11,058		1966	1997	7 - 39 Years
595 Madison (Fuller Building)	—		62,731		62,888		11,092			62,731		73,980		136,711		9,421		1968	1999	7 - 39 Years
640 Fifth Avenue	—		38,224		25,992		94,987			38,224		120,979		159,203		14,771		1950	1997	7 - 39 Years
40 Fulton Street	—		15,732		26,388		3,807			15,732		30,195		45,927		6,125		1987	1998	7 - 39 Years
689 Fifth Avenue	—		19,721		13,446		8,166			19,721		21,612		41,333		2,631		1925	1998	39 Years
20 Broad Street	—		—		28,760		18,743			—		47,503		47,503		6,334		1956	1998	7 - 39 Years
7 West 34th Street	—		34,595		93,703		1,012			34,614		94,696		129,310		9,968		1901	2000	7 - 40 Years
Other	—		—		5,548		10,560			—		16,108		16,108		381
Total New York	967,907		424,319		1,657,863		546,379			423,412		2,205,149		2,628,561		383,338
Washington, DC
Crystal Mall (4 buildings)	$	48,618	$	49,664	$	156,654	$	9,656		$	49,545	$	166,429	$	215,974	$	15,556	1968	2002	10 - 40 Years
Crystal Plaza (6 buildings)	—		57,213		131,206		22,348			57,070		153,697		210,767		9,625		1964-1969	2002	10 - 40 Years
Crystal Square (4 buildings)	185,276		64,817		218,330		26,200			64,652		244,695		309,347		22,708		1974 - 1980	2002	10 - 40 Years
Crystal City Hotel	—		8,000		47,191		—			8,000		47,191		55,191		578		1968	2004	10 - 40 Years
Crystal City Shops	—		—		20,465		—			—		20,465		20,465		470		2004	2004	10 - 40 Years
Crystal Gateway (4 buildings)	146,825		47,594		177,373		(58,759		)	32,736		133,472		166,208		13,322		1983 - 1987	2002	10 - 40 Years
Crystal Park (5 buildings)	253,238		100,935		409,920		19,708			100,228		430,335		530,563		45,470		1984 - 1989	2002	10 - 40 Years
1919 S. Eads Street	11,932		3,979		18,610		69,322			18,696		73,215		91,911		7,454		1990	2002	10 - 40 Years
Skyline Place (6 buildings)	131,106		41,986		221,869		8,487			41,862		230,480		272,342		23,593		1973 - 1984	2002	10 - 40 Years
Seven Skyline Place	—		10,292		58,351		(4,294		)	10,262		54,087		64,349		5,284		2001	2002	10 - 40 Years
One Skyline Tower	63,791		12,266		75,343		8,176			12,231		83,554		95,785		8,116		1988	2002	10 - 40 Years
Courthouse Plaza (2 buildings)	77,153		—		105,475		7,918			—		113,393		113,393		11,303		1988 - 1989	2002	10 - 40 Years
1101 17th Street	25,537		20,666		20,112		2,500			20,609		22,669		43,278		3,046		1963	2002	10 - 40 Years
1730 M. Street	15,944		10,095		17,541		3,264			10,066		20,834		30,900		2,842		1963	2002	10 - 40 Years
1140 Connecticut Avenue	18,888		19,017		13,184		3,857			18,968		17,090		36,058		2,481		1966	2002	10 -40 Years
1150 17th Street	30,838		23,359		24,876		5,237			23,296		30,176		53,472		3,464		1970	2002	10 - 40 Years
1750 Penn Avenue	48,876		20,020		30,032		(622		)	19,948		29,482		49,430		2,932		1964	2002	10 - 40 Years

160

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B		COLUMN C		COLUMN D		COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
					Costs Capitalized subsequent		Gross amount at which carried at close of period			Accumulated Depreciation			Life on which depreciation in latest
			Initial cost to company (1)					Buildings					income
				Buildings and	to			and		and	Date of	Date	statement
Description	Encumbrances		Land	improvements	acquisition		Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
2101 L Street	—		32,815	51,642	(164	)	32,815	51,478	84,293	1,820	1975	2003	10 - 40 Years
Democracy Plaza I	26,095		—	33,628	(1,465	)	—	32,163	32,163	4,535	1987	2002	10 - 40 Years
Tysons Dulles (3 buildings)	—		19,146	79,095	1,427		19,096	80,572	99,668	7,710	1986 - 1990	2002	10 - 40 Years
Commerce Executive (3 buildings)	51,796		13,401	58,705	5,795		13,363	64,538	77,901	6,162	1985 - 1989	2002	10 - 40 Years
Reston Executive (3 buildings)	71,197		15,424	85,722	367		15,380	86,133	101,513	7,971	1987 - 1989	2002	10 - 40 Years
Crystal Gateway 1	57,083		15,826	53,894	4,058		15,826	57,952	73,778	3,617	1981	2002	10 - 40 Years
Other	21,021		—	51,768	(42,279	)	—	9,489	9,489	—
Total Washington, DC Office Buildings	1,285,214		586,515	2,160,986	90,737		584,649	2,253,589	2,838,238	210,059
New Jersey
Bergen	—		—	8,345	12,189		1,092	19,442	20,534	7,712	1967	1987	26 - 40 Years
Total New Jersey	—		—	8,345	12,189		1,092	19,442	20,534	7,712
Total Office Buildings	2,253,121		1,010,834	3,827,194	649,305		1,009,153	4,478,180	5,487,333	601,109
Shopping Centers
New Jersey
Bordentown	7,893	*	498	3,176	1,011		713	3,972	4,685	3,972	1958	1958	7 - 40 Years
Bricktown	15,951	*	929	2,175	9,463		952	11,615	12,567	6,848	1968	1968	22 -40 Years
Cherry Hill (4)	14,670	*	915	3,926	4,924		915	8,850	9,765	3,071	1964	1964	12 - 40 Years
Delran	6,288	*	756	3,184	2,116		756	5,300	6,056	3,883	1972	1972	16 - 40 Years
Dover	7,190	*	224	2,330	2,947		559	4,942	5,501	3,794	1964	1964	16 - 40 Years
East Brunswick	22,273	*	319	3,236	8,428		319	11,664	11,983	7,585	1957	1957	8 - 33 Years
East Brunswick (former Whse)	8,129		—	4,772	4,180		—	8,952	8,952	5,472	1972	1972	18 -40 Years
East Hanover I	26,703	*	376	3,063	9,950		476	12,913	13,389	6,500	1962	1962	9 -40 Years
East Hanover II (4)	—		1,756	8,706	465		2,195	8,732	10,927	1,298	1979	1998	40 Years
Hackensack	24,470	*	536	3,293	7,317		536	10,610	11,146	6,769	1963	1963	15 - 40 Years
Jersey City (4)	18,733	*	652	2,962	4,275		652	7,237	7,889	1,302	1965	1965	11 - 40 Years
Kearny (4)	3,657	*	279	4,429	(208	)	309	4,191	4,500	1,819	1938	1959	23 - 29 Years
Lawnside	10,366	*	851	2,222	1,419		851	3,641	4,492	2,835	1969	1969	17 - 40 Years
Lodi I	9,186	*	245	9,339	107		245	9,446	9,691	1,238	1999	1975	40 Years
Lodi II	12,228		7,606	13,124	—		7,606	13,124	20,730	41		2004	40 Years
Manalapan	12,260	*	725	2,447	8,523		725	10,970	11,695	5,618	1971	1971	14 - 40 Years
Marlton	11,921	*	1,514	4,671	985		1,611	5,559	7,170	4,301	1973	1973	16 - 40 Years
Middletown	16,092	*	283	1,508	4,420		283	5,928	6,211	3,702	1963	1963	19 - 40 Years
Montclair	1,881	*	66	470	330		66	800	866	594	1972	1972	4 - 15 Years
Morris Plains	11,780	*	1,254	3,140	3,490		1,104	6,780	7,884	6,411	1961	1985	7 - 19 Years
North Bergen (4)	3,878	*	510	3,390	(922	)	2,308	670	2,978	230	1993	1959	30 Years
North Plainfield	10,649	*	500	13,340	679		500	14,019	14,519	7,167	1955	1989	21 - 30 Years
Paramus (Bergen Mall)	—		28,312	125,130	3,229		28,692	127,979	156,671	3,157	1957	2003	5 - 40 Years
Totowa	28,898	*	1,097	5,359	11,132		1,099	16,489	17,588	8,357	1957/1999	1957	19 - 40 Years
Turnersville	3,998	*	900	2,132	66		900	2,198	3,098	1,881	1974	1974	23 - 40 Years

161

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B		COLUMN C		COLUMN D		COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
					Costs Capitalized subsequent		Gross amount at which carried at close of period			Accumulated Depreciation			Life on which depreciation in latest
			Initial cost to company (1)					Buildings					income
				Buildings and	to			and		and	Date of	Date	statement
Description	Encumbrances		Land	improvements	acquisition		Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Union (4)	32,818	*	1,014	4,527	4,793		1,329	9,005	10,334	3,103	1962	1962	6 - 40 Years
Watchung (4)	13,241	*	451	2,347	6,866		4,178	5,486	9,664	1,852	1994	1959	27 - 30 Years
Woodbridge (4)	21,631	*	190	3,047	5,405		220	8,422	8,642	1,607	1959	1959	11 - 40 Years
Total New Jersey	356,784		52,758	241,445	105,390		60,099	339,494	399,593	104,407
New York
Albany (Menands)	6,083	*	460	1,677	2,536		461	4,212	4,673	2,699	1965	1965	22 - 40 Years
Buffalo (Amherst)	6,855	*	402	2,019	2,227		636	4,012	4,648	3,367	1968	1968	13 - 40 Years
Freeport	14,480	*	1,231	3,273	2,846		1,231	6,119	7,350	3,787	1981	1981	15 - 40 Years
Inwood	—		12,415	19,096	—		12,415	19,096	31,511	40	N/A	2004	40 Years
New Hyde Park	7,309	*	—	—	4		—	4	4	3	1970	1976	6 - 10 Years
North Syracuse	—		—	—	—		—	—	—	—	1967	1976	11 - 12 Years
Rochester (Henrietta)	—		—	2,124	1,194		—	3,318	3,318	2,599	1971	1971	15 - 40 Years
Rochester (4)	—		443	2,870	(928	)	2,172	213	2,385	213	1966	1966	10 - 40 Years
Valley Stream (Green Acres)	152,819		140,069	99,586	8,516		139,910	108,261	248,171	19,635	1956	1997	39 - 40 Years
715 Lexington Avenue	—		—	11,574	6,580		—	18,154	18,154	534	1923	2001	40 Years
14th Street and Union Square, Manhattan	—		12,566	4,044	62,006		24,080	54,536	78,616	628	1965	1993	40 Years
424 6th Avenue	—		5,900	5,675	239		5,900	5,914	11,814	387	1983	2002	40 Years
Riese	—		19,135	7,294	19,338		25,232	20,535	45,767	1,418	1923-1987	1997	39 Years
Staten Island	20,923		11,446	21,261	—		11,446	21,261	32,707	489	N/A	2004	40 Years
25W. 14th Street	—		29,169	17,878	—		29,169	17,878	47,047	335	N/A	2004	40 Years
99-01 Queens Blvd	—		7,839	20,047	9		7,839	20,056	27,895	167	N/A	2004	40 Years
386 West Broadway	5,084		2,331	5,471	—		2,331	5,471	7,802	3	N/A	2004	40 Years
387 West Broadway	—		5,843	7,642	—		5,843	7,642	13,485	16	N/A	2004	40 Years
1135 Third Avenue	—		7,844	7,844	—		7,844	7,844	15,688	1,373	N/A	1997	39 Years
Total New York	213,553		257,093	239,375	104,567		276,509	324,526	601,035	37,693
Pennsylvania
Allentown	22,741	*	70	3,446	11,758		334	14,940	15,274	7,733	1957	1957	20 - 42 Years
Bensalem (4)	6,284	*	1,198	3,717	3,217		2,727	5,405	8,132	1,465	1972/1999	1972	40 Years
Bethlehem	3,977	*	278	1,806	3,873		278	5,679	5,957	5,070	1966	1966	9 - 40 Years
Broomall	9,563	*	734	1,675	1,332		850	2,891	3,741	2,582	1966	1966	9 - 40 Years
Glenolden	7,172	*	850	1,295	997		850	2,292	3,142	1,390	1975	1975	18 - 40 Years
Lancaster (4)	—		606	2,312	1,113		3,043	988	4,031	370	1966	1966	12 - 40 Years
Levittown	3,213	*	193	1,231	131		183	1,372	1,555	1,363	1964	1964	7 - 40 Years
10th and Market Streets, Philadelphia	8,760	*	933	3,230	12,920		933	16,150	17,083	2,733	1977	1994	27 - 30 Years
Upper Moreland	6,799	*	683	2,497	271		683	2,768	3,451	2,272	1974	1974	15 - 40 Years
York	4,021	*	421	1,700	1,718		409	3,430	3,839	2,231	1970	1970	15 - 40 Years
Total Pennsylvania	72,530		5,966	22,909	37,330		10,290	55,915	66,205	27,209
Maryland

