VORNADO REALTY LP, 10-K405, 1998-03-31

VORNADO REALTY LP
10-K405, 1998-03-31
REAL ESTATE INVESTMENT TRUSTS

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EXHIBIT INDEX ON PAGE 69

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Fiscal Year Ended: DECEMBER 31, 1997

[ ] TRANSITION 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)

<TABLE>
<S> <C>
DELAWARE 13-3925979
- -------------------------------------------------- ----------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- -------------------------------------------------- ----------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>

Registrant's telephone number including area code: (201) 587-1000

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

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

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 X NO ____

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. [ X ]

DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement of Vornado Realty Trust for the annual meeting of
shareholders to be held on May 27, 1998 is incorporated by reference into Part
III.

Page 1 of 82
<PAGE> 2

TABLE OF CONTENTS

PART I. 1. Business.................................................... 3

2. Properties.................................................. 10

3. Legal Proceedings........................................... 24

4. Submission of Matters to a Vote of Security Holders......... 24

Executive Officers of the Registrant........................ 24

PART II. 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 25

6. Selected Consolidated Financial Data........................ 26

7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 28

7A. Quantitative and Qualitative Disclosure about Market Risk... 35

8. Financial Statements and Supplementary Data................. 35

9. Changes In and Disagreements With Independent Auditors' on
Accounting and Financial Disclosure......................... 35

PART III. 10. Directors and Executive Officers of the Registrant.......... 61(1)

11. Executive Compensation...................................... 61(1)

12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 61(1)

13. Certain Relationships and Related Transactions.............. 61(1)

PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 61

SIGNATURES.................................................................... 63
</TABLE>

- ---------------

(1) These items are omitted because Vornado Realty Trust (see Item 1.) will file
a definitive Proxy Statement pursuant to Regulation 14A involving the
election of directors with the Securities and Exchange Commission not later
than 120 days after December 31, 1997, which is incorporated by reference
herein. Information relating to Executive Officers of Vornado Realty Trust
appears on page 24 of this Annual Report on Form 10-K.

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"). Certain factors could cause actual results to
differ materially from those in the forward-looking statements. Factors that
might cause such a material difference include, but are not limited to, (a)
changes in the general economic climate, (b) local conditions such as an
oversupply of space or a reduction in demand for real estate in the area, (c)
conditions of tenants, (d) competition from other available space, (e) increased
operating costs and interest expense, (f) the timing of and costs associated
with property improvements, (g) changes in taxation or zoning laws, (h)
government regulations, (i) failure of Vornado Realty Trust to continue to
qualify as a REIT, (j) availability of financing on acceptable terms, (k)
potential liability under environmental or other laws or regulations and (l)
general competitive factors.

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PART I

ITEM 1. BUSINESS

THE COMPANY

Vornado Realty L.P. (the "Operating Partnership," including the operations
of Vornado Realty Trust prior to the conversion described below) is a Delaware
limited partnership. Operations commenced on April 15, 1997, when Vornado Realty
Trust ("Vornado") a fully-integrated real estate investment trust ("REIT"),
converted to an Umbrella Partnership REIT (UPREIT) by transferring substantially
all of its assets to the Operating Partnership. Vornado is the sole general
partner of the Operating Partnership and owns a 92.7% limited partnership
interest at December 31, 1997. As a result of such conversion, Vornado's
activities are conducted through the Operating Partnership. All references to
the "Company" refer to Vornado and its consolidated subsidiaries, including the
Operating Partnership.

The Company currently owns directly or indirectly:

(i) 59 shopping center properties in seven states and Puerto Rico
containing approximately 12.4 million square feet, including 1.4 million
square feet built by tenants on land leased from the Company;

(ii) all or portions of 14 office building properties in the New York
City metropolitan area (primarily Manhattan) containing approximately 8.4
million square feet;

(iii) eight warehouse/industrial properties in New Jersey containing
approximately 2.0 million square feet;

(iv) approximately 29.3% of the outstanding common stock of
Alexander's, Inc., which has nine properties in the New York City
metropolitan area;

(v) a 60% interest in two partnerships that own Americold Corporation
("Americold") and URS Logistics Inc. ("URS" and, together with Americold,
the "Cold Storage Companies"), which collectively own and operate 80
warehouse facilities nationwide with an aggregate of approximately 394
million cubic feet of refrigerated, frozen and dry storage space;

(vi) a 40% interest in the Hotel Pennsylvania, a New York City hotel
which contains 800,000 square feet of space with 1,700 rooms and 400,000
square feet of retail and office space;

(vii) a 15% limited partnership interest in Charles E. Smith
Commercial Realty L.P., a partnership, which owns interests in and manages
approximately 7.2 million square feet of office properties in Crystal City,
Arlington, Virginia, a suburb of Washington D.C., and manages an additional
14 million square feet of office and other commercial properties in the
Washington, D.C. area; and

(viii) other real estate and investments in mortgages collateralized
by various office, restaurant and other retail properties.

In addition, in January 1998, the Company entered into an agreement to
acquire a substantial portion of the real estate portfolio of Joseph P. Kennedy
Enterprises for approximately $625 million.

OBJECTIVES AND STRATEGY

The Company's business objective is to maximize shareholder value. The
Company intends to achieve its business objective by continuing to pursue its
investment philosophy, making opportunistic investments and executing its
operating strategies through:

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

- Continuing to invest in quality office properties in selected
markets where the Company believes there is high likelihood of
capital appreciation;

- Continuing to invest in retail properties in selected understored
locations such as the New York metropolitan area; and

- Investing in fully integrated operating companies that have a
significant real estate component.

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Presently, the Company executes its strategy through the following
functional groups:

- The Company's office property group is based in New York City. It
seeks to acquire and operate quality office properties in select
geographic areas where there is significant potential for higher
rents or increased cash flow through redevelopment.

- The Company's retail property group is based in Saddle Brook, New
Jersey. It seeks to maintain high tenant occupancy rates and strong
rent levels by providing quality service and having retail
properties in understored geographic areas, such as the New York
metropolitan area. It also seeks to acquire additional properties in
these areas.

- The Company seeks to invest in integrated operating companies having
a significant real estate based component and qualified, experienced
operating management. The Company believes that by participating
with operating management in strategic decision making and by
providing access to efficient growth capital, it can enhance
profitability.

The Company expects to continue to utilize the capital markets to finance
its growth, acquisitions and investments.

ACQUISITIONS

Since January 1, 1997, the Company completed approximately $2.6 billion of
real estate acquisitions or investments. In addition, approximately $900 million
of acquisitions are currently pending; however, there can be no assurance that
such acquisitions will ultimately be completed. The following table lists in
chronological order the acquisitions or investments:

<TABLE>
<CAPTION>
TOTAL
COMPLETED: LOCATION CONSIDERATION
---------- -------- -------------
(IN MILLIONS)
<S> <C> <C>
The Mendik Transaction............................... New York City $ 656
Montehiedra Town Center.............................. San Juan, Puerto Rico 74
90 Park Avenue....................................... New York City 185
Riese Transactions................................... New York City 67
Hotel Pennsylvania................................... New York City 64
20 Broad Street Mortgage............................. New York City 27
Charles E. Smith Commercial Realty Investments....... Washington, D.C. 60
Cold Storage......................................... Throughout the United States 600
Arbor Property Trust (Green Acres Mall).............. Long Island, New York 225
640 Fifth Avenue..................................... New York City 64
One Penn Plaza....................................... New York City 410
150 East 58th Street................................. New York City 118
Other................................................ 30
------
Total Completed Acquisitions............... 2,580
------
PENDING:
- -------
Kennedy Properties................................... Chicago & Washington, D.C. 625
YMCA Development..................................... New York City 64
Las Catalinas Mall................................... Caguas, Puerto Rico 68
Hotel Pennsylvania -- additional investment.......... New York City 70
Cold Storage Freezer Services, Inc................... Midwestern section of the 80
United States
------
Total Pending Acquisitions................. 907
------
Total Acquisitions......................... $3,487
======
</TABLE>

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COMPLETED ACQUISITIONS

Mendik Transaction

In April 1997, Vornado consummated the acquisition of interests in all or a
portion of seven Manhattan office buildings and the management company held by
Bernard H. Mendik, David R. Greenbaum and certain entities controlled by them
(the "Mendik Group") and certain of their affiliates (the "Mendik Transaction").
The properties acquired include (i) four wholly owned properties: Two Penn
Plaza, Eleven Penn Plaza, 1740 Broadway and 866 U.N. Plaza and (ii) three
partially owned properties: Two Park Avenue (40% interest), 330 Madison Avenue
(24.8% interest) and 570 Lexington Avenue (5.6% interest). The consideration for
the Mendik Transaction was approximately $656,000,000, including $264,000,000 in
cash, $177,000,000 in limited partnership units of the Operating Partnership and
$215,000,000 in indebtedness.

Montehiedra Town Center

In April 1997, the Company acquired The Montehiedra Town Center
("Montehiedra"), a shopping center, located in San Juan, Puerto Rico, from Kmart
Corporation ("Kmart") for approximately $74,000,000, of which $63,000,000 was
newly issued ten-year indebtedness. The center, which opened in 1994, contains
525,000 square feet, including a 135,000 square foot Kmart store.

90 Park Avenue

In May 1997, the Company acquired a mortgage loan from a consortium of
banks collateralized by an office building located at 90 Park Avenue, Manhattan,
New York. In August 1997, the Company entered into an agreement with the owners
of 90 Park Avenue pursuant to which the Company restructured the mortgage, took
title to the land and obtained a 43-year lease on the building under which the
Company manages the building and receives the building's cash flow. As part of
the restructuring, the amount of the debt was adjusted from the face value of
$193,000,000 to the May 1997 acquisition cost of $185,000,000, the maturity date
of the debt was extended to August 31, 2022 and the interest rate was set at
7.5%. The Company also purchased the land for $8,000,000, which was further
applied to reduce the debt to $177,000,000. This investment has been classified
as real estate.

Riese Transactions

In June 1997, the Company acquired four properties containing an aggregate
of approximately 80,000 square feet of retail and office space for approximately
$26,000,000. The properties were previously owned by affiliates of the Riese
Organization. These properties are located in midtown Manhattan. The Company
also made a $41,000,000 mortgage loan to Riese affiliates cross-collateralized
by ten other Manhattan properties containing an aggregate of approximately
172,000 square feet of retail and office space. The mortgage loan has a
five-year term and an initial interest rate of 9.75% increasing annually.

Hotel Pennsylvania Investment

In September 1997, the Company acquired a 40% interest in the Hotel
Pennsylvania, which is located on Seventh Avenue opposite Madison Square Garden
in Manhattan, New York. The property was acquired in a joint venture with Hotel
Properties Limited and Planet Hollywood International, Inc. from a group of
partnerships. The venture intends to refurbish the property creating a
sports-themed hotel and entertainment complex. Under the joint venture
agreement, Hotel Properties Limited and Planet Hollywood International, Inc.
have 40% and 20% interests, respectively. The joint venture acquired the hotel
for approximately $159,000,000, of which $120,000,000 was newly issued five-year
financing. The Company's share of the purchase price was approximately
$64,000,000. The Hotel Pennsylvania contains approximately 800,000 square feet
of hotel space with 1,700 rooms and 400,000 square feet of retail and office
space. The Company manages the site's retail and office space, and Hotel
Properties Limited manages the hotel. On March 24, 1998, the Company entered
into an agreement to increase its interest in the Hotel Pennsylvania from 40% to
80%. Under the agreement, the Company will purchase the 40% interest of Hotel
Properties Limited for approximately $70 million, including $48 million of
existing debt. The increase in the Company's interest is subject to reduction to
67%, should Planet Hollywood International exercise its prorata option.

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20 Broad Street Mortgage

In September 1997, the Company purchased from a bank, at a discount, a
mortgage on a 460,000 square foot office building at 20 Broad Street in
Manhattan, New York for $27,000,000. The mortgage, which is in default, yields
approximately 12%. The property is leased to a number of tenants. The largest
such tenant, the New York Stock Exchange, leases approximately 53% of the
property. As part of the Mendik Transaction previously described, the Company
obtained an option to acquire from the Mendik Group its portion of the leasehold
interest in this property.

Charles E. Smith Commercial Realty Investment

In October 1997, the Company acquired a 15% limited partnership interest in
Charles E. Smith Commercial Realty L.P. for $60,000,000 in a partnership
roll-up. The partnership owns interests in and manages approximately 7.2 million
square feet of office properties in Crystal City, Arlington, Virginia, a suburb
of Washington, D.C., and manages an additional 14 million square feet of office
and other commercial properties in the Washington, D.C. area.

Cold Storage

In October 1997, two partnerships in which preferred stock affiliates of
the Company have 60% interests and affiliates of Crescent Real Estate Equities
Company have 40% interests acquired the Cold Storage Companies from affiliates
of Kelso & Company, Inc. and other owners. The consideration for these
transactions totaled approximately $1,000,000,000, including $628,000,000 of
indebtedness. The Company's share of the purchase price was approximately
$600,000,000.

The Cold Storage Companies own and operate 80 refrigerated warehouses with
an aggregate of approximately 394 million cubic feet.

On March 25, 1998, the Cold Storage Companies entered into an agreement to
acquire the assets of Freezer Services, Inc., consisting of nine cold storage
warehouses for approximately $134 million, including $22 million of
indebtedness.

Arbor Property Trust

In December 1997, the Company acquired Arbor Property Trust ("Arbor") for
approximately $225 million and merged it into the Company. The purchase price
was comprised of 2,936,000 common shares of beneficial interest of Vornado,
39,400 Series A Convertible Preferred Shares of Vornado and the assumption of
$125 million of property level debt. Arbor owned the Green Acres Mall, a 1.7
million square foot super-regional enclosed shopping mall complex situated in
Nassau County, Long Island, New York one-mile east of the borough of Queens, New
York. The Green Acres Mall is anchored by four major department stores: Sears,
Roebuck and Co., J.C. Penney Company, Inc., and Federated Department Stores,
Inc. doing business as Stern's and as Macy's. The complex also includes The
Plaza at Green Acres, a 179,000 square foot strip shopping center which is
anchored by Kmart and Waldbaums.

640 Fifth Avenue

In December 1997, the Company acquired 640 Fifth Avenue, an 18 story
Manhattan office building located at the corner of 51st Street, for
approximately $64 million from Met Life International Real Estate Partners
Limited Partnership. The building contains approximately 250,000 square feet.

One Penn Plaza

In February 1998, the Company acquired a long-term leasehold interest in
One Penn Plaza for approximately $410 million from Mid-City Associates. One Penn
Plaza is a 57 story Manhattan office building containing approximately 2,350,000
square feet and encompasses substantially the entire square block bounded by
33rd Street, 34th Street, Seventh Avenue and Eighth Avenue.

150 East 58th Street

In March 1998, the Company acquired 150 East 58th Street (the Architects
and Design Center), a 39 story Manhattan office building, for approximately $118
million from a limited partnership. The building contains approximately 550,000
square feet.

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PENDING ACQUISITIONS

Kennedy Properties

In January 1998, the Company entered into a definitive agreement to acquire
a real estate portfolio from Joseph P. Kennedy Enterprises for approximately
$625 million, consisting of $465 million in cash, $50 million in indebtedness
and an aggregate of $110 million in Operating Partnership Units and Convertible
Preferred Operating Partnership Units.

The real estate assets to be acquired include a portfolio of properties
used for office, retail and trade showroom space. The properties aggregate
approximately 5.3 million square feet and consist of the Merchandise Mart in
Chicago, the Apparel Center in Chicago, the Washington Design Center and the
Washington Office Center in Washington, D.C. The transaction also includes the
acquisition of Merchandise Mart Properties, Inc., which manages the properties
and trade shows. The closing is expected to occur in the second quarter of 1998.

YMCA Development

In September 1997, the Company entered into an agreement with the YMCA to
acquire a portion of a property now occupied by the YMCA. The property overlooks
Central Park and is located between West 63rd and 64th Streets in Manhattan, New
York. Pursuant to the agreement, a preferred stock affiliate of the Company will
acquire and develop approximately 44,000 square feet for use by the YMCA and
approximately 150,000 square feet for sale as residential condominiums. The
agreement contemplates the negotiation and execution of additional related
agreements. The purchase price for the property is approximately $8,400,000, and
the Company estimates that development costs (including the YMCA facilities)
will be approximately $55,000,000. To date, the Company has expended
approximately $2,750,000 in connection with this transaction and provided the
YMCA with a $5,500,000 letter of credit. The transaction is expected to close in
the second quarter of 1998.

Las Catalinas Mall

The Company has an option to acquire K Mart's recently constructed anchor
store and its 50% interest in the Las Catalinas Mall located in Caguas, Puerto
Rico. The total purchase price is approximately $68,000,000 (substantially all
of which would be financed with newly issued debt). The acquisition is expected
to close in the second quarter of 1998.

Hotel Pennsylvania -- additional investment (see Completed Acquisitions).

Cold Storage -- acquisition of Freezer Services, Inc. (see Completed
Acquisitions).

There can be no assurance that any of the pending acquisitions will
ultimately be completed.

PROPOSED SPIN-OFF OF OPERATING COMPANY

In order to maintain Vornado's status as a REIT for federal income tax
purposes, the Company is required to focus principally on investment in certain
real estate assets. Accordingly, the Company cannot directly own certain assets
and conduct certain activities that would be inconsistent with its status as a
REIT.

The Company has formed Vornado Operating, Inc. ("Vornado Operating") to own
assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. Vornado Operating will be able to do so because it
will be taxable as a regular corporation rather than a REIT for taxable years
after 1998. Vornado Operating has filed a registration statement with the
Securities and Exchange Commission with respect to its proposed spin off from
the Company. If the spin off takes place, the Operating Partnership will
distribute pro rata to its partners, including Vornado, the shares of Vornado
Operating, and Vornado will distribute pro rata to holders of its Common Shares
the shares it receives. No holder of Common Shares will be required to make any
payment, exchange any Common Shares or take any other action in order to receive
Vornado Operating's common stock in the spin off. A record date has not yet been
set for the spin off. No assurance can be given concerning the timing of the
spin off, or whether the spin off will occur.

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to offer Vornado Operating an opportunity to become the lessee of certain real
property owned now or in the future by the Company (under mutually satisfactory
lease terms) and (b) Vornado Operating will agree not to make any real estate
investment or other REIT-qualified investments unless it first offers the
Company the opportunity to make such investment and the Company has rejected
that opportunity. The Company currently expects to capitalize Vornado Operating
with an equity contribution of $25 million of cash, and currently intends to
extend to Vornado Operating a $75 million unsecured five-year revolving line of
credit. The Intercompany Agreement and the Credit Agreement were not subject to
arms-length negotiation because Vornado Operating is currently a subsidiary of
the Company. Accordingly, there can be no assurance that the terms of these
agreements are comparable to those the Company could have negotiated with an
unaffiliated third party.

FINANCING ACTIVITIES

In April 1997, Vornado sold 5,750,000 Series A Convertible Preferred Shares
of Beneficial Interest, liquidation preference $50.00 per share. The preferred
shares bear a coupon of 6 1/2% and are convertible into common shares at $36 3/8
per share. An equivalent number of preferred units were issued to Vornado for
the shares sold. The offering, net of expenses, generated approximately
$276,000,000, which was used to fund the cash portion of the Mendik Transaction.

In addition, in April 1997, the Company borrowed $400,000,000 from Union
Bank of Switzerland pursuant to an unsecured bridge loan. In July 1997, the
Company obtained a $600,000,000 unsecured three-year revolving credit facility.
Simultaneously with the closing, the Company borrowed $250,000,000 under the
facility and used the proceeds together with working capital to repay the
$400,000,000 it borrowed in April. In February 1998, the facility was increased
to $1,000,000,000 and certain covenants were amended. The co-managers of the
facility are Union Bank of Switzerland, Chase Manhattan Bank, Citibank and
NationsBank. Union Bank of Switzerland is also the arranger and administrative
agent. The facility contains loan covenants including, among others, maximum
loan to value ratio, minimum debt service coverage and minimum market
capitalization requirements. Interest is at LIBOR plus .70% to 1.00% depending
on the Company's senior debt rating. The credit facility has a competitive bid
option program, which allows the Company to hold auctions among banks
participating in the facility for short term borrowings of up to 50% of the
credit facility. At December 31, 1997, the Company had $370,000,000 outstanding
under the facility at a blended rate of 6.79% (LIBOR plus .83%) which was used
to fund a portion of the purchase price of certain acquisitions previously
described.

In October 1997, Vornado sold 14,000,000 common shares and an additional
2,100,000 common shares in November 1997 when the underwriters exercised in full
their over-allotment option. The shares were sold at a price of $45.00 per share
which, net of expenses, yielded approximately $688,672,000. An equivalent number
of units were issued to Vornado for the shares sold. The net proceeds were used
to repay $310,000,000 outstanding under the Company's line of credit and to fund
a portion of the purchase price of certain acquisitions previously described.

In February 1998, the Company completed a $160,000,000 refinancing of the
Green Acres Mall and prepaid the then existing $118,000,000 debt on the
property. The new 10-year debt matures in March 2008 and bears interest at
6.75%.

Also, in February 1998, the Company obtained a $93,192,000 four month
bridge mortgage loan from Union Bank of Switzerland in connection with its
acquisition of One Penn Plaza. The loan bears interest at LIBOR plus .80%
(currently 6.49%).

The Company has historically maintained a relatively low level of debt to
market capitalization. At December 31, 1997, the ratio of debt to market
capitalization was 24% based on debt of $956,654,000 and market equity of
$4,036,769,000. In the future, in connection with its strategy for growth, this
percentage may increase. This policy may be reviewed and modified from time to
time by the Company without the vote of shareholders.

The Company may seek to obtain funds through equity offerings or debt
financing, although there is no express policy with respect thereto. The Company
may offer its REIT shares or Operating Partnership's units in exchange for
property and repurchase or otherwise reacquire its shares or any other
securities in the future.

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EBITDA BY PROPERTY TYPE

The following table sets forth the percentage of the Company's earnings
before interest expense, taxes, depreciation and amortization ("EBITDA"),
represented by property type on a historical and a pro forma basis for the year
ended December 31, 1997. The pro forma column gives effect to the Completed and
Pending Acquisitions previously described as if they had occurred on January 1,
1997.