162

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B		COLUMN C		COLUMN D		COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
					Costs Capitalized		Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
			Initial cost to company (1)		subsequent			Buildings		Depreciation			income
				Buildings and	to			and		and	Date of	Date	statement
Description	Encumbrances		Land	improvements	acquisition		Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Baltimore (Towson)	11,144	*	581	2,756	666		581	3,422	4,003	2,800	1968	1968	13 - 40 Years
Glen Burnie	5,735	*	462	1,741	1,422		462	3,163	3,625	2,199	1958	1958	16 - 33 Years
Total Maryland	16,879		1,043	4,497	2,088		1,043	6,585	7,628	4,999
California
Anaheim	—		1,093	1,093	—		1,093	1,093	2,186	11	N/A	2004	40 Years
Barstow	—		849	1,356	—		849	1,356	2,205	14	N/A	2004	40 Years
Beaumont	—		206	1,321	—		206	1,321	1,527	14	N/A	2004	40 Years
Calimesa	—		504	1,463	—		504	1,463	1,967	15	N/A	2004	40 Years
Colton	—		1,239	954	—		1,239	954	2,193	10	N/A	2004	40 Years
Colton	—		1,158	332	—		1,158	332	1,490	3	N/A	2004	40 Years
Corona	—		—	3,073	—		—	3,073	3,073	32	N/A	2004	40 Years
Costa Mesa	—		1,399	635	—		1,399	635	2,034	7	N/A	2004	40 Years
Costa Mesa	—		2,239	308	—		2,239	308	2,547	3	N/A	2004	40 Years
Desert Hot Springs	—		197	1,355	—		197	1,355	1,552	14	N/A	2004	40 Years
Fontana	—		518	1,100	—		518	1,100	1,618	11	N/A	2004	40 Years
Garden Grove	—		795	1,254	—		795	1,254	2,049	13	N/A	2004	40 Years
Mojave	—		—	2,250	—		—	2,250	2,250	23	N/A	2004	40 Years
Moreno Valley	—		639	1,156	—		639	1,156	1,795	12	N/A	2004	40 Years
Ontario	—		713	1,522	—		713	1,522	2,235	16	N/A	2004	40 Years
Orange	—		1,487	1,746	—		1,487	1,746	3,233	18	N/A	2004	40 Years
Rancho Cucamonga	—		1,052	1,051	—		1,052	1,051	2,103	11	N/A	2004	40 Years
Rialto	—		434	1,173	—		434	1,173	1,607	12	N/A	2004	40 Years
Riverside	—		209	704	—		209	704	913	7	N/A	2004	40 Years
Riverside	—		251	783	—		251	783	1,034	8	N/A	2004	40 Years
San Bernadino	—		1,598	1,119	—		1,598	1,119	2,717	12	N/A	2004	40 Years
San Bernadino	—		1,651	1,810	—		1,651	1,810	3,461	19	N/A	2004	40 Years
Santa Ana	—		1,565	377	—		1,565	377	1,942	4	N/A	2004	40 Years
Westminister	—		1,673	1,192	—		1,673	1,192	2,865	12	N/A	2004	40 Years
Yucaipa	—		663	426	—		663	426	1,089	4	N/A	2004	40 Years
Total California	—		22,132	29,553	—		22,132	29,553	51,685	305
Connecticut
Newington (4)	6,405	*	502	1,581	1,925		2,421	1,587	4,008	320	1965	1965	9 - 40 Years
Waterbury	6,038	*	—	2,103	8,188		667	9,624	10,291	2,685	1969	1969	21 - 40 Years
Total Connecticut	12,443		502	3,684	10,113		3,088	11,211	14,299	3,005
Massachusetts
Chicopee (4)	—		510	2,031	(936	)	895	710	1,605	710	1969	1969	13 - 40 Years
Springfield (4)	3,057	*	505	1,657	895		2,586	471	3,057	140	1993	1966	28 - 30 Years
Total Massachusetts	3,057		1,015	3,688	(41	)	3,481	1,181	4,662	850
Puerto Rico (San Juan)

163

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AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B	COLUMN C		COLUMN D		COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
				Costs Capitalized		Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
		Initial cost to company (1)		subsequent			Buildings		Depreciation			income
			Buildings and	to			and		and	Date of	Date	statement
Description	Encumbrances	Land	improvements	acquisition		Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Las Catalinas	65,696	15,280	71,754	(203	)	15,280	71,551	86,831	9,891	1996	2002	15 - 39 Years
Montehiedra	57,941	9,182	66,701	2,304		9,182	69,005	78,187	13,216	1996	1997	40 Years
Total Puerto Rico	123,637	24,462	138,455	2,101		24,462	140,556	165,018	23,107
Total Retail Properties	798,883	364,971	683,606	261,548		401,104	909,021	1,310,125	201,575
Merchandise Mart Properties
Illinois
Merchandise Mart, Chicago	—	64,528	319,146	96,626		64,535	415,765	480,300	62,951	1930	1998	40 Years
350 West Mart Center, Chicago	—	14,238	67,008	68,637		14,246	135,637	149,883	19,841	1977	1998	40 Years
33 North Dearborn, Chicago	—	6,624	30,680	5,448		6,624	36,128	42,752	4,201		2000	40 Years
527W. Kinzie, Chicago	—	5,166	—	—		5,166	—	5,166	—
Washington D.C.
Washington Office Center	—	10,719	69,658	5,164		10,719	74,822	85,541	12,934	1990	1998	40 Years
Washington Design Center	47,496	12,274	40,662	10,210		12,274	50,872	63,146	9,859	1919	1998	40 Years
Other	—	4,009	6,273	49		4,009	6,322	10,331	1,064		1998	40 Years
North Carolina
Market Square Complex, High Point	107,940	13,038	102,239	74,606		15,047	174,836	189,883	23,305	1902 - 1989	1998	40 Years
California
L.A. Mart, Los Angeles	—	10,141	43,422	16,630		10,141	60,054	70,195	6,849		2000	40 Years
Total Merchandise Mart	155,436	140,737	679,088	277,370		142,761	954,436	1,097,197	141,004
Temperature Controlled Logistics:
Alabama
Birmingham	2,705	861	4,376	294		874	4,657	5,531	1,029		1997
Montgomery	3,413	13	5,814	5,316		31	11,112	11,143	3,283		1997
Gadsden	10,241	11	306	57		11	363	374	92		1997
Albertville	5,147	540	6,106	195		540	6,301	6,841	1,218		1997
Total Alabama	21,506	1,425	16,602	5,862		1,456	22,433	23,889	5,622
Arizona
Phoenix	3,738	590	12,087	275		590	12,362	12,952	4,160		1998
Total Arizona	3,738	590	12,087	275		590	12,362	12,952	4,160

164

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B	COLUMN C		COLUMN D	COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
				Costs Capitalized	Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
		Initial cost to company (1)		subsequent		Buildings		Depreciation			income
			Buildings and	to		and		and	Date of	Date	statement
Description	Encumbrances	Land	improvements	acquisition	Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Arkansas
Fort Smith	1,786	255	3,957	252	255	4,209	4,464	786		1997
West Memphis	10,031	1,278	13,434	695	1,278	14,129	15,407	2,840		1997
Texarkana	9,541	537	7,922	179	568	8,070	8,638	3,479		1998
Russellville	8,115	906	13,754	72	907	13,825	14,732	3,553		1998
Russellville	13,967	1,522	14,552	21	1,522	14,573	16,095	4,213		1998
Springdale	8,803	864	16,312	362	891	16,647	17,538	3,801		1998
Total Arkansas	52,243	5,362	69,931	1,581	5,421	71,453	76,874	18,672
California
Ontario	7,082	1,006	20,683	5,251	1,006	25,935	26,941	4,831		1997
Fullerton	—	94	565	508	144	1,023	1,167	52		1997
Pajaro	—	—	—	—	—	—	—	—		1997
Turlock	6,144	353	9,906	419	364	10,314	10,678	2,015		1997
Turlock	9,127	662	16,496	74	662	16,570	17,232	3,860		1997
Watsonville	4,564	1,097	7,415	124	1,097	7,539	8,636	1,749		1997
Ontario	3,661	—	—	—	—	—	—	—
Total California	30,578	3,212	55,065	6,376	3,273	61,381	64,654	12,507
Colorado
Denver	3,110	541	6,164	1,536	541	7,700	8,241	2,414		1997
Total Colorado	3,110	541	6,164	1,536	541	7,700	8,241	2,414
Florida
Tampa	225	423	369	17	423	386	809	442		1997
Tampa	6,762	283	2,212	1,353	283	3,565	3,848	868		1997
Tampa	—	32	5,612	361	32	5,973	6,005	1,660		1997
Plant City	1,204	108	7,332	707	108	8,039	8,147	1,860		1997
Bartow	—	9	267	117	9	384	393	110		1997
Total Florida	8,191	855	15,792	2,555	855	18,347	19,202	4,940
Georgia
Atlanta	17,857	4,442	18,373	1,218	4,506	19,527	24,033	4,379		1997
Atlanta	29,009	3,490	38,488	1,082	3,500	39,560	43,060	7,687		1997
Augusta	2,363	260	3,307	1,129	260	4,436	4,696	1,113		1997
Atlanta	16,967	—	—	10,195	1,227	8,968	10,195	872	2001
Atlanta	3,256	700	3,754	114	711	3,857	4,568	809		1997
Montezuma	5,619	66	6,079	688	66	6,767	6,833	1,276		1997
Atlanta	5,366	2,201	6,767	7,777	2,201	14,544	16,745	3,527		1997
Atlanta –  Corporate Office	—	—	—	847	—	847	847	216		1997
Thomasville	1,967	763	21,504	47	810	21,504	22,314	3,909		1998
Total Georgia	82,404	11,922	98,272	23,097	13,281	120,010	133,291	23,788

165

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B	COLUMN C		COLUMN D	COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
				Costs Capitalized	Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
		Initial cost to company (1)		subsequent		Buildings		Depreciation			income
			Buildings and	to		and		and	Date of	Date	statement
Description	Encumbrances	Land	improvements	acquisition	Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Idaho
Burley	17,602	409	36,098	640	472	36,675	37,147	8,626		1997
Nampa	10,230	1,986	15,675	105	2,016	15,750	17,766	2,869		1997
Total Idaho	27,832	2,395	51,773	745	2,488	52,425	54,913	11,495
Illinois
Rochelle	12,337	2,449	19,315	2,200	2,449	21,515	23,964	5,685		1997
East Dubuque	10,918	506	8,792	8	506	8,800	9,306	3,254		1998
Total Illinois	23,255	2,955	28,107	2,208	2,955	30,315	33,270	8,939
Indiana
Indianapolis	20,218	2,021	26,569	2,704	2,071	29,223	31,294	5,730		1997
Total Indiana	20,218	2,021	26,569	2,704	2,071	29,223	31,294	5,730
Iowa
Fort Dodge	2,382	1,488	3,205	488	1,619	3,562	5,181	1,995		1997
Bettendorf	7,222	1,275	12,203	1,558	1,405	13,631	15,036	2,875		1997
Total Iowa	9,604	2,763	15,408	2,046	3,024	17,193	20,217	4,870
Kansas
Wichita	4,359	423	5,216	894	802	5,731	6,533	1,124		1997
Garden City	5,213	159	15,740	148	227	15,820	16,047	2,828		1998
Total Kansas	9,572	582	20,956	1,042	1,029	21,551	22,580	3,952
Kentucky
Sebree	4,967	42	10,401	109	42	10,510	10,552	1,424		1998
Total Kentucky	4,967	42	10,401	109	42	10,510	10,552	1,424
Maine
Portland	2,941	1	4,812	337	2	5,148	5,150	1,207		1997
Total Maine	2,941	1	4,812	337	2	5,148	5,150	1,207
Massachusetts
Gloucester	1,154	765	1,821	—	765	1,821	2,586	550		1997
Gloucester	4,162	2,274	8,327	593	2,274	8,920	11,194	3,863		1997
Gloucester	6,118	1,629	10,541	247	1,629	10,788	12,417	2,527		1997
Gloucester	7,172	1,826	12,271	475	1,826	12,746	14,572	3,285		1997
Boston	3,711	1,464	7,770	374	1,529	8,079	9,608	2,932		1997
Total Massachusetts	22,317	7,958	40,730	1,689	8,023	42,354	50,377	13,157
Missouri
Marshall	7,983	580	9,839	288	588	10,119	10,707	2,054		1997
Carthage	60,640	1,417	68,698	18,450	1,672	86,893	88,565	20,306		1998

166

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B	COLUMN C		COLUMN D	COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
				Costs Capitalized	Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
		Initial cost to company (1)		subsequent		Buildings		Depreciation			income
			Buildings and	to		and		and	Date of	Date	statement
Description	Encumbrances	Land	improvements	acquisition	Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
Total Missouri	68,623	1,997	78,537	18,738	2,260	97,012	99,272	22,360
Mississippi
West Point	11,705	69	11,495	383	69	11,878	11,947	3,823		1998
Total Mississippi	11,705	69	11,495	383	69	11,878	11,947	3,823
Nebraska
Fremont	8,730	13	12,817	431	13	13,248	13,261	2,392		1998
Grand Island	—	31	582	5,391	76	5,928	6,004	993		1997
Total Nebraska	8,730	44	13,399	5,822	89	19,176	19,265	3,385
New York
Syracuse	20,218	1,930	31,749	1,006	1,999	32,686	34,685	6,961		1997
Total New York	20,218	1,930	31,749	1,006	1,999	32,686	34,685	6,961
North Carolina
Charlotte	1,575	80	—	—	80	—	80	—		1997
Charlotte	8,771	1,068	12,296	551	1,178	12,737	13,915	2,704		1997
Tarboro	5,079	—	2,160	18,787	—	20,947	20,947	2,570		1997
Total North Carolina	15,425	1,148	14,456	19,338	1,258	33,684	34,942	5,274
Ohio
Massillon	16,279	—	—	11,772	—	11,772	11,772	1,314	2000
Total Ohio	16,279	—	—	11,772	—	11,772	11,772	1,314
Oklahoma
Oklahoma City	1,481	280	2,173	162	280	2,335	2,615	512		1997
Oklahoma City	1,943	244	2,450	279	263	2,710	2,973	586		1997
Total Oklahoma	3,424	524	4,623	441	543	5,045	5,588	1,098
Oregon
Hermiston	11,786	1,063	23,105	77	1,084	23,161	24,245	5,330		1997
Milwaukee	9,479	1,776	16,546	439	1,799	16,962	18,761	3,905		1997
Salem	16,349	2,721	27,089	515	2,854	27,471	30,325	4,997		1997
Woodburn	12,337	1,084	28,130	421	1,084	28,551	29,635	9,310		1997
Brooks	—	4	1,280	383	4	1,663	1,667	1,667		1997
Ontario	—	1,031	21,896	1,596	1,064	23,459	24,523	4,950		1997
Total Oregon	49,951	7,679	118,046	3,431	7,889	121,267	129,156	30,159
Pennsylvania
Leesport	15,388	2,823	20,698	1,032	3,165	21,388	24,553	4,534		1997
Fogelsville	28,887	9,757	43,633	2,756	9,850	46,296	56,146	12,246		1997
Total Pennsylvania	44,275	12,580	64,331	3,788	13,015	67,684	80,699	16,780

167

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B	COLUMN C		COLUMN D		COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
				Costs Capitalized		Gross amount at which carried at close of period			Accumulated			Life on which depreciation in latest
		Initial cost to company (1)		subsequent			Buildings		Depreciation			income
			Buildings and	to			and		and	Date of	Date	statement
Description	Encumbrances	Land	improvements	acquisition		Land	improvements	Total (2)	amortization	construction (3)	acquired	is computed
South Carolina
Columbia	2,941	360	4,518	33		360	4,551	4,911	960		1997
Total South Carolina	2,941	360	4,518	33		360	4,551	4,911	960
South Dakota
Sioux Falls	10,721	59	14,132	939		59	15,071	15,130	2,558		1998
Total South Dakota	10,721	59	14,132	939		59	15,071	15,130	2,558
Tennessee
Memphis	2,258	80	—	(80	)	—	—	—	—		1997
Memphis	7,510	699	11,484	841		1,111	11,913	13,024	2,305		1997
Murfreesboro	8,087	937	12,568	4,726		947	17,284	18,231	3,304		1997
Total Tennessee	17,855	1,716	24,052	5,487		2,058	29,197	31,255	5,609
Texas
Amarillo	14,213	106	18,549	539		127	19,067	19,194	4,690		1998
Ft. Worth	9,417	—	208	9,393		2,174	7,427	9,601	985		1998
Total Texas	23,630	106	18,757	9,932		2,301	26,494	28,795	5,675
Utah
Clearfield	13,941	1,348	24,605	616		1,348	25,221	26,569	4,672		1997
Total Utah	13,941	1,348	24,605	616		1,348	25,221	26,569	4,672
Virginia
Norfolk	4,254	1,033	5,731	442		1,033	6,173	7,206	1,168		1997
Strasburg	9,295	—	—	16,949		1,204	15,745	16,949	1,960		1999
Total Virginia	13,549	1,033	5,731	17,391		2,237	21,918	24,155	3,128
Washington
Burlington	7,923	756	13,092	248		756	13,340	14,096	1,281		1997
Moses Lake	17,151	659	32,910	242		659	33,152	33,811	4,979		1997
Walla Walla	5,015	954	10,992	(225	)	712	11,009	11,721	3,634		1997
Connell	11,484	357	20,825	191		357	21,016	21,373	3,078		1997
Wallula	3,410	125	7,705	88		125	7,793	7,918	2,184		1997
Pasco	—	9	690	9,257		9	9,947	9,956	1,455		1997
Total Washington	44,983	2,860	86,214	9,801		2,618	96,257	98,875	16,611
Wisconsin
Tomah	9,822	219	16,990	105		222	17,092	17,314	3,352		1997
Babcock	11,164	—	—	5,875		341	5,534	5,875	811		1999
Plover	23,975	865	44,544	775		919	45,265	46,184	7,719		1997
Total Wisconsin	44,961	1,084	61,534	6,755		1,482	67,891	69,373	11,882

168

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
							Costs Capitalized		Gross amount at which carried at close of period						Accumulated				Life on which depreciation in latest
			Initial cost to company (1)				subsequent				Buildings				Depreciation				income
					Buildings and		to				and				and		Date of	Date	statement
Description	Encumbrances		Land		improvements		acquisition		Land		improvements		Total (2)		amortization		construction (3)	acquired	is computed
Total Temperature Controlled Logistics	733,687		77,161		1,048,848		167,835		84,636		1,209,209		1,293,845		265,126
Warehouse/Industrial
New Jersey
East Hanover	26,660		576		7,752		7,830		691		15,467		16,158		13,232		1963 - 1967	1963	7 - 40 Years
Edison	5,322		705		2,839		1,713		704		4,553		5,257		3,293		1954	1982	12 - 25 Years
Garfield	8,274		96		8,068		5,259		45		13,378		13,423		11,293		1942	1959	11 - 33 Years
Total Warehouse/Industrial	40,256		1,377		18,659		14,802		1,440		33,398		34,838		27,818
Other Properties
New York
Hotel Pennsylvania	—		29,904		121,712		20,614		29,904		142,326		172,230		28,666		1919	1997	39 Years
Total New York	—		29,904		121,712		20,614		29,904		142,326		172,230		28,666
Total Other Properties	—		29,904		121,712		20,614		29,904		142,326		172,230		28,666
Leasehold Improvements Equipment and Other	50		12,734		2,414		308,130		12,794		310,483		323,277		139,143				3 - 20 Years
TOTAL DECEMBER 31, 2004	$	3,981,436	$	1,637,718	$	6,381,521	$	1,699,606	$	1,681,792	$	8,037,053	$	9,718,845	$	1,404,441

*      These encumbrances, are cross collateralized under a blanket mortgage in the amount of $476,603 as December 31, 2004.

Notes:

(1)   Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations) unless acquired subsequent to that date – see Column H.

(2)   The net basis of the company’s assets and liabilities for tax purposes is approximately $3,139,148 lower than the amount reported for financial statement purposes.

(3)   Date of original construction – many properties have had substantial renovation or additional construction – see Column D.

(4)   Buildings on these properties were demolished.  As a result, the cost of the buildings and improvements, net of accumulated depreciation, were either transferred to land or written-off.