<TABLE>
<CAPTION>
PERCENTAGE OF EBITDA
-----------------------
PROPERTY TYPE HISTORICAL PRO FORMA
- ------------- ---------- ---------
<S> <C> <C>
Shopping centers............................................ 46% 25%
Office buildings............................................ 30% 35%
Cold storage................................................ 6% 15%
Kennedy Properties.......................................... -- 16%
Industrial.................................................. 3% 1%
Investment in Alexander's, Inc. ("Alexander's")............. 6% 3%
Other....................................................... 9% 5%
--- ---
100% 100%
=== ===
</TABLE>

The percentage of the Company's EBITDA generated by properties located in
the Greater Metropolitan New York area was approximately 65% on a historical
basis and approximately 56% on a pro forma basis for the year ended December 31,
1997. See Item 2. Properties for a description of each property type.

RELATIONSHIP WITH ALEXANDER'S

The Company owns 29.3% of the outstanding shares of common stock of
Alexander's. (See "Interstate Properties" below for a description of
Interstate's ownership of the Company and Alexander's.)

Alexander's has nine properties (where its department stores were formerly
located) (see Item 2. Properties -- Alexander's).

In March 1995, the Company lent Alexander's $45 million. The loan, which
was scheduled to mature in March 1998, has been extended to March 1999 and the
interest rate was reset from 15.60% per annum to 13.87% per annum reflecting a
reduction in both the spread and the underlying treasury rate. Management
believes there are no indications of impairment as discussed in Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan".

The Company manages, develops and leases the Alexander's properties under a
management and development agreement (the "Management Agreement") and a leasing
agreement (the "Leasing Agreement") pursuant to which the Company receives
annual fees from Alexander's. These agreements have a one-year term expiring in
March of each year and are automatically renewable.

The agreement with the Company and Interstate Properties (see below) not to
own in excess of two-thirds of Alexander's common stock expired in March 1998.

Alexander's common stock is listed on the New York Stock Exchange under the
symbol "ALX".

INTERSTATE PROPERTIES

As of December 31, 1997, Interstate Properties owned approximately 16.6% of
the common shares of beneficial interest of Vornado (assuming the conversion of
all Operating Partnership units) and 27.1% of Alexander's common stock.
Interstate Properties is a general partnership in which Steven Roth, David
Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the Chairman of
the Board and Chief Executive Officer of Vornado, 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 are also
directors of Alexander's.

COMPETITION

The real estate industry is highly competitive. The Company's success
depends upon, among other factors, the trends of the national and local
economies, the financial condition and operating results of current

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and prospective tenants, the availability and cost of capital, interest rates,
construction and renovation costs, income tax laws, governmental regulations and
legislation, population trends, the market for real estate properties in the New
York metropolitan area, zoning laws and the ability of the Company to lease,
sublease or sell its properties at profitable levels. The Company competes with
a large number of real estate property owners. Principal means of competition
are rent charged, attractiveness of location and the quality of service. The
Company's properties are principally located in the New York metropolitan area,
a highly competitive market. The economic condition of this market may be
significantly influenced by supply and demand for space and the financial
performance and productivity of the financial, insurance and real estate
industries. An economic downturn may adversely affect the Company's performance.

ENVIRONMENTAL REGULATIONS

Under various Federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be required to
investigate and clean up certain hazardous or toxic substances released at a
property, and may 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 the parties in connection with the contamination. Such laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the release of such substances. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral. Other Federal, state and local laws, ordinances and regulations
require abatement or removal of certain asbestos-containing materials in the
event of demolition or certain renovations or remodeling and also govern
emissions of and exposure to asbestos fibers in the air. The operation and
subsequent removal of certain underground storage tanks are also regulated by
Federal and state laws. In connection with the ownership, operation and
management of its properties, the Company could be held liable for the costs of
remedial action with respect to such regulated substances or tanks or related
claims.

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 condition. However, there can be no assurance
that the identification of new areas of contamination, change 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.

CERTAIN ACTIVITIES

Acquisitions and investments are not necessarily 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 the Company 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 its Board of Trustees without the vote
of shareholders.

EMPLOYEES

The Company has 190 employees excluding employees of partially-owned
entities.

SEGMENT DATA

The Company operates in two reportable segments: commercial office
properties and retail properties. The Company engages in no foreign operations.

The Company's principal executive offices are located at Park 80 West,
Plaza II, Saddle Brook, New Jersey 07663; telephone (201) 587-1000. The Mendik
Division is located at 330 Madison Avenue, New York City, New York 10017;
telephone (212) 557-1100.

ITEM 2. PROPERTIES

The Company currently owns, directly or indirectly, office buildings,
shopping centers, and warehouse and industrial buildings. The Company also has
investments in the Cold Storage Companies, Alexander's, Charles E. Smith
Commercial Realty L.P. and the Hotel Pennsylvania. The following tables and
narrative set forth certain information for each property type.

10
<PAGE> 11

OFFICE PROPERTIES, SHOPPING CENTERS AND OTHER PROPERTIES

The following table sets forth certain information for the properties owned
by the Company as of December 31, 1997 or as of the date of acquisition for
properties thereafter acquired. The Principal Tenants as described below, which
are primarily tenants which occupy 30,000 square feet or more, accounted for
approximately 70% of total square footage.
<TABLE>
<CAPTION>
APPROXIMATE
LEASABLE BUILDING
SQUARE FOOTAGE
-------------------------
YEAR OWNED BY
ORIGINALLY LAND OWNED/ TENANT ON NUMBER ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED OF RENT PER PERCENT
TYPE AND LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY TENANTS SQ. FT.(1) LEASED(1)
----------------- ----------- ------- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS (MENDIK DIVISION)
NEW YORK
One Penn Plaza, Manhattan(4)
(acquired in February 1998).... 1972 2.9 2,372,000 209 $25.16 94%
Two Penn Plaza, Manhattan........ 1968 2.7 1,508,000 61 27.19 98%
Eleven Penn Plaza, Manhattan..... 1923 1.3 956,000 71 25.22 97%
1740 Broadway, Manhattan......... 1950 0.7 551,000 19 32.77 100%
866 United Nations Plaza,
Manhattan...................... 1966 2.1 386,000 84 28.37 81%
90 Park Avenue, Manhattan........ 1964 0.9 877,000 31 31.35 100%
640 Fifth Avenue, Manhattan...... 1950 0.5 249,000 12 22.59 94%
150 East 58th Street, Manhattan
(acquired in March 1998)....... 1969 0.5 548,000 135 29.34 97%
Two Park Avenue, Manhattan (40%
Ownership)..................... 1930 1.0 946,000 44 23.20 97%
330 Madison Avenue, Manhattan
(24.75% Ownership)............. 1963 0.8 771,000 43 33.62 97%
570 Lexington Avenue, Manhattan
(5.6% Ownership)............... 1930 0.3 433,000 32 31.53 63%
825 Seventh Avenue, Manhattan
(50% Ownership)................ 1968 0.5 149,000 1 7.65 100%
NEW JERSEY
Paramus(4)....................... 1987 3.4 118,000 25 17.38 53%
CONNECTICUT
Westport (acquired in January
1998).......................... 1979 20.1 121,000 5 21.62 100%
------- ---------- ----- ------ ---
Total Office Buildings..... 37.7 9,985,000 772 27.09 94%
------- ---------- ----- ------ ---
Vornado's Ownership
Interest................. 35.9 8,353,000 95%
------- ---------- ---

LEASE
EXPIRATION/
OPTION ENCUMBRANCES
TYPE AND LOCATION PRINCIPAL TENANTS EXPIRATION (THOUSANDS)(8)
----------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
OFFICE BUILDINGS (MENDIK DIVISION)
NEW YORK
One Penn Plaza, Manhattan(4)
(acquired in February 1998).... Kmart Corporation 2016/2036 --(10)
Parsons Brinkerhoff 2008/2013
Miller Freeman Inc. 2011/2016
Two Penn Plaza, Manhattan........ McGraw Hill Co. Inc. 2020/2030 $ 80,000
Information Builders, 2013/2023
Inc.
Eleven Penn Plaza, Manhattan..... Times Mirror Company 2001 54,612
General Mills 2002
1740 Broadway, Manhattan......... Mutual of New York 2016/2026 --
William Douglas McAdams 2007
Inc.
866 United Nations Plaza,
Manhattan...................... Mission of Japan to UN 2006/2011 33,000
90 Park Avenue, Manhattan........ Sterling Winthrop Inc 2015/2035 --
640 Fifth Avenue, Manhattan...... Citibank 2018 --
Bozell Jacobs Kenyon 2008/2013
Right Management 2001
Consultants
150 East 58th Street, Manhattan
(acquired in March 1998).......
Two Park Avenue, Manhattan (40%
Ownership)..................... Times Mirror Company 2010/2025 65,000
Smith Barney Inc. 1998
330 Madison Avenue, Manhattan
(24.75% Ownership)............. BDO Seidman 2010/2015 103,800
570 Lexington Avenue, Manhattan
(5.6% Ownership)............... Quebecor Printing Corp 2007/2012 18,339
Rochdale Securities Inc. 2008/2013
Brean Murray & Co, Inc. 2011
825 Seventh Avenue, Manhattan
(50% Ownership)................ American Broadcasting 1999 --
Companies
NEW JERSEY
Paramus(4)....................... 602
CONNECTICUT
Westport (acquired in January
1998).......................... Metropolitan Life 2001 --(10)
Insurance
--------
Total Office Buildings..... 355,353
--------
Vornado's Ownership
Interest................. 221,570
--------
</TABLE>

11
<PAGE> 12
<TABLE>
<CAPTION>
APPROXIMATE
LEASABLE BUILDING
SQUARE FOOTAGE
-------------------------
YEAR OWNED BY
ORIGINALLY LAND OWNED/ TENANT ON NUMBER ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED OF RENT PER PERCENT
TYPE AND LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY TENANTS SQ. FT.(1) LEASED(1)
----------------- ----------- ------- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
NEW JERSEY
Atlantic City.................... 1965 17.7 136,000 -- -- -- --
Bordentown....................... 1958 31.2 179,000 -- 4 6.54 100%
Bricktown........................ 1968 23.9 260,000 3,000 19 10.41 99%
Cherry Hill...................... 1964 37.6 231,000 64,000 13 $ 9.01 94%
Delran........................... 1972 17.5 168,000 4,000 5 5.32 94%
Dover............................ 1964 19.6 173,000 -- 13 6.07 99%
East Brunswick................... 1957 19.2 219,000 10,000 6 11.31 89%
East Hanover..................... 1962 24.6 271,000 -- 17 10.34 98%
Hackensack....................... 1963 21.3 208,000 59,000 21 15.25 98%
Jersey City...................... 1965 16.7 223,000 3,000 11 12.41 97%
Kearny........................... 1959 35.3 42,000 62,000 4 6.64 89%
Lawnside......................... 1969 16.4 145,000 -- 3 10.50 100%
Lodi............................. 1975 8.7 130,000 -- 1 8.56 100%
Manalapan........................ 1971 26.3 194,000 2,000 7 9.09 100%
Marlton.......................... 1973 27.8 173,000 7,000 10 8.52 100%
Middletown....................... 1963 22.7 180,000 52,000 23 13.73 99%
Morris Plains.................... 1985 27.0 172,000 1,000 19 11.31 100%
North Bergen..................... 1959 4.6 7,000 55,000 3 26.21 100%
North Plainfield(4).............. 1989 28.7 217,000 -- 16 8.69 98%
Totowa........................... 1957 40.5 201,000 94,000 6 16.08 92%
Turnersville..................... 1974 23.3 89,000 7,000 3 5.98 100%
Union............................ 1962 24.1 257,000 -- 12 17.75 100%
Vineland......................... 1966 28.0 143,000 -- 4 6.87 51%

LEASE
EXPIRATION/
OPTION ENCUMBRANCES
TYPE AND LOCATION PRINCIPAL TENANTS EXPIRATION (THOUSANDS)(8)
----------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
SHOPPING CENTERS
NEW JERSEY
Atlantic City.................... 2,135(9)
Bordentown....................... Bradlees(2)(3) 2001/2021 3,276(9)
Shop-Rite 2011/2016
Bricktown........................ Caldor 2008/2028 9,919(9)
Shop-Rite 2002/2017
Cherry Hill...................... Bradlees(2)(3) 2006/2026 $ 9,706(9)
Drug Emporium 2002
Shop & Bag 2007/2017
Toys "R" Us 2012/2042
Delran........................... Sam's Wholesale 2011/2021 2,848(9)
Dover............................ Ames 2017/2037 3,635(9)
Shop-Rite 2012/2022
East Brunswick................... Bradlees(3) 2003/2023 8,205(9)
Shoppers World 2007/2012
T.J. Maxx 2004/2009
East Hanover..................... Home Depot 2009/2019 11,066(9)
Marshalls 2004/2009
Pathmark 2001/2024
Today's Man 2009/2014
Hackensack....................... Bradlees(3) 2012/2017 --
Pathmark 2014/2024
Rickel Home Center 2003/2013
Jersey City...................... Bradlees(3) 2002/2022 10,381(9)
Shop-Rite 2008/2028
Kearny........................... Pathmark 2013/2033 --
Rickel Home Center 2008
Lawnside......................... Home Depot 2012/2027 5,708(9)
Drug Emporium 2007
Lodi............................. National Wholesale 2013/2023 2,420(9)
Liquidators
Manalapan........................ Bradlees(3) 2002/2022 6,397(9)
Grand Union 2012/2022
Marlton.......................... Kohl's(2)(3) 2011/2031 5,398(9)
Shop-Rite 2004/2009
Middletown....................... Bradlees(3) 2002/2022 7,761(9)
Grand Union 2009/2029
Morris Plains.................... Caldor 2002/2023 6,600(9)
Shop-Rite 2002
North Bergen..................... A & P 2012/2032 --
North Plainfield(4).............. Kmart 2006/2016 3,379
Pathmark 2001/2011
Totowa........................... Bradlees(3) 2013/2028 15,646(9)
Home Depot 2015/2025
Marshalls 2007/2012
Turnersville..................... Bradlees(2)(3) 2011/2031 2,116(9)
Union............................ Bradlees(3) 2002/2022 15,975(9)
Toys "R" Us 2015
Cost Cutter Drug 2000
Vineland......................... Rickel Home Center 2005/2010 2,358(9)
</TABLE>

12
<PAGE> 13
<TABLE>
<CAPTION>
APPROXIMATE
LEASABLE BUILDING
SQUARE FOOTAGE
-------------------------
YEAR OWNED BY
ORIGINALLY LAND OWNED/ TENANT ON NUMBER ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED OF RENT PER PERCENT
TYPE AND LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY TENANTS SQ. FT.(1) LEASED(1)
----------------- ----------- ------- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Watchung......................... 1959 53.8 50,000 116,000 6 17.60 97%
Woodbridge....................... 1959 19.7 233,000 3,000 11 13.47 99%
NEW YORK
14th Street and Union Square,
Manhattan...................... 1993 0.8 232,000 -- 1 9.92 100%
Albany (Menands)................. 1965 18.6 141,000 -- 2 $ 6.35 100%
Buffalo (Amherst)(4)............. 1968 22.7 185,000 112,000 10 6.98 96%
Coram(4)......................... 1976 2.4 103,000 -- 1 2.22 100%
Freeport......................... 1981 12.5 167,000 -- 3 11.50 100%
New Hyde Park(4)................. 1976 12.5 101,000 -- 1 13.55 100%
North Syracuse(4)................ 1976 29.4 98,000 -- 1 2.74 100%
Rochester (Henrietta)(4)......... 1971 15.0 148,000 -- 1 5.86 47%
Rochester........................ 1966 18.4 176,000 -- 1 6.05 41%
Valley Stream (Green Acres)(4)... 1958 100.0 1,667,000 170,000 158 (6) 87%
PENNSYLVANIA
Allentown........................ 1957 86.8 263,000 354,000 20 9.97 100%
Bensalem......................... 1972 23.2 208,000 7,000 12 7.62 70%
Bethlehem........................ 1966 23.0 157,000 3,000 13 5.27 81%
Broomall......................... 1966 21.0 146,000 22,000 5 9.08 100%
Glenolden........................ 1975 10.0 101,000 -- 3 10.74 100%
Lancaster........................ 1966 28.0 180,000 -- 6 4.39 45%
Levittown........................ 1964 12.8 104,000 -- 1 5.98 100%
10th and Market Streets,
Philadelphia................... 1994 1.8 271,000 -- 3 8.59 69%
Upper Moreland................... 1974 18.6 122,000 -- 1 7.50 100%
York............................. 1970 12.0 113,000 -- 3 4.64 100%
MARYLAND
Baltimore (Belair Rd.)........... 1962 16.0 206,000 -- 2 5.95 65%
Baltimore (Towson)............... 1968 14.6 146,000 7,000 7 9.63 100%

LEASE
EXPIRATION/
OPTION ENCUMBRANCES
TYPE AND LOCATION PRINCIPAL TENANTS EXPIRATION (THOUSANDS)(8)
----------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
Watchung......................... B.J.'s Wholesale 2024 --
Woodbridge....................... Bradlees(3) 2002/2022 8,792(9)
Foodtown 2007/2014
Syms 2000/2005
NEW YORK
14th Street and Union Square,
Manhattan...................... Bradlees 2019/2029 --
Albany (Menands)................. Fleet Bank 2004/2014 $ --
Albany Public Mkts.(5) 2000
Buffalo (Amherst)(4)............. Circuit City 2017 4,863(9)
Media Play 2002/2017
MJ Design 2006/2017
Toys "R" Us 2013
T.J. Maxx 2004
Coram(4)......................... May Department 2011 --
Stores(5)
Freeport......................... Home Depot 2011/2021 8,021(9)
Cablevision 2004
New Hyde Park(4)................. Mayfair Supermarkets 2019/2029 2,043(9)
North Syracuse(4)................ Reisman Properties 2014 --
Rochester (Henrietta)(4)......... Hechinger(5) 2005/2025 2,203(9)
Rochester........................ Hechinger(5) 2005/2025 2,832(9)
Valley Stream (Green Acres)(4)... Macy's 2006/2036 124,985(11)
Sterns 2007/2017
JC Penney 2012
Sears 2023/2073
Kmart 2010/2038
Dime Savings Bank 2000
Greenpoint Bank 2009
PENNSYLVANIA
Allentown........................ Hechinger 2011/2031 7,696(9)
Shop-Rite 2011/2019
Burlington Coat 2017
Factory
Wal*Mart 2024/2094
Sam's Wholesale 2024/2094
T.J. Maxx 1998/2008
Bensalem......................... (2)(3) 2011/2031 3,967(9)
Bethlehem........................ Pathmark 2008/2033 --
Super Petz 2005/2015
Broomall......................... Bradlees(2)(3) 2006/2026 3,260(9)
Glenolden........................ Bradlees(2)(3) 2012/2022 4,245(9)
Lancaster........................ Weis Markets 2008/2018 2,312(9)
Levittown........................ (2)(3) 2006/2026 2,283(9)
10th and Market Streets,
Philadelphia................... Kmart 2010/2035 --
Upper Moreland................... Sam's Wholesale(2) 2010/2015 3,517(9)
York............................. Builders Square 2009/2018 1,463(9)
MARYLAND
Baltimore (Belair Rd.)........... Food Depot 1999/2004 --
Baltimore (Towson)............... Staples 2004 5,779(9)
Cost Saver Supermarket 2000/2020
Drug Emporium 1999/2004
</TABLE>

13
<PAGE> 14
<TABLE>
<CAPTION>
APPROXIMATE
LEASABLE BUILDING
SQUARE FOOTAGE
-------------------------
YEAR OWNED BY
ORIGINALLY LAND OWNED/ TENANT ON NUMBER ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED OF RENT PER PERCENT
TYPE AND LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY TENANTS SQ. FT.(1) LEASED(1)
----------------- ----------- ------- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Baltimore (Dundalk).............. 1966 16.1 183,000 -- 17 6.47 98%
Glen Burnie...................... 1958 21.2 117,000 3,000 4 6.03 100%
Hagerstown....................... 1966 13.9 133,000 15,000 6 $ 3.12 100%
CONNECTICUT
Newington........................ 1965 19.2 134,000 45,000 4 6.46 100%
Waterbury........................ 1969 19.2 140,000 3,000 10 7.81 100%
MASSACHUSETTS
Chicopee......................... 1969 15.4 112,000 3,000 3 5.10 93%
Milford(4)....................... 1976 14.7 83,000 -- 1 5.26 100%
Springfield...................... 1966 17.4 8,000 117,000 2 11.25 100%
TEXAS
Lewisville....................... 1990 13.3 35,000 7,000 16 13.61 98%
Mesquite......................... 1990 5.5 71,000 -- 13 13.86 87%
Dallas........................... 1990 9.9 100,000 -- 9 9.47 81%
PUERTO RICO (SAN JUAN)
Montehiedra...................... 1997 57.1 525,000 -- 96 15.53 99%
------- ---------- --------- ----- ------ ---
Total Shopping Centers..... 1,339.2 10,977,000 1,410,000 673 9.78 92%
------- ---------- --------- ----- ------ ---
WAREHOUSE/INDUSTRIAL
NEW JERSEY
E. Brunswick..................... 1972 16.1 326,000 2 2.46 97%
E. Hanover....................... 1963-1967 45.5 941,000 12 3.85 100%
Edison........................... 1982 18.7 272,000 1 2.75 100%
Garfield......................... 1959 31.6 487,000 3 3.75 38%
------- ---------- ----- ------ ---
Total
Warehouse/Industrial..... 111.9 2,026,000 18 3.41 84%
------- ---------- ----- ------ ---

LEASE
EXPIRATION/
OPTION ENCUMBRANCES
TYPE AND LOCATION PRINCIPAL TENANTS EXPIRATION (THOUSANDS)(8)
----------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
Baltimore (Dundalk).............. A & P 2002/2017 4,084(9)
Ollie's 2003/2008
Manor Shops 1998
Glen Burnie...................... Pathmark Stores, Inc.(5) 2005 2,299(9)
Hagerstown....................... Big Lots 2002/2012 $ --
Pharmhouse 2008/2012
Weis Markets 1999/2009
CONNECTICUT
Newington........................ (3) 2002/2022 3,042(9)
The Wiz 2007/2027
Waterbury........................ Toys "R" Us 2010 3,889(9)
Shaws Supermarkets 2003/2018
MASSACHUSETTS
Chicopee......................... Bradlees(3) 2002/2022 1,999(9)
Milford(4)....................... Bradlees(3) 2004/2009 --
Springfield...................... Wal*Mart 2018/2092 --
TEXAS
Lewisville....................... Albertson's(7) 2055 764(9)
Mesquite......................... 3,445(9)
Dallas........................... Albertson's(7) 2055 1,987(9)
PUERTO RICO (SAN JUAN)
Montehiedra...................... Kmart 2022/2072 62,698
Builders Square 2022/2072
Marshalls 2010/2025
Caribbean Theatres 2021/2026
--------
Total Shopping Centers..... 407,397
--------
WAREHOUSE/INDUSTRIAL
NEW JERSEY
E. Brunswick..................... Popsicle Playwear 2000/2005 --
IFB Apparel 2001/2006
E. Hanover....................... Various Tenants 8,210(9)
Edison........................... White Cons. Ind. 1998/2001 2,455(9)
Garfield......................... Popular Services & 2007 368
Various Tenants
--------
Total
Warehouse/Industrial..... 11,033
--------
</TABLE>

14
<PAGE> 15
<TABLE>
<CAPTION>
APPROXIMATE
LEASABLE BUILDING
SQUARE FOOTAGE
-------------------------
YEAR OWNED BY
ORIGINALLY LAND OWNED/ TENANT ON NUMBER ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED OF RENT PER PERCENT
TYPE AND LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY TENANTS SQ. FT.(1) LEASED(1)
----------------- ----------- ------- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER PROPERTIES
1135 Third Avenue................ 1997 -- 25,000 1 $82.44 100%
Montclair........................ 1972 1.6 17,000 1 16.19 100%
Rahway(4)........................ 1972 -- 32,000 1 4.88 100%
Riese Properties................. 1997 -- 80,000 20 58.42 99%
------- ---------- ----- ------ ---
Total Other Properties..... 1.6 154,000 23 $46.34 99%
------- ---------- ----- ====== ---
Grand Total................ 1,490.4 23,142,000 1,410,000 1,486 92%
======= ========== ========= ===== ===
Grand Total Vornado's
Ownership Interest....... 1,488.6 21,510,000 1,410,000 92%
======= ========== ========= ===

LEASE
EXPIRATION/
OPTION ENCUMBRANCES
TYPE AND LOCATION PRINCIPAL TENANTS EXPIRATION (THOUSANDS)(8)
----------------- ------------------------ ----------- --------------
<S> <C> <C> <C>
OTHER PROPERTIES
1135 Third Avenue................ $ --
Montclair........................ --
Rahway(4)........................ --
Riese Properties................. --
--------
Total Other Properties..... --
--------
Grand Total................ $773,783
========
Grand Total Vornado's
Ownership Interest....... $640,000
========
</TABLE>

------------------
(1) Represents annualized monthly base rent excluding ground leases,
storage rent and rent for leases which had not commenced as of December
31, 1997, which are included in percent leased.