169

VORNADO REALTY L.P.

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

(AMOUNTS IN THOUSANDS)

The following is a reconciliation of real estate assets and accumulated depreciation:

	YEAR ENDED DECEMBER 31,
	2004		2003		2002
Real Estate
Balance at beginning of period	$	7,629,736	$	7,217,515	$	4,426,560
Consolidation of investment in Americold	1,535,344		—		—
Additions during the period:
Land	100,558		69,819		595,977
Buildings & improvements	510,548		419,746		2,276,371
	9,776,186		7,707,080		7,298,908
Less: Assets sold and written-off	57,341		77,344		81,393
Balance at end of period	$	9,718,845	$	7,629,736	$	7,217,515
Accumulated Depreciation
Balance at beginning of period	$	867,177	$	701,327	$	485,447
Consolidation of investment in Americold	353,119		—		—
Additions charged to operating expenses	207,086		183,893		170,888
Additions due to acquisitions	—		855		63,178
	1,427,382		886,075		719,513
Less: Accumulated depreciation on assets sold and written-off	22,941		18,898		18,186
Balance at end of period	$	1,404,441	$	867,177	$	701,327

170

EXHIBIT INDEX

Exhibit No.
3.1	—	Amended and Restated Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 16, 1993 - Incorporated by reference to Exhibit 3(a) to Vornado Realty Trust’s Registration Statement on Form S-4 (File No. 33-60286), filed on April 15, 1993	*
3.2	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on May 23, 1996 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 11, 2002	*
3.3	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 3, 1997 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954) , filed on March 11, 2002	*
3.4	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on October 14, 1997 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.5	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 22, 1998 - Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.6	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on November 24, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.7	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 20, 2000 - Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.8	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on September 14, 2000 - Incorporated by reference to Exhibit 4.6 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001	*
3.9	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust dated May 31, 2002, as filed with the State Department of Assessments and Taxation of Maryland on June 13, 2002 - Incorporated by reference to Exhibit 3.9 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*

*              Incorporated by reference.

171

3.10	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust dated June 6, 2002, as filed with the State Department of Assessments and Taxation of Maryland on June 13, 2002 - Incorporated by reference to Exhibit 3.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*
3.11	—	Articles of Amendment of Declaration of Trust of Vornado Realty Trust dated December 16, 2004, as filed with the State Department of Assessments and Taxation of Maryland on December 16, 2004 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated December 16, 2004 (File No. 001-11954), filed on December 21, 2004	*
3.12	—	Articles Supplementary Classifying Vornado’s $3.25 Series A Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share - Incorporated by reference to Exhibit 3.11 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.13	—	Articles Supplementary Classifying Vornado Realty Trust’s $3.25 Series A Convertible Preferred Shares of Beneficial Interest, as filed with the State Department of Assessments and Taxation of Maryland on December 15, 1997 - Incorporated by reference to Exhibit 3.10 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 31, 2002	*
3.14	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-1 8.5% Cumulative Redeemable Preferred Shares of Beneficial Interest, no par value - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated November 12, 1998 (File No. 001-11954), filed on November 30, 1998	*
3.15	—	Articles Supplementary Classifying Additional Series D-1 8.5% Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K/A, dated November 12, 1998 (File No. 001-11954), filed on February 9, 1999	*
3.16	—	Articles Supplementary Classifying 8.5% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999	*
3.17	—	Articles Supplementary Classifying Vornado Realty Trust’s Series C 8.5% Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 3.7 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on May 19, 1999	*
3.18	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-2 8.375% Cumulative Redeemable Preferred Shares, dated as of May 27, 1999, as filed with the State Department of Assessments and Taxation of Maryland on May 27, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999	*
3.19	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-3 8.25% Cumulative Redeemable Preferred Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999	*

*              Incorporated by reference.

172

3.20	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-4 8.25% Cumulative Redeemable Preferred Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999	*
3.21	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-5 8.25% Cumulative Redeemable Preferred Shares - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated November 24, 1999 (File No. 001-11954), filed on December 23, 1999	*
3.22	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-6 8.25% Cumulative Redeemable Preferred Shares, dated May 1, 2000, as filed with the State Department of Assessments and Taxation of Maryland on May 1, 2000 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated May 1, 2000 (File No. 001-11954), filed May 19, 2000	*
3.23	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-7 8.25% Cumulative Redeemable Preferred Shares, dated May 25, 2000, as filed with the State Department of Assessments and Taxation of Maryland on June 1, 2000 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated May 25, 2000 (File No. 001-11954), filed on June 16, 2000	*
3.24	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-8 8.25% Cumulative Redeemable Preferred Shares - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K, dated December 8, 2000 (File No. 001-11954), filed on December 28, 2000	*
3.25	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-9 8.75% Preferred Shares, dated September 21, 2001, as filed with the State Department of Assessments and Taxation of Maryland on September 25, 2001 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.26	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-10 7.00% Cumulative Redeemable Preferred Shares, dated November 17, 2003, as filed with the State Department of Assessments and Taxation of Maryland on November 17, 2003 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 18, 2003	*
3.27	—	Articles Supplementary Classifying Vornado Realty Trust’s Series D-11 7.20% Cumulative Redeemable Preferred Shares, dated May 27, 2004, as filed with the State Department of Assessments and Taxation of Maryland on May 27, 2004 - Incorporated by reference to Exhibit 99.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004	*
3.28	—	Articles Supplementary Classifying Vornado Realty Trust’s 7.00% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.27 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on August 20, 2004	*
3.29	—	Articles Supplementary Classifying Vornado Realty Trust’s 6.75% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.28 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on November 17, 2004	*

*              Incorporated by reference.

173

3.30	—	Articles Supplementary Classifying Vornado Realty Trust’s 6.55% Series D-12 Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K, dated December 16, 2004 (File No. 001-11954), filed on December 21, 2004	*
3.31	—	Articles Supplementary Classifying Vornado Realty Trust’s 6.625% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K, dated December 16, 2004 (File No. 001-11954), filed on December 21, 2004	*
3.32	—	Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 - Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
3.33	—	Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of October 20, 1997 (the “Partnership Agreement”) - Incorporated by reference to Exhibit 3.26 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.34	—	Amendment to the Partnership Agreement, dated as of December 16, 1997 - Incorporated by reference to Exhibit 3.27 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.35	—	Second Amendment to the Partnership Agreement, dated as of April 1, 1998 - Incorporated by reference to Exhibit 3.5 of Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998	*
3.36	—	Third Amendment to the Partnership Agreement, dated as of November 12, 1998 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated November 12, 1998 (File No. 001-11954), filed on November 30, 1998	*
3.37	—	Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 - Incorporated by reference to Exhibit 3.1 of Vornado Realty Trust’s Current Report on Form 8-K, dated December 1, 1998 (File No. 001-11954), filed on February 9, 1999	*
3.38	—	Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado Realty Trust’s Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999	*
3.39	—	Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999	*
3.40	—	Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 of Vornado Realty Trust’s Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999	*
3.41	—	Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 of Vornado Realty Trust’s Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999	*
3.42	—	Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.3 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999	*
3.43	—	Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.4 of Vornado Realty Trust’s Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999	*

*              Incorporated by reference.

174

3.44	—	Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated November 24, 1999 (File No. 001-11954), filed on December 23, 1999	*
3.45	—	Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated May 1, 2000 (File No. 001-11954), filed on May 19, 2000	*
3.46	—	Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated May 25, 2000 (File No. 001-11954), filed on June 16, 2000	*
3.47	—	Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado Realty Trust’s Current Report on Form 8-K, dated December 8, 2000 (File No. 001-11954), filed on December 28, 2000	*
3.48	—	Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 - Incorporated by reference to Exhibit 4.35 of Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001	*
3.49	—	Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated by reference to Exhibit 3.3 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.50	—	Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 - Incorporated by reference to Exhibit 3.4 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.51	—	Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 - Incorporated by reference to Exhibit 3.1 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on March 18, 2002	*
3.52	—	Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954)	*
3.53	—	Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by reference to Exhibit 3.27 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.54	—	Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 - Incorporated by reference to Exhibit 10.5 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003	*
3.55	—	Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 - Incorporated by reference to Exhibit 3.49 of Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File no 001-11954), filed on March 3, 2004	*
3.56	—	Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 - Incorporated by reference to Exhibit 99.2 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004	*

*              Incorporated by reference.

175

3.57	—	Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 - Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*
3.58	—	Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 - Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*
3.59	—	Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 - Incorporated by reference to Exhibit 3.1 of Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*
3.60	—	Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 - Incorporated by reference to Exhibit 3.2 of Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*
3.61	—	Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 - Incorporated by reference to Exhibit 3.1 of Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on January 4, 2005	*
4.1	—	Instruments defining the rights of security holders (see Exhibits 3.1 through 3.31 of this Annual Report on Form 10-K)	*
4.2	—	Specimen certificate representing Vornado Realty Trust’s Common Shares of Beneficial Interest, par value $0.04 per share - Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 33-62395), filed on October 26, 1995	*
4.3	—	Specimen certificate representing Vornado Realty Trust’s $3.25 Series A Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share, no par value - Incorporated by reference to Exhibit 4.3 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
4.4	—	Specimen certificate evidencing Vornado Realty Trust’s Series B 8.5% Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.2 of Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on March 15, 1999	*
4.5	—	Specimen certificate evidencing Vornado Realty Trust’s Series 8.5% C Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.2 of Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on May 19, 1999	*
4.6	—	Specimen certificate evidencing Vornado Realty Trust’s 7.00% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.5 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed August 20, 2004	*

*              Incorporated by reference.

176

4.7	—	Specimen certificate evidencing Vornado Realty Trust’s 6.75% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.6 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed November 17, 2004	*
4.8	—	Specimen certificate evidencing Vornado Realty Trust’s 6.625% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.7 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed December 21, 2004	*
4.9	—	Indenture and Servicing Agreement, dated as of March 1, 2000, among Vornado, LaSalle Bank National Association, ABN Amro Bank N.V. and Midland Loan Services, Inc. - Incorporated by reference to Exhibit 10.48 of Vornado’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
4.10	—	Indenture, dated as of June 24, 2002, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.1 to Vornado Realty L.P.’s Current Report on Form 8-K dated June 19, 2002 (File No. 000-22685), filed on June 24, 2002	*
4.11	—	Officer’s Certificate pursuant to Sections 102 and 301 of the Indenture, dated June 24, 2002 - Incorporated by reference to Exhibit 4.2 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*
10.1**	—	Vornado Realty Trust’s 1993 Omnibus Share Plan, as amended - Incorporated by reference to Exhibit 4.1 of Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 331-09159), filed on July 30, 1996	*
10.2**	—	Second Amendment, dated as of June 12, 1997, to Vornado’s 1993 Omnibus Share Plan, as amended - Incorporated by reference to Vornado’s Registration Statement on Form S-8 (File No. 333-29011), filed on June 12, 1997	*
10.3	—	Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference to Vornado’s Quarterly Report on Form 10-Q for quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992	*
10.4	—	Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as of November 24, 1993 made by each of the entities listed therein, as mortgagors to Vornado Finance Corp., as mortgagee - Incorporated by reference to Vornado’s Current Report on Form 8-K, dated November 24, 1993 (File No. 001-11954), filed December 1, 1993	*
10.5**	—	Employment Agreement between Vornado Realty Trust and Joseph Macnow dated January 1, 1998 - Incorporated by reference to Exhibit 10.7 of Vornado’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (File No. 001-11954), filed November 12, 1998	*
10.6**	—	Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 2, 1996 - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 001-11954), filed March 13, 1997	*
10.7	—	Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29, 1992 - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

177

10.8	—	Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.9	—	Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 -Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.10	—	Real Estate Retention Agreement between Vornado, Inc., Keen Realty Consultants, Inc. and Alexander’s, Inc., dated as of July 20, 1992 - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.11	—	Amendment to Real Estate Retention Agreement dated February 6, 1995 - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995	*
10.12	—	Stipulation between Keen Realty Consultants Inc. and Vornado Realty Trust re: Alexander’s Retention Agreement - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994	*
10.13	—	Stock Purchase Agreement, dated February 6, 1995, among Vornado Realty Trust and Citibank, N.A. - Incorporated by reference to Vornado’s Current Report on Form 8-K, dated February 6, 1995 (File No. 001-11954), filed February 21, 1995	*
10.14	—	Management and Development Agreement, dated as of February 6, 1995 - Incorporated by reference to Vornado’s Current Report on Form 8-K, dated February 6, 1995 (File No. 001-11954), filed February 21, 1995	*
10.15	—	Standstill and Corporate Governance Agreement, dated as of February 6, 1995 - Incorporated by reference to Vornado’s Current Report on Form 8-K, dated February 6, 1995 (File No. 001-11954), filed February 21, 1995	*
10.16	—	Credit Agreement, dated as of March 15, 1995, among Alexander’s Inc., as borrower, and Vornado Lending Corp., as lender - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001 - 11954), filed March 23, 1995	*
10.17	—	Subordination and Intercreditor Agreement, dated as of March 15, 1995 among Vornado Lending Corp., Vornado Realty Trust and First Fidelity Bank, National Association - Incorporated by reference to Vornado’s Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995	*
10.18	—	Form of Intercompany Agreement between Vornado Realty L.P. and Vornado Operating, Inc. - Incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Vornado Operating, Inc.’s Registration Statement on Form S-11 (File No. 333-40701), filed on January 23, 1998	*
10.19	—	Form of Revolving Credit Agreement between Vornado Realty L.P. and Vornado Operating, Inc., together with related form of Note - Incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Vornado Operating, Inc.’s Registration Statement on Form S-11 (File No. 333-40701)	*
10.20	—	Registration Rights Agreement, dated as of April 15, 1997, between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 of Vornado’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997	*

*              Incorporated by reference.

178

10.21	—	Noncompetition Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, the Mendik Company, L.P., and Bernard H. Mendik - Incorporated by reference to Exhibit 10.3 of Vornado’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997	*
10.22**	—	Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to Exhibit 10.4 of Vornado’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997	*
10.23	—	Agreement, dated September 28, 1997, between Atlanta Parent Incorporated, Portland Parent Incorporated and Crescent Real Estate Equities, Limited Partnership - Incorporated by reference to Exhibit 99.6 of Vornado’s Current Report on Form 8-K (File No. 001-11954), filed on October 8, 1997	*
10.24	—	Contribution Agreement between Vornado Realty Trust, Vornado Realty L.P. and The Contributors Signatory - thereto - Merchandise Mart Properties, Inc. (DE) and Merchandise Mart Enterprises, Inc. - Incorporated by reference to Exhibit 10.34 of Vornado’s Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed on April 8, 1998	*
10.25	—	Sale Agreement executed November 18, 1997, and effective December 19, 1997, between MidCity Associates, a New York partnership, as Seller, and One Penn Plaza LLC, a New York limited liability company, as purchaser - Incorporated by reference to Exhibit 10.35 of Vornado’s Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed on April 8, 1998	*
10.26	—	Credit Agreement, dated as of June 22, 1998, among One Penn Plaza, LLC, as Borrower, The Lenders Party hereto, The Chase Manhattan Bank, as Administrative Agent - Incorporated by reference to Exhibit 10 of Vornado’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 001-11954), filed August 13, 1998	*
10.27	—	Registration Rights Agreement, dated as of April 1, 1998, between Vornado and the Unit Holders named herein - Incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Vornado’s Registration Statement on Form S-3 (File No. 333-50095), filed on May 6, 1998	*
10.28	—	Registration Rights Agreement, dated as of August 5, 1998, between Vornado and the Unit Holders named therein - Incorporated by reference to Exhibit 10.1 of Vornado’s Registration Statement on Form S-3 (File No. 333-89667), filed on October 25, 1999	*
10.29	—	Registration Rights Agreement, dated as of July 23, 1998, between Vornado and the Unit Holders named therein - Incorporated by reference to Exhibit 10.2 of Vornado’s Registration Statement on Form S-3 (File No. 333-89667), filed on October 25, 1999	*
10.30	—	Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 1, 2000, between Entities named therein (as Mortgagors) and Vornado (as Mortgagee) - Incorporated by reference to Exhibit 10.47 of Vornado’s Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
10.31**	—	Employment Agreement, dated January 22, 2000, between Vornado Realty Trust and Melvyn Blum - Incorporated by reference to Exhibit 10.49 of Vornado’s Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

179

10.32**	—	Deferred Stock Agreement, dated December 29, 2000, between Vornado Realty Trust and Melvyn Blum - Incorporated by reference to Exhibit 10.32 of Vornado’s Annual Report on Form 10-K for the period ended December 31, 2002 (File No. 001-11954), filed on March 7, 2003	*
10.33	—	First Amended and Restated Promissory Note of Steven Roth, dated November 16, 1999 - Incorporated by reference to Exhibit 10.50 of Vornado’s Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
10.34	—	Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust - Incorporated by reference to Exhibit 10.51 of Vornado’s Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
10.35	—	Revolving Credit Agreement dated as of March 21, 2000 among Vornado Realty L.P., as borrower, Vornado Realty Trust, as general partner, and UBS AG, as Bank - Incorporated by reference to Vornado’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 001-11954) filed on May 5, 2000	*
10.36	—	Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E. Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod, individually, and Charles E. Smith Management, Inc. - Incorporated by reference to Exhibit 2.1 of Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on January 16, 2002	*
10.37	—	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.1 of Vornado’s Current Report on Form 8-K (File No. 1-11954), filed on March 18, 2002	*
10.38	—	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 of Vornado’s Current Report on Form 8-K (File No. 1-11954), filed on March 18, 2002	*
10.39	—	Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 of Vornado’s Current Report on Form 8-K (File No. 1-11954), filed on March 18, 2002	*
10.40**	—	Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 001-11954), filed on May 1, 2002	*
10.41**	—	First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.42**	—	First Amendment, dated June 7, 2002, to the Convertible Units Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 2, 1996 - Incorporated by reference to Exhibit 99.3 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

180

10.43**	—	Second Amendment, dated October 31, 2002, to the Convertible Units Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 2, 1996 - Incorporated by reference to Exhibit 99.4 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.44**	—	2002 Units Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.7 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.45**	—	First Amendment, dated October 31, 2002, to the 2002 Units Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.8 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.46**	—	First Amendment, dated October 31, 2002, to the Registration Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 2, 1996 - Incorporated by reference to Exhibit 99.9 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.47**	—	Trust Agreement between Vornado Realty Trust and Chase Manhattan Bank, dated December 2, 1996 - Incorporated by reference to Exhibit 99.10 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.48**	—	First Amendment, dated September 17, 2002, to the Trust Agreement between Vornado Realty Trust and Chase Manhattan Bank, dated December 2, 1996 - Incorporated by reference to Exhibit 99.11 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.49	—	Amended and Restated Credit Agreement, dated July 3, 2002, between Alexander’s Inc. and Vornado Lending L.L.C. (evidencing a $50,000,000 line of credit facility) - Incorporated by reference to Exhibit 10(i)(B)(3) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.50	—	Credit Agreement, dated July 3, 2002, between Alexander’s and Vornado Lending L.L.C. (evidencing a $35,000,000 loan) - Incorporated by reference to Exhibit 10(i)(B)(4) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.51	—	Guaranty of Completion, dated as of July 3, 2002, executed by Vornado Realty L.P. for the benefit of Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders - Incorporated by reference to Exhibit 10(i)(C)(5) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.52	—	Reimbursement Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., 731 Commercial LLC, 731 Residential LLC and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(C)(8) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.53	—	Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(E)(3) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

181

10.54	—	59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by reference to Exhibit 10(i)(E)(4) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.55	—	Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.56	—	59th Street Management and Development Agreement, dated as of July 3, 2002, by and between 731 Commercial LLC and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(2) of Alexander’s Inc.’s quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.57	—	Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5 of Interstate Properties’ Schedule 13D dated May 29, 2002 (File No. 005-44144), filed on May 30, 2002	*
10.58**	—	Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2 to Vornado’s Registration Statement on Form S-3 (File No. 333-102216), filed on December 26, 2002	*
10.59**	—	First Amended and Restated Promissory Note from Michael D Fascitelli to Vornado Realty Trust, dated December 17, 2001 - Incorporated by reference to Exhibit 10.59 of Vornado’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-11954), filed on March 7, 2003	*
10.60**	—	Promissory Note from Joseph Macnow to Vornado Realty Trust, dated July 23, 2002 - Incorporated by reference to Exhibit 10.60 of Vornado’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-11954), filed on March 7, 2003	*
10.61**	—	Amendment to Employment Agreement by and between Vornado Realty Trust and Melvyn H. Blum, dated February 13, 2003 - Incorporated by reference to Exhibit 10.61 of Vornado’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-11954), filed on March 7, 2003	*
10.62**	—	Amendment No. 1 to Deferred Stock Agreement by and between Vornado Realty Trust and Melvyn H. Blum, dated February 13, 2003 - Incorporated by reference to Exhibit 10.62 of Vornado’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-11954), filed on March 7, 2003	*
10.63**	—	Employment agreement between Vornado Realty Trust and Mitchell Schear, dated April 7, 2003 - Incorporated by reference to Exhibit 10.1 of Vornado Realty Trust’s Quarterly Report on form 10-Q for the quarter ended June 30, 2003 (File No. 001-11954), filed on August 8, 2003	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

182

10.64	—	Revolving Credit Agreement, dated as of July 2, 2003 among Vornado Realty L.P., as borrower, Vornado Realty Trust, as general partner, and JPMorgan Chase Bank (as Administrative Agent), Bank of America, N.A. and Citicorp North American, Inc., Deutsche Bank Trust Company Americas and Fleet National Bank, and JPMorgan Chase Bank (in its individual capacity) - Incorporated by reference to Exhibit 10.2 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 001-11954), filed on August 8, 2003	*
10.65	—	Guaranty of Payment, made as of July 2, 2003, by Vornado Realty Trust, for the benefit of JPMorgan Chase Bank - Incorporated by reference to Exhibit 10.3 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 001-11954), filed on August 8, 2003	*
10.66	—	Registration Rights Agreement, dated as of July 31, 2003, by and between Vornado Realty Trust and the Unit Holders named therein - Incorporated by reference to Exhibit 10.4 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003	*
10.67	—	Second Amendment to the Registration Rights Agreement, dated as of July 31, 2003, between Vornado Realty Trust and the Unit Holders named therein - Incorporated by reference to Exhibit 10.5 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003	*
10.68	—	Registration Rights Agreement between Vornado and Bel Holdings LLC dated as of November 17, 2003 - Incorporated by reference to Exhibit 10.68 of Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004	*
10.69	—	Registration Rights Agreement, dated as of April 9, 2003, by and between Vornado Realty Trust and the unit holders named therein - Incorporated by reference to Exhibit 10 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-114807), filed on April 23, 2004	*
10.70**		Employment Agreement by and between Vornado Realty Trust and Sandeep Mathrani, dated as of February 4, 2002 - Incorporated by reference to Exhibit 10.70 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 001-11954), filed on May 6, 2004	*
10.71**		First Amendment to the Employment Agreement by and between Vornado Realty Trust and Sandeep Mathrani, dated as of December 12, 2003 - Incorporated by reference to Exhibit 10.71 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 001-11954), filed on May 6, 2004	*
10.72**		Deferred Stock Agreement by and between Vornado Realty Trust and Sandeep Mathrani, dated as of March 4, 2002 - Incorporated by reference to Exhibit 10.72 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 001-11954), filed on May 6, 2004	*
10.73**		Promissory Note from Melvyn Blum to Vornado Realty Trust, dated March 11, 2004 - Incorporated by reference to Exhibit 10.73 of Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 001-11954), filed on May 6, 2004	*

*             Incorporated by reference.