(2) Montgomery Ward & Co., Inc. (a previous lessor) remains liable on such
lease including the rent it was obligated to pay -- approximately 70%.

(3) These leases are either fully guaranteed by Stop & Shop, a wholly-owned
subsidiary of Royal Ahold NV, or in the case of Totowa, guaranteed as
to 70% of rent.

(4) 100% Ground and/or building leasehold interest other than Green Acres,
where approximately 10% of the ground is leased.

(5) The tenant has ceased operations at these locations but continues to
pay rent.

(6) Annualized rent per square foot is $13.16 in total and $27.08 for the
mall tenants only.

(7) Square footage excludes Albertson's which owns its land and building.

(8) At December 31, 1997, the Company's ownership interest in its
properties is encumbered by $640,000,000 of mortgage debt. This amount
is comprised of $586,654,000 of debt on wholly-owned properties, which
is described in Note 5 in the Notes to Consolidated Financial
Statements and $53,346,000 of debt on partially-owned properties, which
is reflected in the Company's investments in partially-owned entities
described in Note 4 in the Notes to Consolidated Financial Statements.

(9) These encumbrances are cross collateralized under a mortgage in the
amount of $227,000,000 at December 31, 1997.

(10) Encumbrances do not include a bridge mortgage loan of $93,192,000 in
connection with the acquisition of One Penn Plaza (described in
"Financings" on page 8 of Item 1) and the $8,000,000 mortgage on the
Westport property: both of these properties were acquired in 1998.

(11) At December 31, 1997, encumbrances were comprised of a $118,000,000
mortgage on the property and a $6,985,000 capital lease obligation. In
February 1998, the Company completed a $160,000,000 refinancing on the
property and prepaid the then existing $118,000,000 mortgage.

15
<PAGE> 16

OFFICE PROPERTIES

The Company's office properties consist of all or a portion of 14 office
buildings in the New York City metropolitan area (primarily Manhattan)
containing approximately 8.4 million square feet. As a result of extensive
renovations and upgrades over the last ten years and the Company's on-going
program of preventative maintenance, the Company believes that its properties
are modern structures, attract high quality tenants and are well positioned to
compete with other Class A office properties in their respective submarkets.

The office properties currently are leased to over 770 tenants, which are
engaged in a variety of businesses, including financial services, investment
banking, publishing, computer technology, health care services, accounting and
law. The average lease term of a tenant's lease is 12 years. 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 for a building over a base year. Electricity is provided to
tenants on a submetered 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
of its premises. At December 31, 1997, no single tenant accounted for more than
5.7% of the Company's total leasable office property square footage.

The following table sets forth a schedule of lease expirations for leases
in place, as of December 31, 1997 for each of the next 10 years on an aggregate
basis, assuming that none of the tenants exercise their renewal options.

<TABLE>
<CAPTION>
ANNUAL RENT
APPROXIMATE APPROXIMATE PER LEASED
NUMBER OF SQUARE FOOTAGE OF PERCENTAGE OF TOTAL ANNUAL RENT OF SQUARE FOOT OF
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FOOTAGE EXPIRING LEASES EXPIRING LEASES
---- --------------- ----------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1998...................... 81 297,000 4.5% $ 8,409,000 $28.28
1999...................... 66 519,000 7.8% 14,796,000 28.51
2000...................... 23 138,000 2.1% 4,508,000 32.60
2001...................... 28 504,000 7.6% 15,346,000 30.43
2002...................... 28 322,000 4.8% 9,199,000 28.56
2003...................... 24 301,000 4.5% 8,113,000 26.91
2004...................... 22 254,000 3.8% 7,266,000 28.63
2005...................... 22 258,000 3.9% 7,974,000 30.87
2006...................... 26 451,000 6.8% 12,964,000 28.75
2007...................... 19 378,000 5.7% 11,332,000 29.96
</TABLE>

For the year ended December 31, 1997, office properties accounted for 41%
of total revenues (46% of pro forma total revenues which gives effect to the
completed and pending acquisitions previously described as if they had occurred
on January 1, 1997). The occupancy rate of the properties was 95% as of March 1,
1998. The annual rent per square foot as of December 31, 1997 was $27.09. Two
Penn Plaza accounted for 12% of total revenues for the year ended December 31,
1997. One Penn Plaza accounted for 10% of total pro forma revenues. No other
office property exceeded 10% of total historical or pro forma revenues or
assets. Below are descriptions of One Penn Plaza and Two Penn Plaza:

Two Penn Plaza

Two Penn Plaza is a 32-story Manhattan office building that sits directly
atop Penn Station and occupies the entire block front on the west side of
Seventh Avenue between 31st and 33rd Streets (adjacent to Madison Square
Garden). Built in 1968, Two Penn Plaza has approximately 1,500,000 rentable
square feet (including 30,000 square feet of retail space and 28,000 square feet
of storage space). The Penn Plaza area has been improved in recent years through
the efforts of the 34th Street Business Improvement District Partnership
("BID"), which provides street cleaning services, security personnel and other
community services to businesses in the area.

The Company currently is exploring the possibility of developing additional
retail space at Two Penn Plaza. The Company believes that the development of
additional retail space may provide a source of additional cash flow and
therefore enhance the value of Two Penn Plaza. There can be no assurance,
however, that any such additional retail space will be developed.

16
<PAGE> 17

As of March 1, 1998, approximately 98% of the rentable square footage in
Two Penn Plaza was leased. The following table sets forth certain information
with respect to Two Penn Plaza at the end of each of the past five years.

<TABLE>
<CAPTION>
ANNUAL
RENT
PER LEASED
YEAR-END PERCENT LEASED SQUARE FEET
-------- -------------- ------------
<S> <C> <C>
1997............................................... 98.0% $27.19
1996............................................... 69.0% 29.39
1995............................................... 94.0% 28.62
1994............................................... 94.5% 27.75
1993............................................... 96.3% 26.23
</TABLE>

The Equitable Life Assurance Society of the United States ("Equitable"),
leased approximately 430,000 square feet at Two Penn Plaza under a lease which
expired on October 31, 1996. Equitable relocated its operations to a building
closer to its Manhattan headquarters. At December 31, 1996, approximately
465,000 square feet (approximately 31%) of the property was vacant. During 1997,
the Company entered into separate leases with Information Builders Inc. ("IBI")
and The McGraw-Hill Companies Inc. ("McGraw-Hill") for space previously occupied
by Equitable. IBI, a privately held software company, leased approximately
180,000 square feet, which commenced on October 1, 1997 and expires on May 31,
2013. Subsequently, IBI exercised their option to lease an additional 40,000
square feet, which also expires on May 31, 2013. In November 1997, McGraw-Hill
signed a lease, which when fully implemented, encompasses approximately 407,000
square feet. McGraw-Hill will take possession of approximately 290,000 square
feet during the first quarter of 1998. McGraw-Hill will take possession of the
remainder of the space as current leases expire in subsequent periods.
McGraw-Hill's lease expires on March 31, 2020.

The following table is a schedule of the annual lease expirations at Two
Penn Plaza as of March 1, 1998 (assuming that no tenants exercise renewal
options):

<TABLE>
<CAPTION>
ANNUAL
RENT PER
APPROXIMATE APPROXIMATE LEASED
SQUARE PERCENTAGE ANNUAL SQUARE
NUMBER OF FOOTAGE OF TOTAL RENT OF FOOT OF
EXPIRING OF EXPIRING SQUARE EXPIRING EXPIRING
YEAR OF LEASE EXPIRATION LEASES LEASES FOOTAGE LEASES LEASES
------------------------ --------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
1998............................... 11 13,000 0.9% $ 179,000 $13.53
1999............................... 9 66,000 4.4% 1,725,000 26.14
2000............................... 9 30,000 2.0% 775,000 25.92
2001............................... 6 83,000 5.5% 2,051,000 24.70
2002............................... 2 31,000 2.1% 887,000 28.64
2003............................... 8 129,000 8.5% 3,268,000 25.41
2004............................... 2 35,000 2.3% 923,000 26.63
2005............................... 2 18,000 1.2% 623,000 35.11
2006............................... 1 57,000 3.8% 1,397,000 24.41
2007............................... 1 113,000 7.5% 3,299,000 29.30
</TABLE>

The aggregate undepreciated tax basis of depreciable real property at Two
Penn Plaza for Federal income tax purposes was approximately $111,000,000 as of
December 31, 1997, and depreciation for such property is computed for Federal
income tax purposes on the declining balance or straight-line methods over lives
which range from 15 to 39 years.

The current assessed value of Two Penn Plaza for real estate tax purposes
is $74,250,000. The tax rate in New York City for commercial real estate is
10.164 for $100 of assessed value which results in real estate taxes for the
1997/1998 tax year of $7,897,380 (including the 34th Street BID tax of
$350,610).

17
<PAGE> 18

One Penn Plaza

One Penn Plaza is a 57-story Manhattan office building which encompasses
substantially the entire square block bounded by 33rd Street, 34th Street,
Seventh Avenue and Eight Avenue. Built in 1972, One Penn Plaza contains
approximately 2,350,000 square feet (including 239,000 square feet of retail
space, 154,000 square feet of garage space and 22,000 square feet of storage
space).

One Penn Plaza is one of the largest office buildings in Midtown Manhattan.
It is strategically located between Macy's and Madison Square Garden with direct
access to Pennsylvania Station. A recently completed $28.5 million capital
improvement program has enhanced the building's competitiveness. The Program
included upgrading the lobby, public corridors on all multi-tenant floors,
elevators, mechanical and HVAC systems. The Penn Plaza area has been enhanced in
recent years through the efforts of the 34th Street BID.

As of March 1, 1998, approximately 94% of the square footage in One Penn
Plaza was leased. The following table sets forth certain information with
respect to One Penn Plaza at the end of each of the past five years.

<TABLE>
<CAPTION>
ANNUAL
RENT
PER LEASED
YEAR END PERCENT LEASED SQUARE FOOT
-------- -------------- -----------
<S> <C> <C>
1997.............................................. 94.0% $25.81
1996.............................................. 85.6% 25.23
1995.............................................. 85.9% 23.54
1994.............................................. 80.1% 24.46
1993.............................................. 80.6% 22.58
</TABLE>

The following table is a schedule of the annual lease expirations at One
Penn Plaza as of March 1, 1998 (assuming that no tenants exercise renewal
options):

<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE % ANNUALIZED ANNUAL
NUMBER OF SQUARE FOOTAGE OF TOTAL RENT OF RENT PER LEASED
EXPIRING OF EXPIRING SQUARE EXPIRING SQUARE FOOT OF
YEAR OF LEASE EXPIRATION LEASES LEASES FOOTAGE LEASES EXPIRING LEASES
------------------------ --------- -------------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1998................................. 28 127,000 5.4% $3,218,000 $25.34
1999................................. 35 145,000 6.1% 4,100,000 28.29
2000................................. 34 95,000 4.0% 2,577,000 27.27
2001................................. 14 78,000 3.3% 2,220,000 28.60
2002................................. 25 154,000 6.5% 4,233,000 27.47
2003................................. 11 88,000 3.7% 2,962,000 33.78
2004................................. 13 273,000 11.5% 6,445,000 23.64
2005................................. 7 140,000 5.9% 3,346,000 23.81
2006................................. 10 157,000 6.6% 4,643,000 29.64
2007................................. 6 58,000 2.5% 1,661,000 28.45
</TABLE>

The aggregate undepreciated tax basis of depreciable real property at One
Penn Plaza for Federal income tax purposes was approximately $410,000,000 as of
December 31, 1997, and depreciation for such property will be computed for
Federal income tax purposes on the straight-line method over 39 years. The
Company acquired this property on February 9, 1998.

The current assessed value of One Penn Plaza for real estate tax purposes
is $116,860,000. The tax rate in New York City for commercial real estate is
10.164 for $100 of assessed value which produces real estate taxes for the
1997/1998 tax year of $12,409,287 (including the 34th Street BID tax of
$536,637).

Washington, D.C.

The Company has a 15% limited partnership interest in Charles E. Smith
Commercial Realty L.P. which owns interests in and manages approximately 7.2
million square feet of office properties in Crystal City, Arlington, Virginia, a
suburb of Washington, D.C., and manages an additional 14.0 million square feet
of office and other commercial properties in the Washington, D.C. area.

18
<PAGE> 19

SHOPPING CENTERS

The Company owns 59 shopping center properties of which 57 are strip
shopping centers primarily located in the Northeast and Midatlantic states, one
is a regional center located in San Juan, Puerto Rico and one is a
super-regional center located in Nassau County, Long Island, New York. The
Company's shopping centers are generally located on major regional highways in
mature densely populated areas. The Company believes its shopping centers
attract consumers from a regional, rather than a neighborhood marketplace
because of their location on regional highways. Shopping centers accounted for
54% of the Company's total revenue (29% of pro forma total revenue) for the year
ended December 31, 1997. The occupancy rate of the shopping center properties
was 92% and 90% as of March 1, 1998 and 1997, respectively, and has been over
90% in each of the past five years.

The Company's shopping center lease terms range from five years or less in
some instances for smaller tenant spaces to as long as thirty years for major
tenants. Leases generally provide for additional rents based on a percentage of
tenant's sales and pass through to tenant's the tenant's 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 revenues in 1997. As of December 31, 1997, the average annual base rent
per square foot for the Company's shopping centers was $9.78 (excluding the
Green Acres Mall). The average annual base rent per square foot for the Green
Acres Mall was $13.16 in total and $27.08 for mall tenants only.

<TABLE>
<CAPTION>
ANNUAL RENT
APPROXIMATE APPROXIMATE PER LEASED
NUMBER OF SQUARE FOOTAGE OF PERCENTAGE OF TOTAL ANNUAL RENT OF SQUARE FOOT OF
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FOOTAGE EXPIRING LEASES EXPIRING LEASES
---- --------------- ----------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1998...................... 44 209,000 1.9% $2,788,000 $13.36
1999...................... 66 570,000 5.2% 6,367,000 11.18
2000...................... 65 454,000 4.1% 5,646,000 12.44
2001...................... 68 425,000 3.9% 5,320,000 12.51
2002...................... 62 1,162,000 10.6% 12,732,000 10.95
2003...................... 38 398,000 3.6% 4,710,000 11.82
2004...................... 61 758,000 6.9% 7,969,000 10.51
2005...................... 84 623,000 5.7% 8,537,000 13.71
2006...................... 45 579,000 5.3% 5,605,000 9.68
2007...................... 39 580,000 5.3% 5,692,000 9.82
</TABLE>

The Company's Montehiedra shopping center, in San Juan, Puerto Rico,
accounted for 4.0% of total revenues for the year ended December 31, 1997 and 2%
on a pro forma basis. No other shopping center accounted for more than 2.7% of
total revenues. The Green Acres Mall, acquired in December 1997, is the
Company's largest shopping center property. It contains 1.8 million square feet
or 14.7% of total shopping center square footage and represents 7.0% of 1997 pro
forma revenues. No other shopping center accounted for more than 5% of total
shopping center square footage.

The Company's strip shopping centers are substantially leased to large
stores (over 20,000 square feet). Tenants include destination retailers such as
discount department stores, supermarkets, home improvements stores, discount
apparel stores, membership warehouse clubs and "category killers." Category
killers are large stores which offer a complete selection of a category of items
(e.g., toys, office supplies, etc.) at low prices, often in a warehouse format.
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.

The Green Acres Mall is a 1.8 million square foot super-regional enclosed
shopping mall complex situated in Nassau County, Long Island, New York one-mile
east of the borough of Queens, New York. The Green Acres Mall is anchored by
four major department stores: Sears, Roebuck and Co., J.C. Penney Company, Inc.,
and Federated Department Stores, Inc. doing business as Stern's and as Macy's.
The complex

19
<PAGE> 20

also includes The Plaza at Green Acres, a 179,000 square foot strip shopping
center which is anchored by Kmart and Waldbaums.

Only one of the Company's tenants, Bradlees, represented more than 10% of
total property rentals for the year ended December 31, 1997. Bradlees accounted
for 10.5% of total property rentals (4.2% of total pro forma property rentals).
In June 1995, Bradlees filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company currently leases 16 locations to Bradlees. Of these
locations, the leases for 14 are fully guaranteed by Stop & Shop Companies, Inc.
("Stop & Shop"), a wholly-owned subsidiary of Royal Ahold NV, a leading
international food retailer, and one is guaranteed as to 70% of the rent.

COLD STORAGE

The Cold Storage Companies, doing business under the trade name of
Americold Logistics, Inc., own and operate 80 refrigerated warehouses with an
aggregate of approximately 394 million cubic feet. The Cold Storage Companies
are headquartered in Atlanta, Georgia and have approximately 4,300 employees.

Services

The Cold Storage Companies provide the frozen food industry with
refrigerated warehousing and transportation management services. Refrigerated
warehouses are comprised of production and distribution facilities. Production
facilities typically serve one or a small number of customers, generally food
processors, located nearby. These customers store large quantities of processed
or partially processed products in the facility 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 primarily services the surrounding
regional market.

The Cold Storage Companies transportation management services include
freight routing, dispatching, freight rate negotiation, backhaul coordination,
freight bill auditing, network flow management, order consolidation and
distribution channel assessment. The Cold Storage Companies'
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.

Customers

Customers consist primarily of national, regional and local frozen food
manufacturers, distributors, retailers and food service organizations including
Con-Agra, Inc., H.J. Heinz & Co., Kraft Foods and Tyson Foods.

Competition

Competition is national, regional and local in nature. The Cold Storage
Companies operate in an environment in which breadth of service, warehouse
locations, customer mix, warehouse size, service performance and price are the
principal competitive factors.

Capital Expenditures

The Cold Storage Companies have budgeted approximately $47,000,000 for
capital expenditures over the next year of which (i) $23,000,000 is for
warehouse expansions, (ii) $15,000,000 is for recurring replacement of equipment
and (iii) $9,000,000 is for non-recurring items including $3,000,000 resulting
from the consolidation of the computer systems and offices of the two companies
acquired, $3,000,000 for reracking of an existing warehouse and $3,000,000 of
structural warehouse delayed maintenance. On March 25, 1998, the Cold Storage
Companies entered into an agreement to acquire the assets of Freezer Services,
Inc., consisting of nine cold storage warehouses for approximately $134 million,
including $22 million of indebtedness. The Cold Storage Companies anticipate
that cash from operations will be adequate to fund capital expenditures, other
than acquisitions which will require funding from borrowings or equity
infusions.