**           Management contract or compensatory agreement.

183

10.74	—	Registration Rights Agreement, dated as of October 7, 2003, between Vornado and the Unit Holder named therein - Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-120384), filed on December 2, 2004	*
10.75	—	Registration Rights Agreement, dated as of May 27, 2004, between Vornado Realty Trust and GSEP 2004 Realty Corp. - Incorporated by reference to Exhibit 10.75 of Vornado Realty Trust’s annual report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.76	—	Registration Rights Agreement, dated as of December 17, 2004, between Vornado Realty Trust and Montebello Realty Corp. 2002 - Incorporated by reference to Exhibit 10.76 of Vornado Realty Trust’s annual report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.77**	—	Form of Stock Option Agreement between Vornado Realty Trust and certain employees, dated as of February 8, 2005 - Incorporated by reference to Exhibit 10.77 of Vornado Realty Trust’s annual report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.78**	—	Form of Restricted Stock Option Agreement between Vornado Realty Trust and certain employees, dated as of February 8, 2005 - Incorporated by reference to Exhibit 10.78 of Vornado Realty Trust’s annual report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
21	—	Subsidiaries of Registrant
23	—	Consent of Independent Registered Public Accounting Firm
31.1	—	Rule 13a-14 (a) Certification of the Chief Executive Officer
31.2	—	Rule 13a-14 (a) Certification of the Chief Financial Officer
32.1	—	Section 1350 Certification of the Chief Executive Officer
32.2	—	Section 1350 Certification of the Chief Financial Officer

*	Incorporated by reference.
**	Management contract or compensatory agreement.

184

EX-21

EXHIBIT 21

Name of Subsidiary	State of Organization
14 West 64th Street Corporation	New York
14th Street Acquisition II, L.L.C.	Delaware
14th Street Acquisition, L.L.C.	Delaware
150 East 58th Street, L.L.C.	New York
1740 Broadway Associates, L.P.	Delaware
20 Broad Company, L.L.C.	New York
20 Broad Lender, L.L.C.	New York
201 East 66th Street Corp.	New York
201 East 66th Street, L.L.C.	New York
330 Madison Company, L.L.C.	New York
350 North Orleans, L.L.C.	Delaware
40 East 14 Realty Associates General Partnership	New York
40 East 14 Realty Associates, L.L.C.	New York
40 Fulton Street, L.L.C.	New York
401 Commercial Son, L.L.C.	New York
401 Commercial, L.P.	New York
401 General Partner, L.L.C.	New York
401 Hotel General Partner, L.L.C.	New York
401 Hotel REIT, L.L.C.	Delaware
401 Hotel TRS, Inc.	Delaware
401 Hotel, L.P.	New York
480-486 JV, L.L.C.	New York
527 West Kinzie, L.L.C.	Illinois
689 Fifth Avenue, L.L.C.	New York
7 West 34th Street, L.L.C.	New York
715 Lexington Avenue, L.L.C.	New York
770 Broadway Company, L.L.C.	New York
770 Broadway Mezzanine, L.L.C.	Delaware
770 Broadway Owner, L.L.C.	Delaware
825 Seventh Avenue Holding Corporation	New York
825 Seventh Avenue Holding, L.L.C.	New York
866 U.N. Plaza Associates, L.L.C.	New York
888 Seventh Avenue, L.L.C.	Delaware
909 Third Avenue Assignee, L.L.C.	New York
909 Third Company, L.P.	New York
909 Third GP, L.L.C.	Delaware
909 Third Mortgage Holder, L.L.C.	Delaware
968 Third Avenue, L.L.C.	New York
968 Third, L.L.C.	New York
Allentown VF, L.L.C.	Pennsylvania
AmeriCold Real Estate, L.P.	Delaware
AmeriCold Realty Trust	Oregon
AmeriCold Realty, Inc.	Delaware
Amherst II VF, L.L.C.	New York
Amherst VF, L.L.C.	New York
Arbor Property, L.P.	Delaware
Art Al Holding, L.L.C.	Delaware
Art Manager, L.L.C.	Delaware

1

Name of Subsidiary	State of Organization
Art Quarry TRS, L.L.C.	Delaware
Atlantic City Holding, L.L.C.	New Jersey
B&B Park Avenue, L.P.	Delaware
Bensalem Holding Company, L.L.C.	Pennsylvania
Bensalem Holding Company, L.P.	Pennsylvania
Bensalem VF, L.L.C.	Pennsylvania
Bethlehem Holding Company, L.L.C.	Pennsylvania
Bethlehem Holding Company, L.P.	Pennsylvania
Bethlehem Properties Holding Company, L.L.C.	Pennsylvania
Bethlehem Properties Holding Company, L.P.	Pennsylvania
Bethlehem VF, L.L.C.	Pennsylvania
Bethlehem VF, L.P.	Pennsylvania
BMS Facilities Group, L.L.C.	Delaware
Bordentown II VF, L.L.C.	New Jersey
Bordentown VF, L.L.C.	New Jersey
Bricktown VF, L.L.C.	New Jersey
Bridgeland Warehouses, L.L.C.	New Jersey
Building Maintenance Service, L.L.C.	Delaware
Canadian Craftshow LTD.	Canada
Carmar Freezers Russellville, L.L.C.	Delaware
Carmar Freezers-Thomasville, L.L.C.	Missouri
Carmar Group, L.L.C.	Delaware
Carmar Industries, L.L.C.	Delaware
CESC 1101 17th Street Limited Partnership	Maryland
CESC 1101 17th Street Manager, L.L.C.	Delaware
CESC 1101 17th Street, L.L.C.	Delaware
CESC 1140 Connecticut Avenue Limited Partnership	District of Columbia
CESC 1140 Connecticut Avenue Manager, L.L.C.	Delaware
CESC 1140 Connecticut Avenue, L.L.C.	Delaware
CESC 1150 17th Street Limited Partnership	District of Columbia
CESC 1150 17th Street Manager, L.L.C.	Delaware
CESC 1150 17th Street, L.L.C.	Delaware
CESC 1730 M Street, L.L.C.	Delaware
CESC 1750 Pennsylvania Avenue, L.L.C.	Delaware
CESC 2101 L Street, L.L.C.	Delaware
CESC Commerce Executive Park, L.L.C.	Delaware
CESC Construction TRS, Inc.	Delaware
CESC Crystal City Holding L.L.C.	Delaware
CESC Crystal City Land L.L.C.	Delaware
CESC Crystal Square Four, L.L.C.	Delaware
CESC Crystal/Rosslyn, L.L.C.	Delaware
CESC District Holdings, L.L.C.	Delaware
CESC Downtown Member, L.L.C.	Delaware
CESC Fairfax Square Manager, L.L.C.	Delaware
CESC Five Skyline Place, L.L.C.	Delaware
CESC Four Skyline Place, L.L.C.	Delaware
CESC Gateway Four L.L.C.	Virginia
CESC Gateway One, L.L.C.	Delaware
CESC Gateway Two Limited Partnership	Virginia
CESC Gateway Two Manager, L.L.C.	Virginia

2

Name of Subsidiary	State of Organization
CESC Gateway/Square Member, L.L.C.	Delaware
CESC Gateway/Square, L.L.C.	Delaware
CESC Mall Land, L.L.C.	Virginia
CESC Mall, L.L.C.	Virginia
CESC One Courthouse Plaza Holdings, L.L.C.	Delaware
CESC One Courthouse Plaza, L.L.C.	Delaware
CESC One Democracy Plaza Manager, L.L.C.	Delaware
CESC One Democracy Plaza, L.P.	Maryland
CESC One Skyline Place, L.L.C.	Delaware
CESC One Skyline Tower, L.L.C.	Delaware
CESC Park Five Land, L.L.C.	Delaware
CESC Park Five Manager, L.L.C.	Virginia
CESC Park Four Land, L.L.C.	Delaware
CESC Park Four Manager, L.L.C.	Virginia
CESC Park One Land, L.L.C.	Delaware
CESC Park One Manager, L.L.C.	Delaware
CESC Park Three Land, L.L.C.	Delaware
CESC Park Three Manager, L.L.C.	Virginia
CESC Park Two , L.L.C.	Delaware
CESC Park Two Land, L.L.C.	Delaware
CESC Park Two Manager L.L.C.	Virginia
CESC Plaza Limited Partnership	Virginia
CESC Plaza Manager, L.L.C.	Virginia
CESC Plaza Parking, L.L.C.	Delaware
CESC Realty Park Five, L.L.C.	Virginia
CESC Realty Park Three, L.L.C.	Virginia
CESC Reston Executive Center, L.L.C.	Delaware
CESC Seven Skyline Place, L.L.C.	Delaware
CESC Six Skyline Place, L.L.C.	Delaware
CESC Square Four L.L.C.	Virginia
CESC Square Four Land L.L.C.	Delaware
CESC Square Land, L.L.C.	Delaware
CESC Square, L.L.C.	Virginia
CESC Three Skyline Place, L.L.C.	Delaware
CESC Two Courthouse Plaza Limited Partnership	Virginia
CESC Two Courthouse Plaza Manager, L.L.C.	Delaware
CESC Two Skyline Place, L.L.C.	Delaware
CESC Tysons Dulles Plaza, L.L.C.	Delaware
CESC Water Park, L.L.C.	Virginia
Charles E. Smith Commercial Realty, L.P.	Delaware
Charles E. Smith Real Estate Services, L.P.	Virginia
Cherry Hill VF, L.L.C.	New Jersey
Chicopee Holding, L.L.C.	Massachusetts
Commerce Executive Park Association of Co-Owners	Virginia
Conrans VF, L.L.C.	New Jersey
Cumberland Holding, L.L.C.	New Jersey
Darby Development Corp.	Florida
Darby Development, L.L.C.	Delaware
Delran VF, L.L.C.	New Jersey
Design Center Owner - DC, L.L.C.	Delaware

3

Name of Subsidiary	State of Organization
Dover VF, L.L.C.	New Jersey
DSAC, L.L.C.	Texas
Dundalk VF, L.L.C.	Maryland
Durham Leasing II, L.L.C.	New Jersey
Durham Leasing, L.L.C.	New Jersey
East Brunswick VF, L.L.C.	New Jersey
Eatontown Monmouth Mall (Junior Mezz), L.L.C.	Delaware
Eatontown Monmouth Mall (Senior Mezz), L.L.C.	Delaware
Eatontown Monmouth Mall, L.L.C.	Delaware
Eleven Penn Plaza, L.L.C.	New York
Fairfax Square Partners	Delaware
Fifth Crystal Park Associates Limited Partnership	Virginia
First Crystal Park Associates Limited Partnership	Virginia
Fourth Crystal Park Associates Limited Partnership	Virginia
Freeport VF, L.L.C.	New York
Fuller Madison, L.L.C.	New York
Gallery Market Holding Company, L.L.C.	Pennsylvania
Gallery Market Holding Company, L.P.	Pennsylvania
Gallery Market Properties Holding Company, L.L.C.	Pennsylvania
Gallery Market Properties Holding Company, L.P.	Pennsylvania
Garfield Parcel, L.L.C.	New Jersey
Glen Burnie VF, L.L.C.	Maryland
Glenolden VF, L.L.C.	Pennsylvania
Graybar Building, L.L.C.	New York
Green Acres Mall, L.L.C.	Delaware
Guard Management Service Corp.	New York
Guillford Associates, L.L.C.	Delaware
Hackensack VF, L.L.C.	New Jersey
Hagerstown VF, L.L.C.	Maryland
Hanover Holding, L.L.C.	New Jersey
Hanover Industries, L.L.C.	New Jersey
Hanover Leasing, L.L.C.	New Jersey
Hanover Public Warehousing, L.L.C.	New Jersey
Hanover VF, L.L.C.	New Jersey
Henrietta Holding, L.L.C.	New York
Inland Quarries, L.L.C.	Delaware
Interior Design Show, Inc.	Canada
Jersey City VF, L.L.C.	New Jersey
Kaempfer 1399, L.L.C.	Delaware
Kaempfer Commonwealth, L.L.C.	Delaware
Kaempfer Warner, L.L.C.	Delaware
Kearny Holding VF, L.L.C.	New Jersey
Kearny Leasing VF, L.L.C.	New Jersey
L.A. Mart Properties, L.L.C.	Delaware
Lancaster Leasing Company, L.L.C.	Pennsylvania
Lancaster Leasing Company, L.P.	Pennsylvania
Landthorp Enterprises, L.L.C.	Delaware
LaSalle Hubbard L.L.C.	Delaware
Lawnside VF, L.L.C.	New Jersey
Lewisville TC, L.L.C.	Texas

4

Name of Subsidiary	State of Organization
Littleton Holding, L.L.C.	New Jersey
Lodi II VF, L.L.C.	New Jersey
Lodi VF, L.L.C.	New Jersey
M 330 Associates, L.P.	New York
M 393 Associates, L.L.C.	New York
M/H Two Park Associates	New York
Manalapan VF, L.L.C.	New Jersey
Market Square - Main Street, L.L.C.	Delaware
Market Square Furniture Plaza L.L.C.	Delaware
Market Square Group, Inc.	Delaware
Market Square Group, L.P.	Delaware
Market Square Hamilton Center, L.L.C.	Delaware
Market Square II, L.L.C.	Delaware
Market Square, L.L.C.	Delaware
Market Square-Furniture Plaza, Inc.	Delaware
Marlton VF, L.L.C.	New Jersey
Marple Holding Company, L.L.C.	Pennsylvania
Marple Holding Company, L.P.	Pennsylvania
Mart Franchise Center, Inc.	Illinois
Mart Franchise Venture, L.L.C.	Delaware
Mart Parking II, L.L.C.	Delaware
Mart Parking, L.L.C.	Delaware
Menands VF, L.L.C.	New York
Merchandise Mart Enterprises, Inc. (Canada)	Canada
Merchandise Mart Properties, Inc.	Delaware
Merchandise Mart, L.L.C.	Delaware
Mesquite TC, L.L.C.	Texas
Middletown VF, L.L.C.	New Jersey
MMPI/Highpoint Lease, L.L.C.	Delaware
Monmouth Mall, L.L.C.	Delaware
Montclair VF, L.L.C.	New Jersey
Morris Plains Holding VF, L.L.C.	New Jersey
Morris Plains Leasing VF, L.L.C.	New Jersey
National Furniture Mart (NC), L.L.C.	Delaware
National Hydrant, L.L.C.	New York
New Bridgeland Warehouses, L.L.C.	Delaware
New Hanover Holding, L.L.C.	Delaware
New Hanover Industries, L.L.C.	Delaware
New Hanover Leasing, L.L.C	Delaware
New Hanover Public Warehousing, L.L.C.	Delaware
New Hyde Park VF, L.L.C.	New York
New Kaempfer 1501, L.L.C.	Delaware
New Kaempfer 1925, L.L.C.	Delaware
New Kaempfer Bowen, L.L.C.	Delaware
New Kaempfer IB, L.L.C.	Delaware
New Kaempfer Waterfront, L.L.C.	Delaware
New KMS, L.L.C.	Delaware
New Landthorp Enterprises, L.L.C.	Delaware
New TG Hanover, L.L.C.	Delaware
New Towmed, L.L.C.	Delaware

5

Name of Subsidiary	State of Organization
New Vornado/Saddle Brook, L.L.C.	Delaware
New Woodbridge II, L.L.C.	New Jersey
Newington VF, L.L.C.	Connecticut
NFM Corp.	Delaware
NFM Partners, L.P.	Delaware
Ninety Park Lender QRS, Inc.	Delaware
Ninety Park Lender, L.L.C.	New York
Ninety Park Manager, L.L.C.	New York
Ninety Park Option, L.L.C.	New York
Ninety Park Property, L.L.C.	New York
North Bergen VF, L.L.C.	New Jersey
North Dearborn, L.L.C.	Delaware
North Plainfield VF, L.L.C.	New Jersey
Office Acquisition Finance, L.L.C.	Delaware
Office Center Owner (D.C.), L.L.C.	Delaware
One Penn Plaza TRS, Inc.	Delaware
One Penn Plaza, L.L.C.	New York
Orleans Hubbard L.L.C.	Delaware
Palisades 14th Street, L.L.C.	Delaware
Palisades A/V Company, L.L.C.	New Jersey
Park Four Member, L.L.C.	Delaware
Park One Member, L.L.C.	Delaware
Philadelphia Holding Company, L.L.C.	Pennsylvania
Philadelphia Holding Company, L.P.	Pennsylvania
Philadelphia VF, L.L.C.	Pennsylvania
Philadelphia VF, L.P.	Pennsylvania
Pike Holding Company, L.L.C.	Pennsylvania
Pike Holding Company, L.P.	Pennsylvania
Pike VF, L.L.C.	Pennsylvania
Pike VF, L.P.	Pennsylvania
Powerspace & Services, Inc.	New York
Rahway Leasing, L.L.C.	New Jersey
RF Operations, L.L.C.	Delaware
Rochester Holding, L.L.C.	New York
Russian Tea Room Realty, L.L.C.	New York
SMB Administration, L.L.C.	Delaware
SMB Cleaning, L.L.C.	Delaware
SMB Holding, L.L.C.	Delaware
SMB Tenant Services Floaters, L.L.C.	Delaware
SMB Tenant Services, L.L.C.	Delaware
SMB Windows, L.L.C.	Delaware
Smith Commercial Management, L.L.C.	Virginia
South Capital, L.L.C.	Delaware
Springfield Member VF, L.L.C.	Delaware
Springfield VF, L.L.C.	Massachusetts
T 53 Condominium, L.L.C.	New York
T.G. Hanover, L.L.C.	New Jersey
TGSI, L.L.C.	Maryland
The Kaempfer Company, Inc.	Delaware
The Park Laurel Condominium	New York

6

Name of Subsidiary	State of Organization
The Second Rochester Holding, L.L.C.	New York
Third Crystal Park Associates Limited Partnership	Virginia
Totowa VF, L.L.C.	New Jersey
Towmed Housing, L.L.C.	Delaware
Towmed Intermediate, L.L.C.	Delaware
Towson VF, L.L.C.	Maryland
Trees Acquisition Subsidiary, Inc.	Delaware
Turnersville VF, L.L.C.	New Jersey
Two Guys From Harrison Holding Co., L.L.C.	Pennsylvania
Two Guys From Harrison Holding Co., L.P.	Pennsylvania
Two Guys From Harrison N.Y. (DE), L.L.C.	Delaware
Two Guys From Harrison N.Y., L.L.C.	New York
Two Guys Mass., L.L.C.	Massachusetts
Two Guys-Connecticut Holding, L.L.C.	Connecticut
Two Park Company	New York
Two Penn Plaza REIT, Inc.	New York
Union Square East, L.L.C.	New York
Union VF, L.L.C.	New Jersey
Upper Moreland Holding Company, L.L.C.	Pennsylvania
Upper Moreland Holding Company, L.P.	Pennsylvania
Upper Moreland VF, L.L.C.	Pennsylvania
URS Real Estate, L.P.	Delaware
URS Realty, Inc.	Delaware
VBL Company, L.L.C.	New York
VC Carthage, L.L.C.	Delaware
VC Freezer Amarillo, L.P.	Delaware
VC Freezer Babcock, L.L.C.	Delaware
VC Freezer Bartow, L.L.C.	Delaware
VC Freezer Fort Worth, L.L.C.	Delaware
VC Freezer Fort Worth, L.P.	Delaware
VC Freezer Fremont, L.L.C.	Delaware
VC Freezer Garden City, L.L.C.	Delaware
VC Freezer Kentucky, L.L.C.	Delaware
VC Freezer Massillon, L.L.C.	Delaware
VC Freezer Omaha Amarillo, L.L.C.	Delaware
VC Freezer Ontario, L.L.C.	Delaware
VC Freezer Phoenix, L.L.C.	Delaware
VC Freezer Russelville, L.L.C.	Delaware
VC Freezer Sioux Falls, L.L.C.	Delaware
VC Freezer Springdale, L.L.C.	Delaware
VC Freezer Strasburg, L.L.C.	Delaware
VC Freezer Texarkana, L.L.C.	Delaware
VC Missouri Holdings, L.L.C.	Delaware
VC Missouri Real Estate Holdings, L.L.C.	Delaware
VC Omaha Holding Strasburg SPE, L.L.C.	Delaware
VC Omaha Holdings, L.L.C.	Delaware
VC Omaha Real Estate Holdings, L.L.C.	Delaware
VFC Connecticut Holding, L.L.C.	Delaware
VFC Massachusetts Holding, L.L.C.	Delaware
VFC New Jersey Holding, L.L.C.	Delaware