20
<PAGE> 21

Facilities

The following table shows the location, size and type of facility for each
of the Cold Storage Properties as of December 31, 1997:

<TABLE>
<CAPTION>
TYPE: TOTAL
PRODUCTION(P)/ CUBIC
DISTRIBUTION(D)/ OWNED/ FOOTAGE
PROPERTY MANAGED(M) LEASED (IN MILLIONS)
-------- ---------------- --------- -------------
<C> <S> <C> <C> <C>
Gateway D Owned 11.1
Xavier Drive, SW
Atlanta, GA
Lakewood D Owned 2.9
Lakewood Avenue, SW
Atlanta, GA
Central P Owned 1.0
West 9th Street
Charlotte, NC
North P Owned 4.1
Exchange Street
Charlotte, NC
Columbia P Owned 1.6
Shop Road
Columbia, SC
Augusta P Owned 1.1
Laney-Walker Road
Augusta, GA
Norfolk P Owned 1.9
East Princess Anne
Road
Norfolk, VA
Montgomery P Owned 0.5
Prince Street
Montgomery, AL
Witchita P Owned 2.8
North Mead
Wichita, KS
Marshall P Owned 4.8
West Highway 20
Marshall, MO
Oklahoma City P Owned 0.7
South Hudson
Oklahoma City, OK
Oklahoma City P Owned 1.4
Exchange Street
Oklahoma City, OK
Fort Smith P Owned 1.4
Midland Boulevard
Fort Smith, AR
Birmingham P Owned 2.0
West 25th Avenue
Birmingham, AL
Memphis P Owned 5.6
East Parkway South
Memphis, TN
Memphis P Owned 0.5
Spottswood Avenue
Memphis, TN
Syracuse D Owned 11.8
Farrell Road
Syracuse, NY
West Memphis D Owned 6.0
South Airport Road
West Memphis, AR
Indianapolis D Owned 9.1
Arlington Avenue
Indianapolis, IN
Ontario D Owned 24% 8.1
Malaga Place Leased 76%
Ontario, CA
Tarboro P Leased 3.4
Sara Lee Road
Tarboro, NC
</TABLE>

<TABLE>
<CAPTION>
TYPE: TOTAL
PRODUCTION(P)/ CUBIC
DISTRIBUTION(D)/ OWNED/ FOOTAGE
PROPERTY MANAGED(M) LEASED (IN MILLIONS)
-------- ---------------- --------- -------------
<C> <S> <C> <C> <C>
Montgomery P Leased 1.2
Newcomb Avenue
Montgomery, AL
Kraft Refrig. M Managed 3.2
Wanamaker Avenue
Ontario, CA
Westgate D Owned 11.4
Westgate Parkway
Atlanta, GA
Gadsden P Leased 4.0
East Air Depot Road
Gadsden, AL
Texarkana P Owned 2.3
Genoa Road
Texarkana, AR
Leesport D Owned 5.8
RD2, Orchard Lane
Leesport, PA
Albertville P Owned 2.2
Railroad Avenue
Albertville, AL
Kraft Dry M Managed 13.5
Airport Drive
Ontario, CA
Southgate D Owned 3.5
Westgate Parkway
Atlanta, GA
Ft. Worth M Managed 17.7
Railhead Drive
Ft. Worth, TX
Transload P Leased 0.01
4th Street, West
Birmingham, AL
Montezuma P Owned 4.4
South Airport Drive
Montezuma, GA
Bettendorf P/D Owned 8.9
State Street
Bettendorf, IA
Boston P/D Owned 3.1
Widett Circle
Boston, MA
Brooks P Owned 4.8
Brooklake Road
Brooks, OR
Burbank P/D Owned 0.8
West Magnolia
Boulevard
Burbank, CA
Burlington P/D Owned 4.7
South Walnut
Burlington, WA
Clearfield P/D Owned 8.6
South Street
Clearfield, UT
Connell P Owned 5.7
West Juniper Street
Connell, WA
Fort Dodge D Owned 3.7
Maple Drive
Fort Dodge, IA
Gloucester P/D Owned 1.9
East Main Street
Gloucester, MA
</TABLE>

21
<PAGE> 22

<TABLE>
<CAPTION>
TYPE: TOTAL
PRODUCTION(P)/ CUBIC
DISTRIBUTION(D)/ OWNED/ FOOTAGE
PROPERTY MANAGED(M) LEASED (IN MILLIONS)
-------- ---------------- --------- -------------
<C> <S> <C> <C> <C>
Gloucester P/D Owned 0.3
Railroad Avenue
Gloucester, MA
Gloucester P/D Owned 2.8
Rogers Street
Gloucester, MA
Gloucester P/D Owned 2.4
Rowe Square
Gloucester, MA
Hermiston P Owned 4.0
Westland Avenue
Hermiston, OR
Kansas City P/D Owned 35.2
Inland Drive
Kansas City, KS
Los Angeles P/D Owned 2.7
Jesse Street
Los Angeles, CA
Milwaukie D Owned 4.7
S.E. McLoughlin Blvd.
Milwaukie, OR
Moses Lake P/D Owned 7.3
Wheeler Road
Moses Lake, WA
Murfreesboro P/D Owned 2.9
Stephenson Drive
Murfreesboro, TN
Nampa P Owned 8.0
4th Street North
Nampa, ID
Park Rapids P Leased 3.8
U.S. Highway 71 South
Park Rapids, MN
Plant City P/D Owned 0.8
South Alexander Street
Plant City, FL
Plover P/D Owned 9.4
110th Street
Plover, WI
Portland P/D Owned 1.8
Read Street
Portland, ME
Rochelle D Owned 6.0
Americold Drive
Rochelle, IL
Salem P/D Owned 12.5
Portland Road N.E.
Salem, OR
Tampa D Owned 0.4
South Lois Avenue
Tampa, FL
Tomah P Owned 4.6
Route 2
Tomah, WI
Turlock P/D Owned 2.5
5th Street
Turlock, CA
</TABLE>

<TABLE>
<CAPTION>
TYPE: TOTAL
PRODUCTION(P)/ CUBIC
DISTRIBUTION(D)/ OWNED/ FOOTAGE
PROPERTY MANAGED(M) LEASED (IN MILLIONS)
-------- ---------------- --------- -------------
<C> <S> <C> <C> <C>
Turlock P/D Owned 3.0
South Kilroy Road
Turlock, CA
Walla Walla P Owned 3.1
14th Avenue South
Walla Walla, WA
Walulla P/D Owned 1.2
Dodd Road
Walulla, WA
Watertown P/D Owned 4.7
Pleasant Street
Watertown, MA
Woodburn P/D Owned 6.3
Silverton Road
Woodburn, OR
Bartow P/D Owned 1.2
U.S. Highway 17
Bartow, FL
Burley P/D Owned 10.7
U.S. Highway 30
Burley, ID
Denver P/D Owned 52% 2.8
East 50th Street Leased 48%
Denver, CO
Denver P/D Leased 0.5
North Washington Street
Denver, CO
Fogelsville D Owned 85% 21.6
Mill Road Leased 15%
Fogelsville, PA
Fullerton P/D Leased 4.0
South Raymond Avenue
Fullerton, CA
Grand Island P/D Leased 2.2
East Roberts Street
Grand Island, NB
Ontario P Leased 8.1
N.E. First Street
Ontario, OR
Pajaro P/D Leased 0.7
Salinas Road
Pajaro, CA
Pasco P Leased 6.7
Industrial Way
Pasco, WA
Tampa P/D Owned 80% 4.1
North 50th Street Leased 20%
Tampa, FL
Tampa D Owned 1.3
Shoreline Drive
Tampa, FL
Watsonville P/D Owned 5.4
West Riverside Drive
Watsonville, CA
Watsonville P/D Leased 1.4
Second Street
Watsonville, CA
</TABLE>

The above table is summarized as follows:

<TABLE>
<CAPTION>
TOTAL
CUBIC PERCENT
FOOTAGE TO
TYPE OF PROPERTY (IN MILLIONS) TOTAL
---------------- ------------- -------
<S> <C> <C>
Owned facilities............................................ 312.5 79%
Leased facilities........................................... 47.4 12%
Managed facilities.......................................... 34.4 9%
----- ---
394.3 100%
</TABLE>

22
<PAGE> 23

ALEXANDER'S PROPERTIES

The following table shows the location, approximate size and leasing status
as of December 31, 1997 of each of Alexander's properties.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
LAND SQUARE BUILDING SQUARE AVERAGE
FOOTAGE FOOTAGE/ ANNUALIZED
("SF") NUMBER BASE RENT PERCENT
LOCATION OWNERSHIP OR ACREAGE OF FLOORS PER SQ. FOOT LEASED
-------- --------- ------------- --------------- --------------- -------
<S> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
NEW YORK:
Rego Park -- Queens..................... Owned 4.8 acres 351,000/3(1) $29.61 100%
Kings Plaza Shopping Center & Marina
(Kings Plaza Mall) Brooklyn........... 50% 24.3 acres 427,000/2(1)(2) 32.60 84%
Owned
Kings Plaza Store -- Brooklyn........... Owned Included in 339,000/4 10.00 85%
Shopping
Center above
Fordham Road -- Bronx................... Owned 92,211 SF 303,000/5 -- --
Flushing -- Queens...................... Leased 44,975 SF 177,000/4(1) 16.35 100%
Third Avenue -- Bronx................... Owned 60,451 SF 173,000/4 4.33 100%
-----------
1,770,000
===========
REDEVELOPMENT PROPERTIES
NEW YORK:
Lexington Avenue -- Manhattan........... 92% 84,420 SF 591,000/6(1)(3)
Owned
Rego Park II -- Queens.................. Owned 6.6 acres --
NEW JERSEY:
Paramus, New Jersey..................... Owned 30.0 acres --/3(4)

LEASE
EXPIRATION/
OPTION
LOCATION TENANTS EXPIRATION
-------- --------------- -----------
<S> <C> <C>
OPERATING PROPERTIES
NEW YORK:
Rego Park -- Queens..................... Bed Bath & 2013
Beyond
Circuit City 2021
Marshalls 2008/2021
Old Navy 2007/2021
Sears 2021
Kings Plaza Shopping Center & Marina
(Kings Plaza Mall) Brooklyn........... 120 Tenants Various
Kings Plaza Store -- Brooklyn........... Sears 2023/2033
Fordham Road -- Bronx...................
Flushing -- Queens...................... Caldor 2027
Third Avenue -- Bronx................... An affiliate of 2023
Conway
REDEVELOPMENT PROPERTIES
NEW YORK:
Lexington Avenue -- Manhattan...........
Rego Park II -- Queens..................
NEW JERSEY:
Paramus, New Jersey.....................
</TABLE>

- ---------------
(1) Excludes parking garages operated for the benefit of Alexander's.

(2) Excludes approximately 150,000 square feet of enclosed, common area space.

(3) Alexander's is evaluating redevelopment plans for this site which may
involve razing the existing buildings and developing a large multi-use
building.

(4) Alexander's has received approvals to develop a shopping center at this site
containing up to 650,000 square feet.

Alexander's estimates that its capital expenditures for redevelopment
projects at the above properties will include: (i) approximately $90,000,000 to
$100,000,000 for the redevelopment of its Paramus property, (ii) approximately
$15,000,000 for improvements to its Kings Plaza Shopping Center and (iii)
$300,000,000 to develop its Lexington Avenue site. While Alexander's anticipates
that financing will be available after tenants have been obtained for these
redevelopment projects, there can be no assurance that such financing will be
obtained, or if obtained, that such financings will be on terms that are
acceptable to the Company. In addition, it is uncertain as to when these
projects will commence.

HOTEL PENNSYLVANIA

23
<PAGE> 24

On March 24, 1998, the Company entered into an agreement to increase its
interest in the Hotel Pennsylvania from 40% to 80%. Under the agreement, the
Company will purchase the 40% interest of Hotel Properties Limited for
approximately $70 million, including $48 million of existing debt. This increase
in the Company's interest is subject to reduction to 67%, should Planet
Hollywood International exercise its prorata option.

For the year ended December 31, 1997 the average occupancy rate for the
hotel space was 78% and the average daily rate for a hotel room was $93.

The retail and office space was 79% occupied at March 1, 1998 and was
leased to 37 tenants including Sports Authority and Bally's Sports Club. The
annual rent per square foot was $26.17.

In March 1998, the Company entered into an agreement to increase its
interest in the Hotel Pennsylvania from 40% to as much as 80%.

INSURANCE

The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
Management of the Company believes that the Company's insurance coverage
conforms to industry norms.

ITEM 3. LEGAL PROCEEDINGS

In January 1997, two individual investors in Mendik Real Estate Limited
Partnership ("RELP"), the publicly held limited partnership that indirectly owns
a 60% interest in the Two Park Avenue Property, filed a purported class action
against NY Real Estate Services 1, Inc. ("NY Real Estate"), Mendik RELP Corp.,
B&B Park Avenue, L.P. (an indirect subsidiary of the Company which acquired the
remaining 40% interest in Two Park Avenue) and Bernard H. Mendik in the Supreme
Court of the State of New York, County of New York, on behalf of all persons
holding limited partnership interests in RELP. The complaint alleges that, for
reasons which include purported conflicts of interest, the defendants breached
their fiduciary duty to the limited partners, that the then proposed transfer of
the 40% interest in Two Park Avenue would result in a burden on the operation
and management of Two Park Avenue and that the transfer of the 40% interest
violates RELP's right of first refusal to purchase the interest being
transferred and fails to provide limited partners in RELP with a comparable
transfer opportunity. Shortly after the filing of the complaint, another limited
partner represented by the same attorneys filed an essentially identical
complaint in the same court. Both complaints seek unspecified damages, an
accounting and a judgment requiring either the liquidation of RELP and the
appointment of a receiver or an auction of Two Park Avenue. Discussions to
settle the actions have been ongoing, but no settlement has been reached. In
August 1997, a fourth limited partner, represented by separate counsel,
commenced another purported class action in the same court by serving a
complaint essentially identical to the complaints in the two previously
commenced actions. Management believes that the ultimate outcome of these
matters will not have a material adverse effect on the Company.

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

No matters were submitted to a vote of security holders of Vornado or the
Operating Partnership during the fourth quarter of the year ended December 31,
1997.

EXECUTIVE OFFICERS OF THE REGISTRANT

The Operating Partnership is managed by Vornado, its 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

24
<PAGE> 25

which run until the next succeeding meeting of the Board of Trustees of Vornado
following the Annual Meeting of Shareholders unless they are removed sooner by
the Board.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, POSITION AND OFFICE (CURRENT AND
NAME AGE DURING PAST FIVE YEARS WITH VORNADO UNLESS OTHERWISE STATED)
---- --- ------------------------------------------------------------
<S> <C> <C>
Steven Roth................. 56 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 2, 1995 and a Director since 1989.
Michael D. Fascitelli....... 41 President and a Trustee since December 2, 1996; Director of
Alexander's, Inc. since December 2, 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.
Bernard Mendik.............. 68 Co-Chairman of the Board since April 28, 1997 and Chief
Executive Officer of the Mendik Division since April 15,
1997; Chairman of the Board of Directors of Mendik Realty
from 1990 until April 15, 1997.
David R. Greenbaum.......... 46 President of the Mendik Division since April 15, 1997;
President of Mendik Realty from 1990 until April 15, 1997.
Joseph Macnow............... 52 Executive Vice President -- Finance and Administration since
January 1998; Vice President -- Chief Financial Officer from
1985 to January 1998; Vice President -- Chief Financial
Officer of Alexander's, Inc. since August 1995
Richard T. Rowan............ 51 Vice President -- Real Estate
Irwin Goldberg.............. 53 Vice President -- Chief Financial Officer since January
1998; Partner at Deloitte & Touche LLP from September 1978
to January 1998.
</TABLE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for the units of the
Operating Partnership. At December 31, 1997, there were 211 unitholders of
record.

25
<PAGE> 26

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues:
Property rentals................... $ 168,321 $ 87,424 $ 80,429 $ 70,755 $ 67,213
Expense reimbursements............. 36,652 26,644 24,091 21,784 19,839
Other income....................... 4,158 2,819 4,198 1,459 1,738
---------- ---------- ---------- ---------- ----------
Total Revenues........................ 209,131 116,887 108,718 93,998 88,790
---------- ---------- ---------- ---------- ----------
Expenses:
Operating.......................... 74,745 36,412 32,282 30,223 27,994
Depreciation and amortization...... 22,983 11,589 10,790 9,963 9,392
General and administrative......... 13,580 5,167 6,687 6,495 5,890
Amortization of officer's deferred
compensation expense............. 22,917 2,083 -- -- --
Costs incurred in connection with
the merger of Vornado, Inc. into
Vornado Realty Trust............. -- -- -- -- 856
---------- ---------- ---------- ---------- ----------
Total Expenses........................ 134,225 55,251 49,759 46,681 44,132
---------- ---------- ---------- ---------- ----------
Operating Income...................... 74,906 61,636 58,959 47,317 44,658
Income applicable to Alexander's...... 7,873 7,956 3,954 -- --
Income from partially-owned
entities........................... 4,658 1,855 788 -- --
Interest and other investment
income............................. 23,767 6,643 5,733 8,132 11,883
Interest and debt expense............. (42,888) (16,726) (16,426) (14,209) (31,155)
Benefit for income taxes.............. -- -- -- -- 6,369
---------- ---------- ---------- ---------- ----------
Net Income............................ 68,316 61,364 53,008 41,240 31,755
Preferred unit distributions.......... (15,549) -- -- -- --
Preferential allocations.............. (7,293) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income applicable to Class A
units.............................. $ 45,474 $ 61,364 $ 53,008 $ 41,240 $ 31,755
========== ========== ========== ========== ==========
Net income per Class A
unit -- basic(1)................. $ .83 $1.26 $1.13 $ .95 $.80
Net income per Class A unit --
diluted(1)....................... $ .79 $1.25 $1.12 $ .94 $.71
Cash distributions declared for
Class A units.................... 1.36 1.22 1.12 1.00 .75*
BALANCE SHEET DATA
Total assets.......................... $2,524,089 $ 565,204 $ 491,496 $ 393,538 $ 385,830
Real estate, at cost.................. 1,564,093 397,298 382,476 365,832 340,415
Accumulated depreciation.............. 173,434 151,049 139,495 128,705 118,742
Debt.................................. 956,654 232,387 233,353 234,160 235,037
Total partners' capital............... 1,492,329 276,257 194,274 116,688 115,737
</TABLE>

- ---------------
* Does not include special distribution of $1.68 per Class A unit of accumulated
earnings and profits paid in June 1993.

26
<PAGE> 27

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
----------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations(2):
Net income applicable to Class A
units............................... $ 45,474 $ 61,364 $ 53,008 $ 41,240 $ 31,755
Benefit for income taxes.............. -- -- -- -- (6,369)
Depreciation and amortization of real
property............................ 22,413 11,154 10,019 9,192 8,842
Straight-lining of property rentals
for rent escalations................ (3,359) (2,676) (2,569) (2,181) (2,200)
Leasing fees received in excess of
income recognized................... 1,733 1,805 1,052 -- --
Losses/(gains) on sale of
securities.......................... -- -- 360 (51) (263)
Proportionate share of adjustments to
equity in net income of
partially-owned entities to arrive
at funds from operations:
Cold Storage Companies.............. 4,183 -- -- -- --
Alexander's......................... (2,471) (2,331) 539 -- --
Mendik partially-owned office
buildings........................ 2,891 -- -- -- --
Hotel Pennsylvania.................. 457 -- -- -- --
Charles E. Smith Commercial Realty
L.P. ............................ 1,298 -- -- -- --
Costs incurred in connection with the
merger of Vornado, Inc. into Vornado
Realty Trust........................ -- -- -- -- 856
----------- --------- --------- -------- --------
Funds from operations.................... $ 72,619 $ 69,316 $ 62,409 $ 48,200 $ 32,621
=========== ========= ========= ======== ========
Cash flow provided by (used in):
Operating activities.................. $ 110,754 $ 70,703 $ 62,882 $ 46,948 $ 27,725
Investing activities.................. (1,064,484) 14,912 (103,891) (15,434) 1,350
Financing activities.................. 1,219,988 (15,046) 36,577 (32,074) (56,433)
</TABLE>

- ---------------
(1) The earnings per unit amounts prior to 1997 have been restated to comply
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS 128). For further discussion of earnings per unit and the
impact of SFAS 128, see the notes to the consolidated financial statements.
All unit and per unit information has also been adjusted for a 2-for-1 unit
split in October 1997.

(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and
is not necessarily indicative of cash available to fund cash needs which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use
of funds from operations. Funds from operations should not be considered as
an alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flows as a measure of liquidity.
Management considers funds from operations a supplemental measure of
operating performance and along with cash flow from operating activities,
financing activities and investing activities, it provides investors with an
indication of the ability of the Company to incur and service debt, to make
capital expenditures and to fund other cash needs. Funds from operations may
not be comparable to similarly titled measures employed by other REITs since
a number of REITs, including the Company, calculate funds from operations in
a manner different from that used by the National Association of Real Estate
Investment Trusts ("NAREIT"). Funds from operations, as defined by NAREIT,
represents net income applicable to common shares before depreciation and
amortization, extraordinary items and gains or losses on sales of real
estate. Funds from operations as disclosed above has been modified to adjust
for the effect of straight-lining of property rentals for rent escalations
and leasing fee income.

27
<PAGE> 28

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

RESULTS OF OPERATIONS

Years Ended December 31, 1997 and December 31, 1996

The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income, were $209,131,000 in the year ended December
31, 1997, compared to $116,887,000 in the prior year, an increase of
$92,244,000. This increase was primarily comprised of $90,520,000 of revenues
from properties acquired in 1997.

Property rentals were $168,321,000 in the year ended December 31, 1997,
compared to $87,424,000 in the prior year, an increase of $80,897,000. This
increase resulted from:

<TABLE>
<S> <C>
1997 Acquisitions:
Mendik................................................ $56,958,000
90 Park Avenue........................................ 9,874,000
Montehiedra shopping center........................... 6,386,000
Riese................................................. 2,485,000
Green Acres Mall...................................... 937,000
-----------
76,640,000
Full year effect of a 1996 Acquisition.................. 472,000
Shopping center leasing activity........................ 1,907,000
Step-ups in shopping center leases...................... 1,878,000
-----------
$80,897,000
===========
</TABLE>

Tenant expense reimbursements were $36,652,000 in the year ended December
31, 1997, compared to $26,644,000 in the prior year, an increase of $10,008,000.
This increase was primarily comprised of $11,320,000 of reimbursements from
tenants at properties acquired in 1997, partially offset by a reduction in
reimbursements at the Company's other properties due to lower expenses passed
through to tenants.

Operating expenses were $74,745,000 in the year ended December 31, 1997, as
compared to $36,412,000 in the prior year, an increase of $38,333,000. This
increase was primarily comprised of $39,645,000 of expenses from properties
acquired in 1997, partially offset by lower snow removal costs and repairs and
maintenance at the Company's other properties.

Depreciation and amortization expense increased in 1997 as compared to
1996, primarily as a result of acquisitions.

General and administrative expenses were $13,580,000 in the year ended
December 31, 1997 compared to $5,167,000 in the prior year, an increase of
$8,413,000. This increase resulted primarily from (i) Mendik Division payroll
and corporate office expenses of $2,760,000, (ii) cash compensation attributable
to the employment of the Company's President of $2,350,000 and (iii)
professional fees of $1,641,000.