7

Name of Subsidiary	State of Organization
VFC Pennsylvania Holding, L.L.C.	Delaware
VFC Pennsylvania Holding, L.P.	Delaware
VM Acquisition Corporation	Delaware
VNK Corp.	Delaware
VNK, L.L.C.	Delaware
VNO 386 West Broadway, L.L.C.	Delaware
VNO 387 West Broadway, L.L.C.	Delaware
VNO 424 Sixth Avenue, L.L.C.	Delaware
VNO 426 West Broadway, L.L.C.	Delaware
VNO 63rd Street, L.L.C.	New York
VNO 99-01 Queens Boulevard, L.L.C.	Delaware
VNO Broome Street, L.L.C.	Delaware
VNO Crystal City TRS, Inc.	Delaware
VNO Douglaston Plaza, L.L.C.	Delaware
VNO Hotel, L.L.C.	Delaware
Vornado - KC License, L.L.C.	Delaware
Vornado - Westport, L.L.C.	Connecticut
Vornado 1399, L.L.C.	Delaware
Vornado 1740 Broadway, L.L.C.	New York
Vornado 175 Lex, Inc.	Delaware
Vornado 1925 K, L.L.C.	Delaware
Vornado 25W14, L.L.C.	Delaware
Vornado 330 West 34th Street, L.L.C.	New York
Vornado 401 Commercial, L.L.C.	New York
Vornado 550-600 Mamaroneck, L.P.	New York
Vornado 63rd Street, Inc.	New York
Vornado 640 Fifth Avenue, L.L.C.	New York
Vornado 90 Park Avenue, L.L.C.	New York
Vornado 90 Park QRS, Inc.	New York
Vornado Acquisition Co., L.L.C.	Delaware
Vornado Art Holding Manager, L.L.C.	Delaware
Vornado Art I, L.L.C.	Delaware
Vornado Art II, L.L.C.	Delaware
Vornado Asset Protection Trust Grantee (TRS), L.L.C.	Delaware
Vornado B&B, L.L.C.	New York
Vornado Ballantrae Holdings, Inc.	Delaware
Vornado Bergen Mall, L.L.C.	New Jersey
Vornado Beverly, L.L.C.	Delaware
Vornado Bowen, L.L.C.	Delaware
Vornado Burnside Plaza, L.L.C.	Delaware
Vornado Caguas GP, Inc.	Delaware
Vornado Caguas GP, L.L.C.	Delaware
Vornado Caguas Holding, L.L.C.	Delaware
Vornado Caguas Holding, L.P.	Delaware
Vornado Caguas, L.L.C.	Delaware
Vornado Caguas, L.P.	Delaware
Vornado CAPI, L.L.C.	Delaware
Vornado Carthage and KC Quarries TRS, Inc.	Delaware
Vornado Catalinas GP, Inc.	Delaware
Vornado Catalinas GP, L.L.C.	Delaware

8

Name of Subsidiary	State of Organization
Vornado Catalinas Holding, L.L.C.	Delaware
Vornado Catalinas Holding, L.P.	Delaware
Vornado Catalinas, L.L.C.	Delaware
Vornado Catalinas, L.P.	Delaware
Vornado CCA Gainesville, L.L.C.	Delaware
Vornado CESCR Gen-Par, L.L.C.	Delaware
Vornado CESCR Holdings, L.L.C.	Delaware
Vornado CESCR II, L.L.C.	Delaware
Vornado CESCR, L.L.C.	Delaware
Vornado Commonwealth, L.L.C.	Delaware
Vornado Communications, L.L.C.	Delaware
Vornado Community GP, L.L.C.	Delaware
Vornado Community LP, L.L.C.	Delaware
Vornado Condominium Management, L.L.C.	New York
Vornado Crescent Carthage and KC Quarry, L.L.C.	Delaware
Vornado Crescent Portland Partnership	Delaware
Vornado Crystal City, L.L.C.	Delaware
Vornado Crystal Park Loan, L.L.C.	Delaware
Vornado Eleven Penn Plaza, L.L.C.	Delaware
Vornado ESA, L.L.C.	Delaware
Vornado Finance GP, L.L.C.	Delaware
Vornado Finance II, L.P.	Delaware
Vornado Finance SPE, Inc.	Delaware
Vornado Finance, L.P.	Delaware
Vornado Forest Plaza Member, L.L.C.	Delaware
Vornado Forest Plaza, L.L.C.	Delaware
Vornado Fort Lee, L.L.C.	New Jersey
Vornado GM III, L.L.C.	Delaware
Vornado GM Loan II, L.L.C.	Delaware
Vornado GM Loan IV, L.L.C.	Delaware
Vornado GM Loan, L.L.C.	Delaware
Vornado Green Acres Acquisition, L.L.C.	Delaware
Vornado Green Acres Delaware, L.L.C.	Delaware
Vornado Green Acres Funding, L.L.C.	Delaware
Vornado Green Acres Holdings, L.L.C.	Delaware
Vornado Green Acres SPE Managing Member, Inc.	Delaware
Vornado IB Holdings, L.L.C.	Delaware
Vornado Investment Corp.	New York
Vornado Investments Corporation	Delaware
Vornado Investments, L.L.C.	Delaware
Vornado KMS Holdings, L.L.C.	Delaware
Vornado Lending Corp.	New Jersey
Vornado Lending, L.L.C.	New Jersey
Vornado Lodi Delaware Member, L.L.C.	Delaware
Vornado Lodi Delaware, L.L.C.	Delaware
Vornado Lodi, L.L.C.	New Jersey
Vornado M 330, L.L.C.	New York
Vornado M 393 QRS, Inc.	New York
Vornado M 393, L.L.C.	New York
Vornado Mamaroneck, L.L.C.	New York

9

Name of Subsidiary	State of Organization
Vornado Management Corp.	New Jersey
Vornado Merger Sub, L.P.	Delaware
Vornado MH, L.L.C.	New York
Vornado MLP GP, L.L.C.	Delaware
Vornado Monmouth Mall, L.L.C.	New Jersey
Vornado Montehiedra Acquisition, L.L.C.	Delaware
Vornado Montehiedra Acquisition, L.P.	Delaware
Vornado Montehiedra Holding II, L.P.	Delaware
Vornado Montehiedra Holding, L.L.C.	Delaware
Vornado Montehiedra Holding, L.P.	Delaware
Vornado Montehiedra OP, L.L.C.	Delaware
Vornado Montehiedra OP, L.P.	Delaware
Vornado Montehiedra, Inc.	Delaware
Vornado New York RR One, L.L.C.	New York
Vornado Newkirk, L.L.C.	Delaware
Vornado NK Loan, L.L.C.	Massachusetts
Vornado Office Management, L.L.C.	New York
Vornado Office, Inc.	New York
Vornado PS, L.L.C.	Delaware
Vornado Realty, L.L.C.	Delaware
Vornado Realty, L.P.	Delaware
Vornado Rockville, L.L.C.	Delaware
Vornado RTR, Inc.	Delaware
Vornado SB 1, L.P.	Delaware
Vornado SB 10, L.P.	Delaware
Vornado SB 11, L.P.	Delaware
Vornado SB 12, L.P.	Delaware
Vornado SB 13, L.P.	Delaware
Vornado SB 14, L.P.	Delaware
Vornado SB 15, L.P.	Delaware
Vornado SB 16, L.P.	Delaware
Vornado SB 17, L.P.	Delaware
Vornado SB 18, L.P.	Delaware
Vornado SB 19, L.P.	Delaware
Vornado SB 2, L.P.	Delaware
Vornado SB 20, L.P.	Delaware
Vornado SB 21, L.P.	Delaware
Vornado SB 22, L.P.	Delaware
Vornado SB 23, L.P.	Delaware
Vornado SB 24, L.P.	Delaware
Vornado SB 25, L.P.	Delaware
Vornado SB 3, L.P.	Delaware
Vornado SB 4, L.P.	Delaware
Vornado SB 5, L.P.	Delaware
Vornado SB 6, L.P.	Delaware
Vornado SB 7, L.P.	Delaware
Vornado SB 8, L.P.	Delaware
Vornado SB 9, L.P.	Delaware
Vornado SB, L.L.C.	Delaware
Vornado SC Properties, L.L.C.	Delaware

10

Name of Subsidiary	State of Organization
Vornado Shenandoah Holdings, L.L.C.	Delaware
Vornado Sign, L.L.C.	Delaware
Vornado Title, L.L.C.	Delaware
Vornado TSQ, L.L.C.	Delaware
Vornado Two Park Holding, L.L.C.	Delaware
Vornado Two Penn Plaza, L.L.C.	New York
Vornado Two Penn Property, L.L.C.	Delaware
Vornado Vegas Blvd Debt, L.L.C.	Delaware
Vornado Vegas Blvd Equity, L.L.C.	Delaware
Vornado Warner, L.L.C.	Delaware
Vornado Waterfront Holdings, L.L.C.	Delaware
Vornado/Tea Room, L.L.C.	New York
VRT Development Rights, L.L.C.	New York
VRT Massachusetts Holding, L.L.C.	Delaware
VRT New Jersey Holding, L.L.C.	Delaware
VSPS, L.L.C.	Delaware
Washington CESC TRS, Inc.	Delaware
Washington Design Center DC, L.L.C.	Delaware
Washington Design Center Subsidiary, L.L.C.	Delaware
Washington Mart TRS, Inc.	Delaware
Washington Office Center DC, L.L.C.	Delaware
Watchung VF, L.L.C.	New Jersey
Waterbury VF, L.L.C.	Connecticut
Wayne VF, L.L.C.	New Jersey
Wells Kinzie, L.L.C.	Delaware
West Windsor Holding Corporation	New Jersey
West Windsor Holding, L.L.C.	New Jersey
Woodbridge VF, L.L.C.	New Jersey
York Holding Company, L.L.C.	Pennsylvania
York Holding Company, L.P.	Pennsylvania
York VF, L.L.C.	Pennsylvania

11

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of our reports dated March 7, 2005, relating to the financial statements and financial statement schedules of Vornado Realty L.P., (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s application of the provisions of SFAS No. 142 “Goodwill and Other Intangible Assets”) and management’s report on the effectiveness of internal control over financial reporting appearing in the Annual Report on Form 10-K of Vornado Realty L.P. for the year ended December 31, 2004:

Vornado Realty Trust and Vornado Realty L.P. (Joint Registration Statements) :

Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3

Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3

Registration Statement No. 333-108138 on Form S-3

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 7, 2005

1

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Steven Roth, certify that:

1.I have reviewed this annual report on Form 10-K of Vornado Realty L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 9, 2005

/s/       Steven Roth

Steven Roth

Chief Executive Officer of Vornado Realty Trust, the
sole general partner of Vornado Realty L.P.

1

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Joseph Macnow, certify that:

1.I have reviewed this annual report on Form 10-K of Vornado Realty L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 9, 2005

/s/        Joseph Macnow

Joseph Macnow,

Chief Financial Officer of Vornado Realty Trust, the
sole general partner of Vornado Realty L.P.

1

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vornado Realty Trust, the sole general partner of Vornado Realty L.P. (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the year ended December 31, 2004(the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 9, 2005	/s/	Steven Roth
	Name:	Steven Roth
	Title:	Chief Executive Officer of Vornado Realty Trust, the sole general partner of Vornado Realty L.P.

1

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vornado Realty Trust, the sole general partner of Vornado Realty L.P. (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the year ended December 31, 2004(the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

March 9, 2005	/s/	Joseph Macnow
	Name:	Joseph Macnow
	Title:	Chief Financial Officer of Vornado Realty Trust, the sole general partner of Vornado Realty L.P.

1