The Company recognized expense of $22,917,000 in the year ended December
31, 1997 and $2,083,000 in the prior year representing the amortization of the
$25,000,000 deferred payment due to the Company's President.

Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $7,873,000 in the year ended December 31, 1997, compared
to $7,956,000 in the prior year, a decrease of $83,000. This decrease resulted
primarily from a $327,000 reduction in loan interest income due to the reset of
the interest rate on the loan; partially offset by an increase in equity in
non-recurring income.

Income from partially-owned entities was $4,658,000 in the year ended
December 31, 1997, compared to $1,855,000 in the prior year, an increase of
$2,803,000. This increase consists of: (i) $1,720,000 from the Cold Storage
Companies, (ii) $424,000 from partially owned properties acquired as part of the
Mendik Transaction, (iii) $1,055,000 from the Company's 40% interest in Hotel
Pennsylvania and (iv) $85,000 from the

28
<PAGE> 29

Company's 15% interest in Charles E. Smith Commercial Realty L.P., partially
offset by (v) lower management fee income.

Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $23,767,000 for the year ended December 31, 1997, compared to
$6,643,000 in the prior year, an increase of $17,124,000. Of this increase,
$9,047,000 resulted primarily from income earned on higher average investments
(resulting from proceeds from stock offerings and temporary borrowings) and
$7,901,000 resulted from investments in mortgage loans receivable.

Interest and debt expense was $42,888,000 for the year ended December 31,
1997, compared to $16,726,000 in the prior year, an increase of $26,162,000. Of
this increase, (i) $13,369,000 resulted from borrowings under the Company's
revolving credit facility and a term loan, (ii) $9,009,000 resulted from debt on
the properties acquired in the Mendik Transaction and (iii) $3,784,000 resulted
from borrowings related to the acquisition of the Montehiedra Town Center in
April 1997.

The preferential allocations to Class C, D and E unit holders in the
Operating Partnership aggregated $7,293,000 for the year ended December 31,
1997.

The preferred unit distributions of $15,549,000 apply to the 6.5% preferred
shares issued in April 1997 and include accretion of expenses of issuing them of
$1,918,000.

The Company operates in a manner intended to enable Vornado to continue to
qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as
amended. Under those sections, a REIT which distributes at least 95% of its REIT
taxable income as a dividend to its shareholders each year and which meets
certain other conditions will not be taxed on that portion of its taxable income
which is distributed to its shareholders. The Company has distributed to its
shareholders an amount greater than its taxable income. Therefore, no provision
for Federal income taxes is required.

Years Ended December 31, 1996 and December 31, 1995

The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income, were $116,887,000 in 1996, compared to
$108,718,000 in 1995, an increase of $8,169,000 or 7.5%.

Property rentals from shopping centers were $80,001,000 in 1996, compared
to $74,255,000 in 1995, an increase of $5,746,000 or 7.7%. Of this increase, (i)
$3,800,000 resulted from rental step-ups in existing tenant leases which are not
subject to the straight-line method of revenue recognition and (ii) $2,000,000
resulted from expansions and an acquisition. Property rentals received from new
tenants were approximately the same as property rentals lost from vacating
tenants. Percentage rent included in property rentals was $936,000 in 1996,
compared to $959,000 in 1995.

Property rentals from the remainder of the portfolio were $7,423,000 in
1996, compared to $6,174,000 in 1995, an increase of $1,249,000 or 20.2%. Of
this increase, $650,000 resulted from the purchase of an office building in June
1996.

Tenant expense reimbursements, which consist of the tenants' pro-rata share
of common area maintenance expenses (such as snow removal costs, landscaping and
parking lot repairs), real estate taxes and insurance, were $26,644,000 in 1996,
compared to $24,091,000 in 1995, an increase of $2,553,000. This increase
reflects a corresponding increase in operating expenses passed through to
tenants.

Other income was $2,819,000 in 1996, compared to $4,198,000 in 1995, a
decrease of $1,379,000. This decrease resulted primarily from (i) including
management and development fee income from Alexander's in "Income from
Partially-Owned Entities" rather than in "Other income" for a full year in 1996,
compared to six months in 1995 and (ii) the recognition of leasing fee income in
the first quarter of 1995 from Alexander's of $915,000 applicable to 1993 and
1994 (no leasing fee income was recognized prior to 1995 because required
conditions had not been met), partially offset by (iii) the increase in
management, development and leasing fees from Interstate Properties.

29
<PAGE> 30

Operating expenses were $36,412,000 in 1996, compared to $32,282,000 in
1995, an increase of $4,130,000. Of this increase, (i) $3,100,000 were passed
through to tenants and consisted of higher snow removal costs of $1,500,000,
increased real estate taxes of $1,000,000 and other common area maintenance
expense increases of $600,000 and (ii) $500,000 resulted from increases in rent
expense and other property expenses. In addition, in 1995 operating expenses
were partially offset by real estate tax refunds and other miscellaneous income
of approximately $500,000.

Depreciation and amortization expense increased by $799,000 in 1996,
compared to 1995, as a result of expansions and an acquisition.

General and administrative expenses were $5,167,000 in 1996, compared to
$6,687,000 in 1995, a decrease of $1,520,000. This decrease resulted primarily
from a reduction in corporate office expenses caused by the third quarter 1995
assignment of the Company's Management and Development Agreement with
Alexander's to Vornado Management Corp. ("VMC").

In December 1996, the Company recognized an expense of $2,083,000,
representing one month's amortization of the $25,000,000 deferred payment due to
the Company's President. The balance of the deferred payment will be amortized
in 1997.

Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $7,956,000 for the year ended December 31, 1996, compared
to $3,954,000 in the prior year, an increase of $4,002,000. This increase
resulted from (i) lower operating losses at Alexander's caused by the
commencement of rent at the Rego Park I property in March 1996, (ii) the
recognition of $2,053,000 of non-recurring income as a result of the reversal of
a liability which is no longer required and (iii) interest income on the loan to
Alexander's for a full year in 1996, compared to a ten month period in 1995.

In July 1995, the Company assigned its Management Agreement with
Alexander's to VMC. In exchange, the Company received 100% of the non-voting
preferred stock of VMC which entitles it to 95% of the economic benefits of VMC
through distributions. In addition, the Company lent $5,000,000 to VMC for
working capital purposes under a three-year term loan bearing interest at the
prime rate plus 2%. VMC is responsible for its pro-rata share of compensation
and fringe benefits of employees and 30% of other expenses which are common to
both Vornado and VMC. Income from investment in and advances to VMC (now
included in "Income from partially-owned entities") was $1,855,000 for the year
ended December 31, 1996, compared to $788,000 for the period from July 6th to
December 31, in 1995. Income from investment in and advances to VMC for the year
ended December 31, 1996 reflects additional fee income earned by VMC in the
first quarter of 1996 relating to the substantial completion of the
redevelopment of Alexander's Rego Park I property.

Interest and other investment income was $6,643,000 for 1996, compared to
$5,733,000 in 1995, an increase of $910,000 or 15.9%. This increase resulted
from higher net gains on marketable securities and the yield earned on the
mortgage note receivable exceeding the yield earned on the investment of such
funds in 1995.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows for the Years Ended December 31, 1997, 1996 and 1995

Year Ended December 31, 1997

Cash flows provided by operating activities of $110,754,000 was comprised
of (i) net income of $61,023,000, (ii) adjustments for non-cash items of
$39,723,000 and (iii) the net change in operating assets and liabilities of
$10,008,000. The adjustments for non-cash items are primarily comprised of (i)
amortization of deferred officer's compensation expense of $22,917,000 and (ii)
depreciation and amortization of $24,460,000.

Net cash used in investing activities of $1,064,484,000 was primarily
comprised of (i) acquisitions of real estate of $887,423,000 (see detail below),
(ii) investments in mortgage loans receivable of $71,663,000 (see detail below),
(iii) capital expenditures of $23,789,000, (iv) restricted cash for tenant
improvements of

30
<PAGE> 31

$27,079,000 and (v) real estate deposits of $46,152,000. Acquisitions of real
estate and investments in mortgage loans receivable are comprised of:

<TABLE>
<CAPTION>
VALUE OF
VORNADO
SHARES
OR
DEBT UNITS TOTAL
CASH ASSUMED ISSUED* CONSIDERATION
-------- -------- -------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate:
Mendik Transaction.......................... $263,790 $215,279 $177,000 $ 656,069
60% interest in Cold Storage Companies...... 243,846 376,800 -- 620,646
Green Acres Mall............................ -- 125,000 102,015 227,015
90 Park Avenue office building.............. 185,000 -- -- 185,000
Montehiedra shopping center................. 11,000 63,000 -- 74,000
40% interest in Hotel Pennsylvania.......... 17,487 48,000 -- 65,487
640 Fifth Ave. office building.............. 64,000 -- -- 64,000
15% interest in Charles E. Smith Commercial
Realty L.P............................... 60,000 -- -- 60,000
Riese properties............................ 26,000 -- -- 26,000
1135 Third Avenue and other................. 16,300 -- -- 16,300
-------- -------- -------- ----------
887,423 828,079 279,015 1,994,517
-------- -------- -------- ----------
Mortgage loans receivable:
Riese properties............................ 41,649 41,649
20 Broad Street............................. 27,000 27,000
909 Third Ave. and other, net .............. 3,014 3,014
-------- ----------
71,663 71,663
-------- ----------
Total Acquisitions............................ $959,086 $828,079 $279,015 $2,066,180
======== ======== ======== ==========
</TABLE>

- ---------------
* Valued at time of acquisition.

Net cash provided by financing activities of $1,219,988,000 was primarily
comprised of proceeds from (i) borrowings of $770,000,000, (ii) issuance of
common shares of Vornado of $688,672,000, and (iii) issuance of preferred shares
of $276,000,000, partially offset by (iv) repayment of borrowings of
$409,633,000, (v) distributions to Class A unitholders of $77,461,000, (vi)
preferred unit distributions of $15,549,000 and (vii) the repayment of
borrowings on U.S. Treasury obligations of $9,636,000.

Year Ended December 31, 1996

Cash flows provided by operating activities of $70,703,000 was comprised of
(i) net income of $61,364,000 and (ii) adjustments for non-cash items of
$9,972,000, less (iii) the net change in operating assets and liabilities of
$633,000. The adjustments for non-cash items are primarily comprised of
depreciation and amortization of $12,586,000 and amortization of deferred
officers compensation expense of $2,083,000, partially offset by the effect of
straight-lining of rental income of $2,676,000 and equity in income from
Alexander's of $1,108,000. The net change in "Leasing fees receivable" and
"Deferred leasing fee income" included in item (iii) above reflects a decrease
of $1,717,000 resulting from the rejection of a lease by an Alexander's tenant
in March 1996 and an increase of $1,738,000 resulting from the releasing of a
portion of this space. "Leasing fees receivable" of $2,500,000 were collected
during this period.

Net cash provided by investing activities of $14,912,000 was comprised of
(i) proceeds from sale or maturity of securities available for sale of
$46,734,000, partially offset by (ii) the Company's investment in a mortgage
note receivable of $17,000,000 and (iii) capital expenditures of $14,822,000
(including $8,923,000 for the purchase of an office building).

31
<PAGE> 32

Net cash used in financing activities of $15,046,000 was primarily
comprised of (i) distributions to Class A unitholders of $59,558,000, (ii) the
net repayment of borrowings on U.S. Treasury obligations of $34,239,000, (iii)
the net repayment on mortgages of $966,000, partially offset by (iv) net
proceeds from the issuance of common shares of Vornado of $73,060,000 and (v)
the proceeds from the exercise of stock options of Vornado of $6,657,000.

Cash increased during the period from December 31, 1995 to December 31,
1996 from $19,127,000 to $89,696,000 primarily as the result of the issuance of
common shares of Vornado in the fourth quarter of 1996 as noted above.

Year Ended December 31, 1995

Cash flows provided by operating activities of $62,882,000 was comprised
of: (i) net income of $53,008,000 and (ii) adjustments for non-cash items of
$11,305,000 less (iii) the net change in operating assets and liabilities of
$1,431,000. The adjustments for non-cash items are primarily comprised of
depreciation and amortization of $11,779,000, plus equity in loss of Alexander's
of $2,389,000, partially offset by the effect of straight-lining of rental
income of $2,569,000. Further, during this period in connection with the
Alexander's transaction, "Leasing fees and other receivables" increased by
$7,656,000 and "Deferred leasing fee income" correspondingly increased by
$8,888,000. These amounts have been included in "Changes in assets and
liabilities: other" in the Consolidated Statements of Cash Flows and are part of
the net change in operating assets and liabilities shown in item (iii) above.

Net cash used in investing activities of $103,891,000 was comprised of (i)
the Company's investment in and advances to Alexander's of $100,482,000, (ii)
capital expenditures of $16,644,000, (iii) a loan to VMC of $5,074,000 and (iv)
purchases of securities available for sale of $4,027,000, partially offset by
(v) the net proceeds from the sale of securities available for sale of
$22,336,000.

Net cash provided by financing activities of $36,577,000 was primarily
comprised of (i) net proceeds from issuance of common shares of Vornado of
$79,831,000, and (ii) net borrowings on U.S. Treasury obligations of $9,600,000,
partially offset by (iii) distributions to Class A unitholders of $52,875,000.

Funds from Operations for the Years Ended December 31, 1997 and 1996

Funds from operations were $72,619,000 in the year ended December 31, 1997,
compared to $69,316,000 in the prior year, an increase of $3,303,000 or 4.8%.
Funds from operations for this year reflect amortization of the deferred payment
due to the Company's President and related compensation of $25,397,000, compared
to $2,157,000 in the prior year. The following table reconciles funds from
operations and net income:

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Net income applicable to Class A units.................... $45,474,000 $61,364,000
Depreciation and amortization of real property............ 22,413,000 11,154,000
Straight-lining of property rentals for rent
escalations............................................. (3,359,000) (2,676,000)
Leasing fees received in excess of income recognized...... 1,733,000 1,805,000
Proportionate share of adjustments to equity in net income
of partially-owned entities to arrive at funds from
operations.............................................. 6,358,000 (2,331,000)
----------- -----------
Funds from operations..................................... $72,619,000 $69,316,000
=========== ===========
</TABLE>

Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs, which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use of
funds from operations. Funds from operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of operating performance
and along with cash flow from operating activities, financing

32
<PAGE> 33

activities and investing activities, it provides investors with an indication of
the ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. Funds from operations may not be
comparable to similarly titled measures reported by other REITs since a number
of REITs', including the Company, calculate funds from operations in a manner
different from that used by the National Association of Real Estate Investment
Trusts ("NAREIT"). Funds from operations, as defined by NAREIT, represents net
income applicable to common shares before depreciation and amortization,
extraordinary items and gains or losses on sales of real estate. Funds from
operations as disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing fee income.
Below are the cash flows provided by (used in) operating, investing and
financing activities:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------------------
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ------------
<S> <C> <C>
Operating activities......................... $ 110,754,000 $ 70,703,000
=============== ============
Investing activities......................... $(1,064,484,000) $ 14,912,000
=============== ============
Financing activities......................... $ 1,219,988,000 $(15,046,000)
=============== ============
</TABLE>

Certain Cash Requirements

The Company has budgeted approximately $51,000,000 for capital expenditures
(excluding acquisitions) over the next year of which (i) $38,500,000 is for
tenant improvements and leasing costs at its office properties, (ii) $5,500,000
is for rebuilding the Lodi Shopping Center, net of expected insurance proceeds,
(iii) $1,500,000 is for tenant improvements and renovations at its shopping
center properties and (iv) $4,300,000 is for recurring maintenance.

In addition to the Company's budgeted capital expenditures, below is a
summary of certain other transactions affecting the Company's liquidity at
December 31, 1997:

<TABLE>
<CAPTION>
CAPITAL REQUIRED
----------------------
<S> <C>
Acquisitions completed subsequent to December 31, 1997:
One Penn Plaza (purchase price of $410,000,000 less a
deposit of $41,000,000 made in December 1997 and
indebtedness of $93,000,000)........................... $276,000,000
150 East 58th Street...................................... 118,000,000
Pending acquisitions:
Kennedy Properties (purchase price of $625,000,000 less
value of Operating Partnership Units to be issued of
$110,000,000 and debt to be assumed of $50,000,000).... 465,000,000
YMCA Development.......................................... 55,000,000
Capital expenditures for the Hotel Pennsylvania (the
Company's 40% share)................................... 25,000,000
------------
$939,000,000
============
</TABLE>

The capital expenditures shown above would increase as a result of the
Company's proposed increased ownership of the Hotel Pennsylvania (see Item
2. -- Properties).

The Company expects that the Cold Storage Companies and Alexander's, in
which the Company owns partial interests, will separately fund their capital
expenditures. (See Item 2. -- Properties)

The $20,000,000 convertible obligation, payable at Vornado's option in
919,540 of its Common Shares or the cash equivalent of their appreciated value,
to Michael D. Fascitelli, the Company's President, vested as of December 2,
1997.

In July 1997, the Company obtained a $600,000,000 unsecured three-year
revolving credit facility. In February 1998, the facility was increased to
$1,000,000,000. At December 31, 1997, the Company had $370,000,000 outstanding
under the facility.

33
<PAGE> 34

The Company has an effective shelf registration under which it can offer an
aggregate of $2.0 billion of equity securities and an aggregate of $1.0 billion
of debt securities.

The Company anticipates that cash from continuing operations will be
adequate to fund business operations and the payment of dividends and
distributions on an ongoing basis for more than the next twelve months; however,
capital outlays for significant acquisitions will require funding from
borrowings or equity offerings.

ACQUISITION ACTIVITY

As a result of acquisitions, the book value of the Company's assets have
grown from $565,204,000 at December 31, 1996 to $2,524,089,000 at December 31,
1997. In addition, another $528,000,000 in acquisitions were completed through
March 6, 1998 and $907,000,000 in acquisitions were pending at that date.

The Company's success is affected by its ability to integrate the assets
and businesses it acquires and to effectively manage those assets and
businesses. The Company currently expects to continue to grow at a relatively
fast pace. However, its ability to do so will be dependent on a number of
factors, including, among others, (a) the availability of reasonably priced
assets that meet the Company's acquisition criteria and (b) the price of
Vornado's common stock, the rates at which the Company is able to borrow money
and, more generally, the availability of financing on terms that, in the
Company's view, make such acquisitions financially attractive.

RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 128, "Earnings per Share," establishes
standards for computing and presenting earnings per share, and is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Statement No. 129, "Disclosure of Information about Capital
Structure," establishes standards for disclosing information about an entity's
capital structure, and is effective for financial statements for periods ending
after December 15, 1997. Statement No. 130, "Reporting Comprehensive Income,"
establishes standards for reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial statements
for periods beginning after December 15, 1997.

Management has incorporated the required disclosures under Statements Nos.
128 and 129 in its financial statements, and does not believe that the other new
standards will have a material effect on reported operating results, per share
amounts, financial position or cash flow.

YEAR 2000 ISSUES

Many of the world's computer systems currently record years in a two-digit
format. Such computer systems may be unable to properly interpret dates beyond
the year 1999, which could lead to business disruptions in the United States and
internationally (the "Year 2000" issue). The potential costs and uncertainties
associated with the Year 2000 issue will depend on a number of factors,
including software, hardware and the nature of the industry in which a company
operates. Additionally, companies must coordinate with other entities with which
they electronically interact, such as customers, creditors and borrowers. Year
2000 compliance programs and information systems modifications are being
initiated in an attempt to ensure that these systems and key processes will
remain functional. This objective is expected to be achieved either by modifying
present systems using existing internal and external programming resources or by
installing new systems, and by monitoring supplier and other third-party
interfaces. While there can be no assurance that all such modifications will be
successful, management does not expect that either costs of

34
<PAGE> 35

modifications or consequences of any unsuccessful modifications should have a
material adverse effect on the financial position, results of operations or
liquidity of the Company.

ECONOMIC CONDITIONS

Substantially all of the Company's leases contain step-ups in rent. Such
rental increases are not designed to, and in many instances do not, approximate
the cost of inflation, but do have the effect of mitigating the adverse impact
of inflation. In addition, substantially all of the Company's leases contain
provisions that require the tenant to reimburse the Company for the tenant's
share of common area charges (including roof and structure in strip shopping
centers, unless it is the tenant's direct responsibility) and real estate taxes
or for increases of such expenses over a base amount, thus offsetting, in part,
the effects of inflation on such expenses.

Inflation did not have a material effect on the Company's results for the
periods presented.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 36
Consolidated Balance Sheets at December 31, 1997 and 1996... 37
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995.......................... 38
Consolidated Statements of Partners' Capital for the years
ended December 31, 1997, 1996 and 1995.................... 39
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... 40
Notes to Consolidated Financial Statements.................. 41
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS' ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Not applicable.

35
<PAGE> 36

INDEPENDENT AUDITORS' REPORT

Partners
Vornado Realty L.P.
Saddle Brook, New Jersey

We have audited the accompanying consolidated balance sheets of Vornado
Realty L.P. as of December 31, 1997 and 1996, and the related consolidated
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. Our audits also included the
financial statement schedules listed in the Index at Item 14. 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 generally accepted auditing
standards. 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, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. 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.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 25, 1998

36
<PAGE> 37

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(AMOUNTS IN THOUSANDS EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Real estate, at cost:
Land...................................................... $ 436,274 $ 61,278
Buildings and improvements................................ 1,118,334 327,485
Leasehold improvements and equipment...................... 9,485 8,535
---------- --------
Total............................................. 1,564,093 397,298
Less accumulated depreciation and amortization............ 173,434 151,049
---------- --------
Real estate, net.................................. 1,390,659 246,249
Cash and cash equivalents, including U.S. government
obligations under repurchase agreements of $8,775 and
$17,036................................................... 355,954 89,696
Restricted cash............................................. 27,079 --
Marketable securities....................................... 34,469 27,549
Investments in partially-owned entities, including
investment in and advances to Alexander's of $108,752 and
$107,628.................................................. 482,787 112,821
Due from officer............................................ 8,625 8,418
Accounts receivable, net of allowance for doubtful accounts
of $658 and $575.......................................... 16,663 9,786
Mortgage loans receivable................................... 88,663 17,000
Receivable arising from the straight-lining of rents........ 24,127 17,052
Other assets................................................ 95,063 13,716
Officer's deferred compensation expense..................... -- 22,917
---------- --------
$2,524,089 $565,204
========== ========
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable................................. $ 956,654 $232,387
Due for U.S. Treasury obligations........................... -- 9,636
Accounts payable and accrued expenses....................... 36,538 9,905
Officer's compensation payable.............................. 25,000 25,000
Deferred leasing fee income................................. 9,927 8,373
Other liabilities........................................... 3,641 3,646
---------- --------
Total liabilities................................. 1,031,760 288,947
---------- --------
Commitments and contingencies
Partners' capital:
Preferred units of beneficial interest: no par value per
unit; authorized, 20,000,000 units; liquidation
preference $50.00 per unit ($289,466); issued and
outstanding, 5,789,315 units, stated at................ 279,884 --
General partner units issued and outstanding, 72,164,654
and 53,095,360 units................................... 1,149,272 359,918
Limited partnership units; issued and outstanding,
5,681,124 units........................................ 178,567 --
Partnership deficit....................................... (109,561) (77,574)
---------- --------
1,498,162 282,344
Unrealized loss on securities available for sale.......... (840) (998)
Due from officers for purchase of units of beneficial
interest............................................... (4,993) (5,089)
---------- --------
Total partners' capital........................... 1,492,329 276,257
---------- --------
$2,524,089 $565,204
========== ========
</TABLE>

See notes to consolidated financial statements.
37
<PAGE> 38

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Property rentals.................................... $168,321 $ 87,424 $ 80,429
Expense reimbursements.............................. 36,652 26,644 24,091
Other income (including fee income from related
parties of $1,752, $2,569 and $4,123)............ 4,158 2,819 4,198
-------- -------- --------
Total revenues........................................ 209,131 116,887 108,718
-------- -------- --------
Expenses:
Operating........................................... 74,745 36,412 32,282
Depreciation and amortization....................... 22,983 11,589 10,790
General and administrative.......................... 13,580 5,167 6,687
Amortization of officer's deferred compensation
expense.......................................... 22,917 2,083 --
-------- -------- --------
Total expenses........................................ 134,225 55,251 49,759
-------- -------- --------
Operating income...................................... 74,906 61,636 58,959
Income applicable to Alexander's...................... 7,873 7,956 3,954
Income from partially-owned entities.................. 4,658 1,855 788
Interest and other investment income.................. 23,767 6,643 5,733
Interest and debt expense............................. (42,888) (16,726) (16,426)
-------- -------- --------
Net income............................................ 68,316 61,364 53,008
Preferred unit distributions.......................... (15,549) -- --
Preferential allocations.............................. (7,293) -- --
-------- -------- --------
NET INCOME applicable to Class A units.............. $ 45,474 $ 61,364 $ 53,008
======== ======== ========
NET INCOME PER CLASS A UNIT -- BASIC.................. $ .83 $ 1.26 $ 1.13
======== ======== ========
NET INCOME PER CLASS A UNIT -- DILUTED................ $ .79 $ 1.25 $ 1.12
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

38
<PAGE> 39

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
UNREALIZED
GAIN(LOSS)
ON SECURITIES DUE TOTAL
PREFERRED LIMITED GENERAL AVAILABLE FROM PARTNERS'
UNITS PARTNERS PARTNER DEFICIT FOR SALE OFFICERS CAPITAL
--------- -------- ---------- --------- ------------- -------- ----------
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995....... $ 199,050 $ (79,513) $ 2,336 $(5,185) $ 116,688
Net income..................... -- 53,008 -- -- 53,008
Net proceeds from issuance of
Class A units................ 79,831 -- -- -- 79,831
Distributions to Class A
unitholders ($1.12 per
unit)........................ -- (52,875) -- -- (52,875)
Class A units issued under
employees' share plans....... 1,320 -- -- -- 1,320
Change in unrealized gains
(losses) on securities
available for sale........... -- -- (3,698)* -- (3,698)
---------- --------- ------- ------- ----------
BALANCE, DECEMBER 31, 1995..... 280,201 (79,380) (1,362) (5,185) 194,274
Net income..................... -- 61,364 -- -- 61,364
Net proceeds from issuance of
Class A units................ 73,060 -- -- -- 73,060
Distributions to Class A
unitholders ($1.22 per
unit)........................ -- (59,558) -- -- (59,558)
Class A units issued under
employees' share plans....... 6,657 -- -- -- 6,657
Change in unrealized gains
(losses) on securities
available for sale........... -- -- 364 -- 364
Forgiveness of amount due from
officers..................... -- -- -- 96 96
---------- --------- ------- ------- ----------
BALANCE, DECEMBER 31, 1996..... 359,918 (77,574) (998) (5,089) 276,257
Net income..................... -- 68,316 -- -- 68,316
Distributions to preferred
unitholders ($2.37 per
unit)........................ -- (15,549) -- -- (15,549)
Preferential allocations to
Unitholders.................. -- (7,293) -- -- (7,293)
Net proceeds from issuance of
preferred units (including
accretion of $1,918)......... $277,918 -- -- -- -- 277,918
Units issued in connection with
the Mendik acquisition....... -- $178,567 -- -- -- -- 178,567
Net proceeds from issuance of
Class A units................ -- -- 688,672 -- -- -- 688,672
Units issued in connection with
Arbor acquisition............ 1,966 -- 100,049 -- -- -- 102,015
Distributions to Class A
unitholders ($1.36 per
unit)........................ -- -- -- (77,461) -- -- (77,461)
Class A units issued in
connection with an employment
agreement and employees'
share plans.................. -- -- 633 -- -- -- 633
Change in unrealized gains
(losses) on securities
available for sale........... -- -- -- -- 158 -- 158
Forgiveness of amount due from
officers..................... -- -- -- -- -- 96 96
-------- -------- ---------- --------- ------- ------- ----------
BALANCE, DECEMBER 31, 1997..... $279,884 $178,567 $1,149,272 $(109,561) $ (840) $(4,993) $1,492,329
======== ======== ========== ========= ======= ======= ==========
</TABLE>

- ---------------
* Includes $3,435 in unrealized gains attributable to the Company's investment
in the common stock of Alexander's, Inc.

See notes to consolidated financial statements.
39
<PAGE> 40

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 68,316 $ 61,364 $ 53,008
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization (including debt
issuance costs)............................... 24,460 12,586 11,779
Amortization of officer's deferred compensation
expense....................................... 22,917 2,083 --
Straight-lining of rental income................ (7,075) (2,676) (2,569)
Equity in (income) loss of Alexander's.......... (2,188) (1,108) 2,389
Equity in income of other investees............. (4,658) -- --
Net gain on marketable securities............... (1,026) (913) (294)
Changes in operating assets and liabilities:.... 10,008 (633) (1,431)
----------- --------- --------
Net cash provided by operating activities........... 110,754 70,703 62,882
----------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate....................... (887,423) -- --
Investments in mortgage loans receivable.......... (71,663) (17,000) --
Cash restricted for tenant improvements........... (27,079) -- --
Additions to real estate.......................... (23,789) (14,822) (16,644)
Investment in and advances to Alexander's......... -- -- (100,482)
Real estate deposits and other.................... (46,152) -- (5,074)
Purchases of securities available for sale........ (8,378) -- (4,027)
Proceeds from sale or maturity of securities
available for sale.............................. -- 46,734 22,336
----------- --------- --------
Net cash (used in) provided by investing
activities........................................ (1,064,484) 14,912 (103,891)
----------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common units............ 688,672 73,060 79,831
Proceeds from issuance of preferred units......... 276,000 -- --
Proceeds from borrowings on U.S. Treasury
obligations..................................... -- 10,000 40,000
Repayment of borrowings on U.S. Treasury
obligations..................................... (9,636) (44,239) (30,400)
Proceeds from borrowings.......................... 770,000 10,000 60,000
Repayments on borrowings.......................... (409,633) (10,966) (60,807)
Costs of refinancing debt......................... (3,038) -- (492)
Distributions to Class A unitholders.............. (77,461) (59,558) (52,875)
Distributions to Preferred unitholders............ (15,549) -- --
Issuance of units................................. 633 6,657 1,320
----------- --------- --------
Net cash provided by (used in) financing
activities........................................ 1,219,988 (15,046) 36,577
----------- --------- --------
Net increase (decrease) in cash and cash
equivalents....................................... 266,258 70,569 (4,432)
Cash and cash equivalents at beginning of year...... 89,696 19,127 23,559
----------- --------- --------
Cash and cash equivalents at end of year............ $ 355,954 $ 89,696 $ 19,127
=========== ========= ========
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest........................ $ 38,968 $ 15,695 $ 15,881
NON-CASH TRANSACTIONS:
Financing assumed in acquisitions................. $ 403,279 $ -- $ --
Vornado shares issued in connection with
acquisitions.................................... 102,015 -- --
Units issued in connection with acquisitions...... 177,000 -- --
Deferred officer's compensation expense and
related liability............................... -- 25,000 --
Unrealized (loss)gain on securities available for
sale............................................ 158 364 (3,698)
</TABLE>

See notes to consolidated financial statements.

40
<PAGE> 41

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Vornado Realty L.P. (the "Operating Partnership", including the operations
of Vornado Realty Trust prior to the conversion described below) is a Delaware
limited partnership. It commenced operations on April 15, 1997, when Vornado
Realty Trust ("Vornado"), a fully-integrated real estate investment trust
("REIT"), converted to an Umbrella Partnership REIT (UPREIT) by transferring
substantially all of its assets to the Operating Partnership in exchange for
units. Vornado is the sole general partner of the Operating Partnership and owns
a 92.7% limited partnership interest at December 31, 1997. As a result of such
conversion, Vornado's activities are conducted through the Operating
Partnership. All references to the "Company" refer to Vornado and its
consolidated subsidiaries, including the Operating Partnership.

The Company currently owns directly or indirectly:

(i) 59 shopping center properties in seven states and Puerto Rico;

(ii) all or portions of 14 office building properties in the New York
City metropolitan area (primarily Manhattan);

(iii) eight warehouse/industrial properties in New Jersey;

(iv) approximately 29.3% of the outstanding common stock of
Alexander's, Inc., which has nine properties in the New York City
metropolitan area;

(v) a 60% interest in two partnerships that own Americold
Corporation and URS Logistics, Inc., (collectively the "Cold Storage
Companies") which own and operate 80 refrigerated, frozen and dry storage
space warehouse facilities;

(vi) a 40% interest in the Hotel Pennsylvania, a New York City hotel
which contains retail and office space;

(vii) a 15% limited partnership interest in Charles E. Smith
Commercial Realty, which owns interests in and manages office properties in
Crystal City, Arlington, Virginia, a suburb of Washington D.C., and manages
additional office and other commercial properties in the Washington, D.C.
area;

(viii) other real estate and investments in mortgages collateralized
by various office, restaurant and other retail properties;

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The accompanying consolidated financial statements
include the accounts of Vornado Realty L.P. All significant intercompany amounts
have been eliminated. Equity interests in partially-owned entities include
partnerships, joint ventures and preferred stock affiliates (corporations in
which the Company owns all of the preferred stock and none of the common equity)
and are accounted for under the equity method of accounting as the Company
exercises significant influence. These investments are recorded initially at
cost and subsequently adjusted for net equity in income (loss) and cash
contributions and distributions. Ownership of the preferred stock entitles the
Company to substantially all of the economic benefits in the preferred stock
affiliates. The common stock of the preferred stock affiliates is owned by
Officers and Trustees of Vornado.

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.

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.
Depreciation is provided
41
<PAGE> 42
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

The Company's properties are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount of the property may not be
recoverable. In such an event, a comparison is made of the current and projected
operating cash flows of each such property into the foreseeable future on an
undiscounted basis, to the carrying amount of such property. Such carrying
amount would be adjusted, if necessary, to reflect an impairment in the value of
the asset.

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 does not include cash restricted for tenant
improvements at the Company's Two Penn Plaza office building.

MARKETABLE SECURITIES: Marketable securities are carried at fair market
value. The Company has classified debt and equity securities which it intends to
hold for an indefinite period of time as securities available for sale and
equity securities it intends to buy and sell on a short term basis as trading
securities. Unrealized gains and losses are included in earnings for trading
securities and as a component of shareholder's equity for securities available
for sale. Realized gains or losses on the sale of securities are recorded based
on average cost.

At December 31, 1997 and 1996, marketable securities had an aggregate cost
of $34,950,000 and $28,299,000 (of which $7,230,000 and $7,260,000 represents
trading securities) and an aggregate market value of $34,469,000 and $27,549,000
(of which $7,583,000 and $7,508,000 represents trading securities). Gross
unrealized gains and losses were $1,583,000 and $2,064,000 at December 31, 1997
and $606,000 and $1,356,000 at December 31, 1996.

MORTGAGE LOANS RECEIVABLE: 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. Interest on impaired loans is recognized on a cash basis.

FAIR VALUE OF FINANCIAL INSTRUMENTS: All financial instruments of the
Company are reflected in the accompanying consolidated balance sheets at amounts
which, in management's estimation, based upon an interpretation of available
market information and valuation methodologies (including discounted cash flow
analyses with regard to fixed rate debt) are considered appropriate, and
reasonably approximate their fair values. Such fair value estimates are not
necessarily indicative of the amounts that would be realized upon disposition of
the Company's financial instruments.

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 in accordance with the terms of
the agreements to which they relate.

REVENUE RECOGNITION: Base rents, additional rents based on tenants' sales
volume and reimbursement of the tenants' share of certain operating expenses are
generally recognized when due from tenants. The straight-line basis is used to
recognize base rents under leases entered into after November 14, 1985, which
provide for varying rents over the lease terms.

INCOME TAXES: No provision has been made for income taxes in the
accompanying consolidated financial statements of the Operating Partnership
since such taxes, if any, are the responsibility of the individual partners. The
Company operates in a manner intended to enable Vornado to continue to qualify
as a REIT

42
<PAGE> 43
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

under Sections 856-860 of the Internal Revenue Code of 1986 as amended. Under
those sections, a REIT which distributes at least 95% of its REIT taxable income
as a dividend to its shareholders each year and which meets certain other
conditions will not be taxed on that portion of its taxable income which is
distributed to its shareholders. Vornado has distributed to shareholders an
amount greater than its taxable income. Therefore, no provision for Federal
income taxes is required. All dividend distributions for the three years ended
December 31, 1997, are characterized for Federal income tax purposes as ordinary
income.

The net basis of the Company's assets and liabilities for tax purposes is
approximately $480,000,000 lower than the amount reported for financial
statement purposes.

AMOUNTS PER UNIT: In 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings per unit with basic and
diluted earnings per unit. Basic earnings per unit excludes any dilutive effects
of options, warrants and convertible securities. Diluted earnings per unit is
very similar to the previously reported diluted earnings per unit. All earnings
per unit amounts for all periods have been presented, and where appropriate,
restated to conform to the requirements of SFAS 128. All unit and per unit
information has also been adjusted for a 2-for-1 unit split in October 1997.

STOCK OPTIONS: The Company accounts for stock-based compensation 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 the
quoted market price of Vornado's stock on the grant date. Accordingly, no
compensation cost has been recognized for the Company's stock option plans. An
equivalent number of units are issued when options are exercised.

3. ACQUISITIONS

The Company completed approximately $2.6 billion of real estate
acquisitions or investments from January 1, 1997 through March 6, 1998 and an
additional $900 million of acquisitions are pending; however, there can be no
assurance that such acquisitions will ultimately be completed. These
acquisitions were consummated through subsidiaries or preferred stock affiliates
of the Company and were recorded under the purchase method of accounting.
Related net assets and results of operations have been included in these
financial statements since their respective dates of acquisition. The respective
purchase costs were allocated to acquired assets and assumed liabilities using
their relative fair values as of the closing dates, based on valuations and
other studies which are not yet complete. Accordingly, the initial valuations
are subject to change as such information is finalized. The Company believes
that any such change will not be significant since the allocations were
principally to real estate. The following are the details of the acquisitions or
investments:

COMPLETED IN 1997

Mendik Transaction

In April 1997, Vornado consummated the acquisition of interests in all or a
portion of seven Manhattan office buildings and the management company held by
Bernard H. Mendik, David R. Greenbaum and certain entities controlled by them
(the "Mendik Group") and certain of their affiliates (the "Mendik Transaction"),
which is operated as the Mendik Division. The properties acquired include (i)
four wholly owned properties: Two Penn Plaza, Eleven Penn Plaza, 1740 Broadway
and 866 U.N. Plaza and (ii) three partially owned properties: Two Park Avenue
(40% interest), 330 Madison Avenue (24.8% interest) and 570 Lexington Avenue
(5.6% interest). The consideration for the transaction was approximately
$656,000,000, including $264,000,000 in cash, $177,000,000 in the limited
partnership units of the Operating Partnership issued to persons other than
Vornado ("Minority Interests") and $215,000,000 in indebtedness.
43
<PAGE> 44
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Montehiedra Town Center

In April 1997, the Company acquired The Montehiedra Town Center
("Montehiedra"), a shopping center, located in San Juan, Puerto Rico, for
approximately $74,000,000, of which $63,000,000 was newly issued ten-year
indebtedness.

90 Park Avenue

In May 1997, the Company acquired a mortgage loan from a consortium of
banks collateralized by an office building located at 90 Park Avenue, Manhattan,
New York. On August 21, 1997, the Company entered into an agreement with the
owners of 90 Park Avenue pursuant to which the Company restructured the
mortgage, took title to the land and obtained a 43-year lease on the building
under which the Company manages the building and receives the building's cash
flow. As part of the restructuring, the amount of the debt was adjusted from the
face value of $193,000,000 to the May 1997 acquisition cost of $185,000,000, the
maturity date of the debt was extended to August 31, 2022 and the interest rate
was set at 7.5%. The Company purchased the land from the borrower for
$8,000,000, which was further applied to reduce the debt to $177,000,000. This
investment has been classified as real estate.

Riese Transactions

In June 1997, the Company acquired four properties for approximately
$26,000,000. The properties were previously owned by affiliates of the Riese
Organization. These properties are located in midtown Manhattan. The Company
also made a $41,000,000 mortgage loan to Riese affiliates cross-collateralized
by ten other Manhattan properties. The mortgage loan has a five-year term and an
initial interest rate of 9.75% increasing annually.

Hotel Pennsylvania Investment

20 Broad Street Mortgage

In September 1997, the Company purchased from a bank, at a discount, a
mortgage on an office building at 20 Broad Street in Manhattan, New York for
$27,000,000. The mortgage, which is in default, yields approximately 12%. The
property is leased to a number of tenants. The largest such tenant, the New York
Stock Exchange, leases approximately 53% of the property. As part of the Mendik
Transaction previously described, the Company obtained an option to acquire from
the Mendik Group its portion of the leasehold interest in this property.

Charles E. Smith Commercial Realty Investment

In October 1997, the Company acquired a 15% limited partnership interest in
Charles E. Smith Commercial Realty L.P. for $60,000,000 in a partnership
roll-up. The partnership owns interests in and manages office properties in
Crystal City, Arlington, Virginia, a suburb of Washington, D.C., and manages
additional office and other commercial properties in the Washington, D.C. area.

44
<PAGE> 45
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cold Storage

In October 1997, two partnerships in which preferred stock affiliates of
the Company have 60% interests and affiliates of Cresent Real Estate Equities
Company have 40% interests acquired Americold Corporation ("Americold") and URS
Logistics, Inc. ("URS") from affiliates of Kelso & Company, Inc. and other
owners. Americold and URS are cold storage and logistics warehouse companies.
The consideration for these transactions totaled approximately $1,000,000,000,
including $628,000,000 of indebtedness. The Company's share of the purchase
price was approximately $600,000,000. See "Subsequent Events."

Arbor Property Trust

In December 1997, the Company acquired Arbor Property Trust ("Arbor") for
approximately 2,936,000 common shares of beneficial interest of Vornado and
39,400 Series A Convertible Preferred Shares of Vornado. The approximate value
of the transaction was $225 million, subject to property level debt of $125
million. Arbor was a single property real estate investment trust which owned
the Green Acres Mall, a super-regional enclosed shopping mall complex situated
in Nassau County, Long Island, New York one-mile east of the borough of Queens,
New York.

640 Fifth Avenue

In December 1997, the Company acquired 640 Fifth Avenue, a Manhattan office
building located at the corner of 51st Street, for approximately $64 million
from Met Life International Real Estate Partners Limited Partnership.

COMPLETED IN 1998 (SEE "SUBSEQUENT EVENTS")

One Penn Plaza

In February 1998, the Company acquired a long-term leasehold interest in
One Penn Plaza, a Manhattan office building for approximately $410 million from
Mid-City Associates.

150 East 58th Street

In March 1998, the Company acquired 150 East 58th Street (the "Architects
and Design Center"), a Manhattan office building, for approximately $118 million
from a limited partnership.

PENDING

Kennedy Properties (See "Subsequent Events")

YMCA Development

45
<PAGE> 46
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$55,000,000. To date the Company has expended approximately $2,750,000 in
connection with this transaction and provided the YMCA with a $5,500,000 letter
of credit. The transaction is expected to close in the second quarter of 1998.

Las Catalinas Mall

Hotel Pennsylvania -- additional investment (see "Subsequent Events").

Cold Storage -- acquisition of Freezer Services, Inc. (see "Subsequent
Events").

Pro Forma Information

The unaudited pro forma information set forth below presents (i) the
condensed consolidated statements of income for the Company for the years ended
December 31, 1997 and 1996 as if (a) the acquisitions described above (excluding
the pending acquisitions in Cold Storage and Hotel Pennsylvania) and the
financings attributable thereto had occurred on January 1, 1996 and (ii) the
condensed consolidated pro forma balance sheet of the Company as of December 31,
1997, as if such acquisitions and financings had occurred on December 31, 1997.

Condensed Pro Forma Consolidated Income Statement

<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED) YEAR ENDED
------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------- ---------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues...................................... $500,200 $488,900
======== ========
Net income.................................... $122,300 $123,800
Preferred unit distributions.................. (20,700) (19,800)
Preferential allocations...................... (16,200) (16,200)
-------- --------
Net income applicable to Class A units........ $ 85,400 $ 87,800
======== ========
Net income per Class A unit -- basic.......... $1.55 $1.79
=========== ===========
Net income per Class A unit -- diluted........ $1.49 $1.78
=========== ===========
</TABLE>

Pro Forma revenues and net income applicable to Class A units after giving
effect only to the acquisitions and financings completed prior to December 31,
1997 were $314,900,000 and $87,500,000 for the year ended December 31, 1997 and
$315,600,000 and $95,550,000 for the year ended December 31, 1996. The pro forma
results for the year ended December 31, 1997, include non-recurring lease
cancellation income of $14,350,000, partially offset by related expenses of
$2,775,000.

Condensed Pro Forma Consolidated Balance Sheet (Unaudited) at December 31,
1997
(amounts in thousands):

<TABLE>
<S> <C>
Total assets................................................ $3,553,600
==========
Total liabilities........................................... $1,951,300
Total partners' capital..................................... 1,602,300
----------
Total liabilities and partners' capital..................... $3,553,600
==========
</TABLE>

46
<PAGE> 47
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS IN PARTIALLY-OWNED ENTITIES

The Company's investments in partially-owned entities and income recognized
from such investments is disclosed below. Summarized financial data is provided
for (i) investments in entities which exceed 10% of the Company's total assets
and (ii) investments in which the Company's share of partially-owned entities
pre-tax income exceeds 10% of the Company's net income.

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
COMPANY'S INVESTMENT TOTAL ASSETS TOTAL DEBT TOTAL EQUITY
--------------------- --------------------- ------------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996
--------- --------- ---------- -------- -------- -------- -------- ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENTS:
Cold Storage
Companies.......... $243,846 $ -- $1,481,405 $ -- $638,047 $ -- $404,227 $ --
========== ======== ======== ======== ======== ======
Alexander's.......... 108,752 107,628 $ 235,074 $211,585 $208,087 $192,347 $ 13,029 $5,564
========== ======== ======== ======== ======== ======
Charles E. Smith
Commercial Realty
L.P. .............. 60,437 --
Hotel Pennsylvania... 20,152 --
Mendik Partially-
Owned Office
Buildings.......... 37,209 --
Vornado Management
Corp. and Mendik
Management
Company............ 12,391 5,193
-------- --------
$482,787 $112,821
======== ========
</TABLE>

INCOME STATEMENT DATA:

<TABLE>
<CAPTION>
COMPANY'S INCOME
FROM PARTIALLY-OWNED
ENTITIES TOTAL REVENUES NET INCOME (LOSS)
------------------------ --------------------------- --------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
------ ------ ------ ------- ------- ------- ------ ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME APPLICABLE TO
ALEXANDER'S................ $7,873 $7,956 $3,954 $25,369 $21,833 $11,734 $7,466* $24,699* $(6,731)
====== ====== ====== ======= ======= ======= ====== ======= =======
INCOME FROM OTHER PARTIALLY-
OWNED INVESTMENTS:
Cold Storage Companies....... $1,720 $ -- $ -- $78,699 $ -- $ -- $ 90 $ -- $ --
======= ======= ======= ====== ======= =======
Hotel Pennsylvania........... 1,055 -- --
Charles E. Smith Commercial
Realty L.P. ............... 85 -- --
Mendik Partially-Owned Office
Buildings.................. 424 -- --
Vornado Management Corp. and
Mendik Management
Company.................... 1,374 1,855 788
------ ------ ------
$4,658 $1,855 $ 788
====== ====== ======
</TABLE>

- ---------------
* 1997 net income includes $8,914 of income from the condemnation of a portion
of a property. 1996 income includes income from discontinued operations of
$11,602 and a non-recurring gain of $14,372.

47
<PAGE> 48
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Alexander's

The Company owns 29.3% of the outstanding shares of common stock of
Alexander's. In March 1995, the Company lent Alexander's $45,000,000. The loan,
which was scheduled to mature in March 1998, has been extended to March 1999 and
the interest rate was reset from 15.60% per annum to 13.87% per annum reflecting
a reduction in both the spread and the underlying treasury rate. In addition,
Alexander's has approximately $163,087,000 of other indebtedness at December 31,
1997 of which: (i) $30,000,000 has been extended with the Company's loan to
March 1999, (ii) $75,000,000 bearing interest at 6.82%, is due on September 15,
1998, (iii) $22,684,000 bearing interest at 10.22%, is due in February 2000 (iv)
$21,812,000, bearing interest at 9.50%, is due on August 21, 1998 and (v)
$13,596,000, bearing interest at 8.19%, is due on December 31, 1998. All of
these loans are collateralized by Alexander's real estate.

The investment in Alexander's is comprised of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Common stock, net of $1,596,000 and $989,000 of accumulated
depreciation of buildings................................. $ 54,931 $ 56,952
Loan receivable............................................. 45,000 45,000
Deferred loan origination income............................ (83) (583)
Leasing fees and other receivables.......................... 6,576 5,901
Equity in income (loss)..................................... 1,894 (293)
Deferred expenses........................................... 434 651
-------- --------
$108,752 $107,628
======== ========
</TABLE>

Alexander's is managed by and its properties are leased by the Company,
pursuant to agreements with a one-year term expiring in March of each year which
are automatically renewable. The annual management fee payable to the Company by
Alexander's is $3,000,000, plus 6% of development costs with minimum guaranteed
fees of $750,000 per annum.

The leasing agreement provides for the Company to generally receive a fee
of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten years of
a lease term, 2% of lease rent for the eleventh through the twentieth years of a
lease term and 1% of lease rent for the twenty-first through thirtieth year of a
lease term. Subject to the payment of rents by Alexander's tenants, the Company
is due $6,244,000 at December 31, 1997. Such amount is receivable annually in an
amount not to exceed $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 had it been paid on September 21, 1993, or at the time the
transactions which gave rise to the commissions occurred, if later. The Company
recognized leasing fee income of $767,000, $695,000 and $1,448,000 in 1997, 1996
and 1995, respectively.

As of December 31, 1997, Interstate Properties owned approximately 16.6% of
the common shares of beneficial interest of Vornado (assuming the conversion of
all Operating Partnership units) and 27.1% of Alexander's common stock.
Interstate Properties is a general partnership in which Steven Roth, David
Mandelbaum and Russell B. Wight, Jr. are 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 the Company and are
also directors of Alexander's.

The agreement with the Company and Interstate Properties not to own in
excess of two-thirds of Alexander's common stock expired in March 1998.

48
<PAGE> 49
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cold Storage Companies

Investment represents a 60% interest in two partnerships held by preferred
stock affiliates and advances to the partnerships of $713,000. Income recognized
is from the date of acquisition (November 1, 1997) and is comprised of a
management fee of approximately $1,800,000, which represents 1% per annum of the
Total Combined Assets (as defined) of the Cold Storage Companies and the
Company's 60% share of equity in net income, net of the management fee.

At December 31, 1997, the Cold Storage Companies have an aggregate of
$638,047,000 of debt which is comprised of (i) a $586,778,000 bridge loan
maturing on October 31, 1998 and bearing interest at LIBOR plus 1.25% (7.23% at
December 31, 1997) (ii) $37,041,000 of capital lease obligations and (iii)
$14,228,000 of other notes and mortgages. The Cold Storage Companies are in the
process of refinancing the bridge loan.

Hotel Pennsylvania

This investment represents a 40% interest in partnerships held by (i) a
subsidiary of the Company for the property's commercial operations and (ii) a
preferred stock affiliate for the property's hotel operations. Income is
recognized from the date of acquisition (September 24, 1997) and is comprised of
a fee for managing the commercial operations and equity in net income.

Charles E. Smith Commercial Realty L.P.

This investment represents a 15% interest in partnership. Income is
comprised of equity in net income of the partnership for the two months ended
December 31, 1997 (the period since the investment was made).

Mendik Partially-Owned Office Buildings

This investment represents the Company's interests in the partially-owned
properties included in the Mendik Transaction: Two Park Avenue (40% interest)
330 Madison Avenue (24.8% interest) and 570 Lexington Avenue (5.6% interest).

Vornado Management Corp. and Mendik Management Company

These investments represent non-voting interest in preferred stock
affiliates. Income is comprised of equity in the net income of preferred stock
affiliates.

49
<PAGE> 50
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT

Following is a summary of the Company's debt:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---- ----
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Notes and Mortgage Payable:
Fixed Interest:
Mortgage payable cross collateralized by an aggregate
of 44 shopping centers and warehouse/industrial
properties, due in 2000 with interest at 6.36%
(prepayable with yield maintenance)................... $ 227,000 $ 227,000
Eleven Penn Plaza mortgage payable, due in 2007,
requires amortization based on a 25 year term with
interest at 8.39% (prepayable after 2003 with yield
maintenance).......................................... 54,612 --
866 UN Plaza mortgage payable, due in 2004, with
interest at 7.79% (prepayable without penalty)........ 33,000 --
Monteheidra Town Center mortgage pass-through
certificates, due in 2007 (52,447) and 2009 (10,251),
requires amortization based on 30 year term with
interest at 8.23% (prepayable after August 1999 with
yield maintenance).................................... 62,698 --
Other mortgages payable................................ 11,344 5,387
---------- ----------
388,654 232,387
---------- ----------
Variable Interest:
Two Penn Plaza mortgage payable, due in 2005, interest
at LIBOR plus .63% (6.44% at December 31, 1997)
(prepayable without penalty).......................... 80,000 --
Green Acres Mall and Plaza, collateralized notes, due
on August 19, 1998, interest at LIBOR plus .78% (6.40%
at December 31, 1997) (see below)..................... 118,000 --
---------- ----------
198,000 --
---------- ----------
Total notes and mortgages payable................. 586,654 232,387
Unsecured revolving credit facility, interest at LIBOR plus
.83% (6.79% at December 31, 1997(see below)).............. 370,000 --
---------- ----------
Total Debt........................................ $ 956,654 $ 232,387
========== ==========
</TABLE>

The net carrying value of properties collateralizing the notes and
mortgages amounted to $888,558 at December 31, 1997. As at December 31, 1997,
the maturities for the next five years are as follows (amounts in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31: AMOUNT
------------------------ --------
<S> <C> <C>
1998.............................................. $120,218 ($118,000 of which has been
refinanced -- see below)
1999.............................................. 1,869
2000.............................................. 228,731
2001.............................................. 1,886
2002.............................................. 2,038
</TABLE>

In July 1997, the Company obtained a $600,000,000 unsecured three-year
revolving credit facility. In February 1998, the facility was increased to
$1,000,000,000. The facility contains customary loan covenants including, among
others, limits on total outstanding indebtedness; maximum loan to value ratio;
minimum debt service coverage and minimum market capitalization requirements.
Interest is at LIBOR plus .70% to

50
<PAGE> 51
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1.00% depending on the Company's senior debt rating. The credit facility has a
competitive bid option program, which allows the Company to hold auctions among
banks participating in the facility for short term borrowings of up to
$500,000,000. The Company paid an origination fee in July 1997 of .30%,
origination and amendment fees in February 1998 of .39% and pays a commitment
fee quarterly over the remaining term of the facility ranging from .15% to .20%
on the facility amount.

6. PARTNERS' CAPITAL

In April 1997, Vornado completed its public offering of 5,750,000 Series A
Convertible Preferred Shares of Beneficial Interest, liquidation preference
$50.00 per share. The preferred shares bear a coupon of 6 1/2% and are
convertible into common shares at $36 3/8 per share. An equivalent number of
units were issued to Vornado for the shares sold. The offering, net of expenses,
generated approximately $276,000,000 which was used to fund the cash portion of
the Mendik Transaction. Distributions on the preferred units in 1997 were
approximately $15,549,000 (including accretion of expenses in connection with
the offering of $1,918,000).

On October 20, 1997, the Company paid a 100% unit dividend to unitholders.
All unit and per unit information has been adjusted to reflect this two-for-one
unit split.

In connection with the acquisition of Arbor in December 1997, the Company
issued approximately 2,936,000 common shares of beneficial interest and 39,400
Series A Convertible Preferred Shares of Beneficial Interest. The approximate
value of the shares issued at the time of the acquisition was $102,000,000.

7. EMPLOYEES' SHARE OPTION PLAN

Under Vornado's Omnibus Share Plan (the "Plan"), various officers and key
employees have been granted incentive share options and non-qualified options to
purchase common shares of Vornado. Options granted are at prices equal to 100%
of the market price of Vornado's shares at the date of grant, 1,119,917 shares
vest on a graduated basis, becoming fully vested 27 months after grant,
3,500,000 shares (granted in connection with Mr. Fascitelli's employment
agreement) vest on a graduated basis becoming fully vested 60 months after grant
and 910,000 shares (granted in connection with the Mendik Transaction) vest on a
graduated basis, becoming fully vested 36 months after grant. All options expire
ten years after grant. An equivalent number of units are issued when options are
exercised.

The Plan also provides for the award of Stock Appreciation Rights,
Performance Shares and Restricted Stock, as defined, none of which have been
awarded as of December 31, 1997.

51
<PAGE> 52
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

If compensation cost for Plan awards had been determined based on fair
value at the grant dates, net income and income per share would have been
reduced to the pro-forma amounts below, for the years ended December 31, 1997
and 1996 (amounts in thousands, except share amounts):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Net income applicable to Class A units:
As reported.............................................. $45,474 $61,364
Pro-forma................................................ 41,248 60,613
Net income per Class A unit applicable to Class A units:
Basic:
As reported........................................... $ .83 $ 1.26
Pro-forma............................................. .75 1.24
Diluted:
As reported........................................... .79 1.25
Pro forma............................................. .72 1.23
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Binomial option-pricing model with the following weighted-average
assumptions used for grants in the periods ending December 31, 1997 and 1996.

<TABLE>
<CAPTION>
DECEMBER
------------------
1997 1996
------- -------
<S> <C> <C>
Expected volatility......................................... 25% 26%
Expected life............................................... 5 years 5 years
Risk-free interest rate..................................... 6.4% 5.6%
Expected dividend yield..................................... 3.4% 5.1%
</TABLE>

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

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------------- --------------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES/UNITS EXERCISE PRICE SHARES/UNITS EXERCISE PRICE
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Outstanding at January 1............. 4,139,386 $22.51 1,079,880 $12.27
Granted.............................. 1,521,500 29.99 3,741,500 23.14
Exercised............................ (33,969) 18.69 (681,994) 9.75
Cancelled............................ (97,000) 31.25 -- --
---------- ----------
Outstanding at December 31........... 5,529,917 $24.43 4,139,386 $22.51
========== ==========
Options exercisable at December 31... 1,327,418 420,770
========== ==========
Weighted-average fair value of
options granted during the year
ended
December 31 (per option)........... $7.87 $4.75
</TABLE>

52
<PAGE> 53
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about options outstanding under
the Plan at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ------------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES DECEMBER 31, 1997 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1997 EXERCISE PRICE
- --------------- ----------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$6 to $12 52,868 5.0 Years $11 52,868 $11
$17 to $19 564,674 7.2 Years 18 502,425 18
$23 3,500,000 8.9 Years 23 700,000 23
$26 302,375 9.1 Years 26 72,125 26
$30 910,000 9.2 Years 30 -- --
$32 to $42 200,000 9.4 Years 34 -- --
--------- ---------
$6 to $42 5,529,917 8.9 Years $24 1,327,418 $21
========= =========
</TABLE>

Vornado shares available for future grant at December 31, 1997 were
7,945,464.

8. RETIREMENT PLAN

Prior to December 31, 1997, the Company's qualified retirement plan covered
all full-time employees. The Plan provided annual pension benefits that were
equal to 1% of the employee's annual compensation for each year of
participation. In December 1997, benefits for active employees were frozen. The
funding policy is in accordance with the minimum funding requirements of ERISA.

Pension expense includes the following components (amounts in thousands):

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost -- benefits earned during the $ 115 $ 108 $ 70
period......................................
Interest cost on projected benefit 607 544 573
obligation..................................
Actual return on assets....................... (494) (179) (307)
Net amortization and deferral................. 347 (59) 66
----- ----- -----
Net pension expense...................... $ 575 $ 414 $ 402
===== ===== =====
Assumptions used in determining the net
pension expense were:
Discount rate................................. 7 1/4% 7 1/2% 7 1/4%
Rate of increase in compensation levels....... 5 1/2% 5 1/2% 6 1/2%
Expected rate of return on assets............. 7 % 8 % 8 %
</TABLE>

53
<PAGE> 54
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the Plan's funded status and the amount
recognized in the Company's balance sheet (amounts in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $ 8,245 $ 7,590
------- -------
Accumulated benefit obligation......................... $ 8,337 $ 7,657
------- -------
Projected benefit obligation........................... $ 8,337 $ 8,028
Plan assets at fair value.............................. 4,901 3,915
------- -------
Projected benefit obligation in excess of plan assets.... 3,436 4,113
Unrecognized net obligations............................. (1,086) (2,135)
Adjustment required to recognize minimum liability....... 1,086 1,764
------- -------
Accrued pension costs.................................... $ 3,436 $ 3,742
======= =======
</TABLE>

Plan assets are invested in U.S. government obligations and securities
backed by U.S. government guaranteed mortgages.

9. LEASES

As lessor:

The Company leases space to tenants in shopping centers and office
buildings 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, 1997, future
base rental revenue under noncancellable 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):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31: AMOUNT
------------------------ ----------
<S> <C>
1998............................................. $ 215,744
1999............................................. 218,958
2000............................................. 207,757
2001............................................. 197,321
2002............................................. 185,814
Thereafter....................................... 1,522,822
</TABLE>

These amounts do not include rentals based on tenants' sales. These
percentage rents approximated $1,786,000, $936,000 and $959,000 for the years
ended December 31, 1997, 1996 and 1995.

54
<PAGE> 55
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As lessee:

The Company is a tenant under operating leases for certain properties.
These leases will expire principally during the next twenty years. Future
minimum lease payments under operating leases at December 31, 1997, are as
follows (amounts in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31: AMOUNT
------------------------ -------
<S> <C>
1998............................................... $ 2,350
1999............................................... 2,274
2000............................................... 2,109
2001............................................... 2,098
2002............................................... 1,135
Thereafter......................................... 27,126
</TABLE>

Rent expense was $2,001,000, $1,465,000 and $1,395,000 for the years ended
December 31, 1997, 1996 and 1995.

10. CONTINGENCIES

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, change 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.

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.

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.

In April 1997, the Company's Lodi Shopping Center was destroyed by a fire.
The Company intends to rebuild the shopping center commencing in 1998, which
rebuilding is subject to the approval of local

55
<PAGE> 56
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

authorities. The Company carries replacement value insurance. To date the
insurance carrier has paid the Company $5,500,000 as a deposit for the above
mentioned rebuilding. In the event the Company cannot rebuild the shopping
center, a large portion of the deposit would be returned to the carrier. If the
shopping center is rebuilt, the Company will recognize a gain measured by the
total proceeds from the insurance carrier, which could amount to approximately
$10,000,000, net of the book value of the property of $1,564,000.

11. REPURCHASE AGREEMENTS

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.

12. OTHER RELATED PARTY TRANSACTIONS

On December 2, 1996, Michael D. Fascitelli became the President of Vornado
and was elected to Vornado's Board. Mr. Fascitelli signed a five-year employment
contract under which, in addition to his annual salary, he received a deferred
payment consisting of $5,000,000 in cash and a $20,000,000 convertible
obligation payable at Vornado's option in 919,540 of its Common Shares or the
cash equivalent of their appreciated value but not less than $20,000,000.
Accordingly, cash of $5,000,000 and 919,540 Common Shares are being held in an
irrevocable trust. The deferred payment obligation to Mr. Fascitelli vested as
of December 2, 1997. Further, Mr. Fascitelli was granted options for 3,500,000
Common Shares of Vornado.

At December 31, 1997, the loans due from Mr. Roth, Mr. Rowan and Mr. Macnow
in connection with their stock option exercises were $13,122,500 ($4,993,000 of
which is shown as a reduction in partners' capital), $202,000 and $182,000,
respectively. The loans bear interest at a rate equal to the broker call rate
(7.25% at December 31, 1997) but not less than the minimum applicable federal
rate provided under the Internal Revenue Code. Interest on the loan to Mr. Roth
is payable quarterly. Mr. Roth's loan, which was due in December 1997, was
extended for five years until December 2002. The Company has agreed on each
January 1st (commencing January 1, 1997) to forgive one-fifth of the amounts due
from Mr. Rowan and Mr. Macnow, provided that they remain employees of the
Company.

The Company currently manages and leases the real estate assets of
Interstate Properties pursuant to a management agreement for which the Company
receives a quarterly 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 sixty
days' notice at the end of the term. Although the management agreement was not
negotiated at arms length, the Company believes based upon comparable fees
charged by other real estate companies, that its terms are fair to the Company.
For the years ended December 31, 1997, 1996 and 1995, $1,184,000, $2,074,000 and
$1,150,000 of management fees were earned by the Company pursuant to the
management agreement.

The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties. The Company has entered
into contracts with the Mendik Group (Bernard H. Mendik, David R. Greenbaum and
certain entities controlled by them) to provide such services in its Manhattan
office buildings. Although the terms and conditions of the contracts pursuant to
which these services are provided were not negotiated at arms length, the
Company believes based upon comparable fees charged to other real estate
companies, that the terms and conditions of such contracts are fair to the
Company. The Company was charged fees in connection with these contracts of
$9,965,241 for the period from April 15, 1997 (date of acquisition of the Mendik
portfolio) to December 31, 1997.

56
<PAGE> 57
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The common stock of the preferred stock affiliates which own interests in
the Cold Storage Companies, Hotel Pennsylvania and related management companies
is owned by Officers and Trustees of Vornado.

13. PREFERENTIAL ALLOCATIONS

Holders of Class C, D and E units distributed in connection with the Mendik
Transaction (Vornado owns all of the Class A units) are entitled to a
preferential annual distribution rate of $2.015. Holders of Class C Units are
entitled to a preferential annual distribution rate of $1.69. Class C Units will
automatically convert to Class A Units when the distributions paid to holders of
Class A Units equal $.4225 per quarter ($1.69 annually) for four consecutive
quarters. Class D and E Units will automatically convert to Class A Units when
the distributions paid to holders of Class A Units equal $.50375 per quarter
($2.015 annually) for four consecutive quarters. Generally, the value of each
Class A Unit, equates to one common share of beneficial interest of Vornado.
Preferential distributions aggregated $7,293,000 for the period from April 15,
1997 (date of acquisition of the Mendik portfolio) to December 31, 1997.

14. EARNINGS PER CLASS A UNIT

The following table sets forth the computation of basic and diluted
earnings per Class A unit:

<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Numerator:
Net income........................................ $ 68,316 $ 61,364 $ 53,008
Preferred unit distributions...................... (15,549) -- --
Preferential allocations.......................... (7,293) -- --
----------- ----------- -----------
Numerator for basic and diluted earnings per
unit -- net income applicable to Class A
units.......................................... $ 45,474 $ 61,364 $ 53,008
=========== =========== ===========

Denominator:
Denominator for basic earnings per
unit -- weighted average units................. 55,097,656 48,854,832 46,765,618
Effect of dilutive securities:
Employee stock options......................... 2,119,553 352,052 393,720
----------- ----------- -----------
Denominator for diluted earnings per
unit -- adjusted weighted average units and
assumed conversions............................ 57,217,209 49,206,884 47,159,338
=========== =========== ===========
Net income per Class A unit -- basic................ $ 0.83 $ 1.26 $ 1.13
Net income per Class A unit -- diluted.............. $ 0.79 $ 1.25 $ 1.12
</TABLE>

15. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

The following summary represents the results of operations for each quarter
in 1997 and 1996 (amounts in thousands, except share amounts):

57
<PAGE> 58
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
NET INCOME NET INCOME PER
APPLICABLE TO CLASS A UNIT(1)
CLASS A -----------------
REVENUE UNITS BASIC DILUTED
------- ------------- ----- -------
<S> <C> <C> <C> <C>
1997
March 31................................ $29,297 $ 9,690 $.19 $.18
June 30................................. 50,662 8,933 .17 .17
September 30............................ 61,868 10,385 .20 .19
December 31............................. 67,304 16,466 .26 .25
1996
March 31................................ $28,610 $15,922 $.33 $.33
June 30................................. 29,245 15,120 .31 .31
September 30............................ 29,063 14,939 .31 .31
December 31............................. 29,969 15,383 .31 .31
</TABLE>

- ---------------
(1) The total for the year may differ from the sum of the quarters as a result
of weighting.

16. SEGMENT INFORMATION

The Company has two reportable segments: office properties and retail
properties (including shopping centers). The Company operated as a single
segment until April, 1997, at which time the Mendik transaction was consummated
and the Company acquired interests in all or a portion of several Manhattan
office buildings and a management company. Accordingly, selected financial
information related to each segment is presented for 1997 only.

<TABLE>
<CAPTION>
CORPORATE
OFFICE RETAIL AND OTHER TOTAL
------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Property rentals................... $69,472 $90,304 $ 8,545 $ 168,321
Expense reimbursements............. 9,284 25,489 1,879 36,652
Other income....................... 2,070 231 1,857 4,158
Operating expenses................. 38,047 33,386 3,312 74,745
Depreciation and amortization...... 9,546 11,592 1,845 22,983
Operating income................... 30,486 70,406 (25,986)(1) 74,906
Identifiable assets................ 668,128 820,575 1,035,386 (2) 2,524,089
Capital expenditures............... 12,992 8,445 2,352 23,789
</TABLE>

- ---------------
(1) Includes amortization of officer's deferred compensation expense of $22,917
and excludes income applicable to Alexander's of $7,873 and income from
other partially-owned entities of $4,658.

(2) Includes investment in partially-owned entities of $482,800 and cash of
$356,000.

One retail tenant represents 19.6% of the total retail rentals for the year
ended December 31, 1997. Three office tenants represent 20.6%, 11.6% and 11.4%,
respectively of total office rentals for the year ended December 31, 1997. No
other tenant individually accounted for more than 10% of the respective segment
property rentals.

17. SUBSEQUENT EVENTS

Kennedy Properties

58
<PAGE> 59
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in indebtedness and an aggregate of $110 million in Operating Partnership Units
and Convertible Preferred Operating Partnership Units.

The real estate assets to be acquired include a portfolio of properties
used for office, retail and trade showroom space. The properties aggregate
approximately 5.3 million square feet and consist of the Merchandise Mart in
Chicago, the Apparel Center in Chicago, the Washington Design Center and the
Washington Office Center in Washington D.C. The transaction also includes the
acquisition of Merchandise Properties, Inc., which manages the properties and
trade shows. The closing is expected to occur in the second quarter of 1998.

Hotel Pennsylvania

On March 24, 1998, the Company entered into an agreement to increase its
interest in the Hotel Pennsylvania from 40% to 80%. Under the agreement, the
Company will purchase the 40% interest of Hotel Properties Limited (one of its
joint venture partners) for approximately $70 million including $48 million of
existing debt. The increase in the Company's interest is subject to reduction to
67% should the third joint venture partner exercise its pro rata option.

Cold Storage

There can be no assurance that these proposed transactions will ultimately
be completed.

One Penn Plaza

150 East 58th Street

In March 1998, the Company acquired 150 East 58th Street (the Architects
and Design Center), a 39 story Manhattan office building, for approximately $118
million. The building contains approximately 550,000 square feet.

Green Acres Mall

PROPOSED SPIN-OFF OF OPERATING COMPANY

59
<PAGE> 60
VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

If the spin off takes place, the Company and Vornado Operating intend to
enter into an Intercompany Agreement pursuant to which, among other things, (a)
the Company will agree under certain circumstances to offer Vornado Operating an
opportunity to become the lessee of certain real property owned now or in the
future by the Company (under mutually satisfactory lease terms) and (b) Vornado
Operating will agree not to make any real estate investment or other
REIT-qualified investments unless it first offers the Company the opportunity to
make such investment and the Company has rejected that opportunity. The Company
expects to capitalize Vornado Operating with an equity contribution of $25
million of cash, and intends to extend to Vornado Operating a $75 million
unsecured five-year revolving line of credit. The Intercompany Agreement and the
Credit Agreement were not subject to arms-length negotiation because Vornado
Operating is currently a subsidiary of the Company. Accordingly, there can be no
assurance that the terms of these agreements are comparable to those the Company
could have negotiated with an unaffiliated third party.

60
<PAGE> 61

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Operating Partnership is managed by Vornado, its general partner.
Information relating to trustees of Vornado will be contained in a definitive
Proxy Statement involving the 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, 1997,
and such information is incorporated herein by reference. Information relating
to Executive Officers of Vornado appears at page 25 of this Annual Report on
Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to Vornado's executive compensation will be contained
in Vornado's Proxy Statement referred to above in Item 10, "Directors and
Executive Officers of the Registrant", 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", and such information is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information relating to certain relationships and related transactions will
be contained in Vornado's Proxy Statement referred to in Item 10, "Directors and
Executive Officers of the Registrant", and such information is incorporated
herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(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.

2. Financial Statement Schedules.

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.

<TABLE>
<CAPTION>
PAGES IN THIS
ANNUAL REPORT
ON FORM 10-K
---------------
<S> <C>
Independent Auditors' Report
II -- Valuation and Qualifying Accounts -- years ended
December 31, 1997, 1996 and 1995................... 64
III -- Real Estate and Accumulated Depreciation as of
December 31, 1997.................................. 65
</TABLE>

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 consolidated financial statements of Alexander's, Inc. for the year
ended December 31, 1996 are hereby incorporated by reference to Item 14(a)1 of
the 1996 Annual Report on Form 10-K of Alexander's, Inc. for the year ended
December 31, 1996.

61
<PAGE> 62

3. The following exhibits listed on the Exhibit Index are filed with
this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
12 Consolidated Ratios of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Share Dividend
Requirements
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors to Incorporation by
Reference.
27 Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K

During the last quarter of the period covered by this Annual Report on Form
10-K described below.

<TABLE>
<CAPTION>
PERIOD COVERED: (DATE OF ITEMS REPORTED DATE OF REPORT
EARLIEST EVENT REPORTED) -------------- --------------
<S> <C> <C>
September 22, 1997...... Financial statements and pro forma financial October 8, 1997
information in connection with the acquisition
of or investments in Charles E. Smith
Commercial Realty L.P., Hotel Pennsylvania, URS
Logistics, Inc. and Americold Corporation
October 14, 1997........ Underwriting agreements in connection with sale October 24, 1997
of securities
November 18, 1997....... Agreements to acquire One Penn Plaza and 150 December 1, 1997
East 58th St. office buildings
December 16, 1997....... Acquisition of Arbor Property Trust and 640 December 22, 1997
Fifth Avenue, an office building
</TABLE>

62
<PAGE> 63

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
------------------------------------
(General Partner)

By: /s/ IRWIN GOLDBERG
------------------------------------
Irwin Goldberg, Vice President,
Chief Financial Officer

Date: March 25, 1998

---------------------------------------------------------------

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:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C> <C>

By: /s/ STEVEN ROTH Chairman of the Board of March 25, 1998
----------------------------------------------------- Trustees (Principal
(Steven Roth) Executive Officer)

By: /s/ MICHAEL D. FASCITELLI President and Trustee March 25, 1998
-----------------------------------------------------
(Michael D. Fascitelli)

By: /s/ IRWIN GOLDBERG Vice President -- Chief March 25, 1998
----------------------------------------------------- Financial Officer
(Irwin Goldberg)

By: /s/ DAVID MANDELBAUM Trustee March 25, 1998
-----------------------------------------------------
(David Mandelbaum)

By: /s/ BERNARD MENDIK Trustee March 25, 1998
-----------------------------------------------------
(Bernard Mendik)

By: /s/ STANLEY SIMON Trustee March 25, 1998
-----------------------------------------------------
(Stanley Simon)

By: /s/ RONALD G. TARGAN Trustee March 25, 1998
-----------------------------------------------------
(Ronald G. Targan)

By: /s/ RUSSELL B. WIGHT, JR. Trustee March 25, 1998
-----------------------------------------------------
(Russell B. Wight, Jr.)

By: /s/ RICHARD R. WEST Trustee March 25, 1998
-----------------------------------------------------
(Richard R. West)
</TABLE>

63
<PAGE> 64

VORNADO REALTY L.P.
AND SUBSIDIARIES

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------- ------------ --------------- ------------------------------- --------
BALANCE ADDITIONS DEDUCTIONS BALANCE
AT BEGINNING CHARGED AGAINST ------------------------------- AT END
DESCRIPTION OF YEAR OPERATIONS DESCRIPTION AMOUNT OF YEAR
----------- ------------ --------------- ---------------------- ------ --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Deducted from accounts
receivable, allowance for Uncollectible accounts
doubtful accounts............ $575 $305 written-off $222 $658
==== ==== ==== ====

YEAR ENDED DECEMBER 31, 1996:
Deducted from accounts
receivable allowance for Uncollectible accounts
doubtful accounts............ $578 $211 written-off $214 $575
==== ==== ==== ====

YEAR ENDED DECEMBER 31, 1995:
Deducted from accounts
receivable, allowance for Uncollectible accounts
doubtful accounts............ $457 $613 written-off $492 $578
==== ==== ==== ====
</TABLE>

64
<PAGE> 65

VORNADO REALTY L.P.
AND SUBSIDIARIES

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------ ------------ ------------------------ -------------- -------------------------------------
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
------------------------ CAPITALIZED -------------------------------------
BUILDINGS AND SUBSEQUENT BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(2)
----------- ------------ -------- ------------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
NEW YORK
Two Penn Plaza,
Manhattan............... $ 80,000 $ 53,615 $164,903 $ 9,090 $ 53,615 $ 173,993 $ 227,608
Eleven Penn Plaza,
Manhattan............... 54,612 40,333 85,259 931 40,333 86,190 126,523
1740 Broadway,
Manhattan............... -- 26,971 102,890 2,191 26,971 105,081 132,052
866 United Nations Plaza,
Manhattan............... 33,000 32,196 37,534 174 32,196 37,708 69,904
90 Park Avenue,
Manhattan............... -- 8,000 175,890 45 8,000 175,935 183,935
825 Seventh Avenue,
Manhattan............... -- 853 8,017 (193) 853 7,824 8,677
640 Fifth Avenue,
Manhattan............... -- 38,224 25,992 -- 38,224 25,992 64,216
-------- -------- -------- -------- -------- ---------- ----------
Total New York........ 167,612 200,192 600,485 12,238 200,192 612,723 812,915
-------- -------- -------- -------- -------- ---------- ----------
NEW JERSEY
Paramus................... 601 -- 8,345 2,363 -- 10,708 10,708
-------- -------- -------- -------- -------- ---------- ----------
Total New Jersey...... 601 -- 8,345 2,363 -- 10,708 10,708
-------- -------- -------- -------- -------- ---------- ----------
TOTAL OFFICE BUILDINGS........ 168,213 200,192 608,830 14,601 200,192 623,431 823,623
-------- -------- -------- -------- -------- ---------- ----------
SHOPPING CENTERS
NEW JERSEY
Atlantic City............. 2,135* 358 2,143 586 358 2,729 3,087
Bordentown................ 3,276* 498 3,176 1,226 713 4,187 4,900
Bricktown................. 9,919* 929 2,175 9,180 929 11,355 12,284
Cherry Hill............... 9,706* 915 3,926 3,308 915 7,234 8,149
Delran.................... 2,848* 756 3,184 2,024 756 5,208 5,964
Dover..................... 3,635* 224 2,330 2,598 204 4,948 5,152
East Brunswick............ 8,205* 319 3,236 3,823 319 7,059 7,378
East Hanover.............. 11,066* 376 3,063 3,541 477 6,503 6,980
Hackensack................ -- 536 3,293 7,278 536 10,571 11,107
Jersey City............... 10,381* 652 2,962 1,798 652 4,760 5,412
Kearny(4)................. -- 279 4,429 (1,301) 290 3,117 3,407
Lawnside.................. 5,708* 851 2,222 1,492 851 3,714 4,565
Lodi(5)................... 2,420* 245 2,315 1,464 245 3,779 4,024
Manalapan................. 6,397* 725 2,447 4,955 725 7,402 8,127
Marlton................... 5,398* 1,514 4,671 684 1,611 5,258 6,869
Middletown................ 7,761* 283 1,508 3,956 283 5,464 5,747
Morris Plains............. 6,600* 1,254 3,140 3,277 1,104 6,567 7,671
North Bergen(4)........... -- 510 3,390 (956) 2,309 635 2,944
North Plainfield.......... 3,380 500 13,340 320 500 13,660 14,160
Totowa.................... 15,646* 1,097 5,359 11,964 1,097 17,323 18,420
Turnersville.............. 2,116* 900 2,132 66 900 2,198 3,098
Union..................... 15,975* 1,014 4,527 1,894 1,014 6,421 7,435
Vineland.................. 2,358* 290 1,594 1,253 290 2,847 3,137

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- ------------------------------ ---------------- --------------- -------- ----------------------

LIFE ON WHICH
ACCUMULATED DEPRECIATION IN LATEST
DEPRECIATION AND DATE OF DATE INCOME STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
----------- ---------------- --------------- -------- ----------------------
<S> <C> <C> <C> <C>
OFFICE BUILDINGS
NEW YORK
Two Penn Plaza,
Manhattan............... $ 3,072 1968 1997 39 Years
Eleven Penn Plaza,
Manhattan............... 1,568 1923 1997 39 Years
1740 Broadway,
Manhattan............... 1,941 1950 1997 39 Years
866 United Nations Plaza,
Manhattan............... 689 1966 1997 39 Years
90 Park Avenue,
Manhattan............... 1,691 1964 1997 39 Years
825 Seventh Avenue,
Manhattan............... 313 1968 1997 39 Years
640 Fifth Avenue,
Manhattan............... 28 1950 1997 39 Years
--------
Total New York........ 9,302
--------
NEW JERSEY
Paramus................... 2,632 1967 1987 29-40 Years
--------
Total New Jersey...... 2,632
--------
TOTAL OFFICE BUILDINGS........ 11,934
--------
SHOPPING CENTERS
NEW JERSEY
Atlantic City............. 1,899 1965 1965 14-40 Years
Bordentown................ 3,655 1958 1958 7-40 Years
Bricktown................. 4,306 1968 1968 22-40 Years
Cherry Hill............... 4,828 1964 1964 12-40 Years
Delran.................... 2,737 1972 1972 16-40 Years
Dover..................... 2,689 1964 1964 16-40 Years
East Brunswick............ 4,893 1957 1957 9-33 Years
East Hanover.............. 4,147 1962 1962 9-40 Years
Hackensack................ 4,206 1963 1963 15-40 Years
Jersey City............... 3,444 1965 1965 12-40 Years
Kearny(4)................. 997 1938 1959 24-40 Years
Lawnside.................. 2,009 1969 1969 17-40 Years
Lodi(5)................... 2,215 1955 1975 10-27 Years
Manalapan................. 3,463 1971 1971 14-40 Years
Marlton................... 3,628 1973 1973 16-40 Years
Middletown................ 2,545 1963 1963 19-40 Years
Morris Plains............. 4,106 1961 1985 7-19 Years
North Bergen(4)........... 79 1993 1959 30 Years
North Plainfield.......... 3,924 1955 1989 25-30 Years
Totowa.................... 5,555 1957 1957 17-40 Years
Turnersville.............. 1,634 1974 1974 23-40 Years
Union..................... 4,783 1962 1962 7-40 Years
Vineland.................. 1,694 1966 1966 18-40 Years
</TABLE>

(Continued)

65
<PAGE> 66

VORNADO REALTY L.P.
AND SUBSIDIARIES

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------ ------------ ------------------------ -------------- -------------------------------------
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
------------------------ CAPITALIZED -------------------------------------
BUILDINGS AND SUBSEQUENT BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(2)
----------- ------------ -------- ------------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Watchung(4)............... -- 451 2,347 6,811 4,200 5,409 9,609
Woodbridge................ 8,792* 190 3,047 711 220 3,728 3,948
-------- -------- -------- -------- -------- ---------- ----------
Total New Jersey...... 143,722 15,666 85,956 71,952 21,498 152,076 173,574
-------- -------- -------- -------- -------- ---------- ----------
NEW YORK
14th Street and Union
Square, Manhattan....... -- 12,566 4,044 3,525 12,581 7,554 20,135
Albany (Menands).......... -- 460 1,677 2,812 460 4,489 4,949
Buffalo (Amherst)......... 4,863* 402 2,019 2,125 636 3,910 4,546
Freeport.................. 8,021* 1,231 3,273 2,848 1,231 6,121 7,352
New Hyde Park............. 2,043* -- -- 126 -- 126 126
North Syracuse............ -- -- -- 23 -- 23 23
Rochester (Henrietta)..... 2,203* -- 2,124 1,168 -- 3,292 3,292
Rochester................. 2,832* 443 2,870 616 443 3,486 3,929
Valley Stream............. 124,985 138,691 99,586 -- 138,691 99,586 238,277
-------- -------- -------- -------- -------- ---------- ----------
Total New York........ 144,947 153,793 115,593 13,243 154,042 128,587 282,629
-------- -------- -------- -------- -------- ---------- ----------
PENNSYLVANIA
Allentown................. 7,696* 70 3,446 10,056 334 13,238 13,572
Bensalem.................. 3,967* 1,198 3,717 1,883 1,198 5,600 6,798
Bethlehem................. -- 278 1,806 3,873 278 5,679 5,957
Broomall.................. 3,260* 734 1,675 1,644 850 3,203 4,053
Glenolden................. 4,245* 850 1,295 756 850 2,051 2,901
Lancaster................. 2,312* 606 2,312 2,646 606 4,958 5,564
Levittown................. 2,283* 193 1,231 177 193 1,408 1,601
10th and Market Streets,
Philadelphia............ -- 933 3,230 4,878 933 8,108 9,041
Upper Moreland............ 3,517* 683 2,497 265 683 2,762 3,445
York...................... 1,463* 421 1,700 1,279 421 2,979 3,400
-------- -------- -------- -------- -------- ---------- ----------
Total Pennsylvania.... 28,743 5,966 22,909 27,457 6,346 49,986 56,332
-------- -------- -------- -------- -------- ---------- ----------
MARYLAND
Baltimore (Belair Rd.).... -- 785 1,333 3,146 785 4,479 5,264
Baltimore (Towson)........ 5,779* 581 2,756 714 581 3,470 4,051
Baltimore (Dundalk)....... 4,084* 667 1,710 3,166 667 4,876 5,543
Glen Burnie............... 2,299* 462 1,741 637 462 2,378 2,840
Hagerstown................ -- 168 1,453 909 168 2,362 2,530
-------- -------- -------- -------- -------- ---------- ----------
Total Maryland........ 12,162 2,663 8,993 8,572 2,663 17,565 20,228
-------- -------- -------- -------- -------- ---------- ----------
CONNECTICUT
Newington................. 3,042* 502 1,581 688 502 2,269 2,771
Waterbury................. 3,889* -- 2,103 1,590 667 3,026 3,693
-------- -------- -------- -------- -------- ---------- ----------
Total Connecticut..... 6,931 502 3,684 2,278 1,169 5,295 6,464
-------- -------- -------- -------- -------- ---------- ----------
MASSACHUSETTS
Chicopee.................. 1,999* 510 2,031 358 510 2,389 2,899
Springfield(4)............ -- 505 1,657 836 2,586 412 2,998
-------- -------- -------- -------- -------- ---------- ----------
Total Massachusetts... 1,999 1,015 3,688 1,194 3,096 2,801 5,897
-------- -------- -------- -------- -------- ---------- ----------

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- ------------------------------ ---------------- --------------- -------- ----------------------

LIFE ON WHICH
ACCUMULATED DEPRECIATION IN LATEST
DEPRECIATION AND DATE OF DATE INCOME STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
----------- ---------------- --------------- -------- ----------------------
<S> <C> <C> <C> <C>
Watchung(4)............... 559 1994 1959 27-30 Years
Woodbridge................ 2,793 1959 1959 11-40 Years
--------
Total New Jersey...... 76,788
--------
NEW YORK
14th Street and Union
Square, Manhattan....... 606 1965 1993 36-40 Years
Albany (Menands).......... 1,859 1965 1965 22-40 Years
Buffalo (Amherst)......... 2,401 1968 1968 1-40 Years
Freeport.................. 2,595 1981 1981 15-40 Years
New Hyde Park............. 122 1970 1976 6-7 Years
North Syracuse............ 23 1967 1976 11-12 Years
Rochester (Henrietta)..... 1,976 1971 1971 15-40 Years
Rochester................. 2,331 1966 1966 10-40 Years
Valley Stream............. 98 1956 1997 40 Years
--------
Total New York........ 12,011
--------
PENNSYLVANIA
Allentown................. 4,508 1957 1957 20-42 Years
Bensalem.................. 3,399 1972 1972 17-40 Years
Bethlehem................. 3,001 1966 1966 9-40 Years
Broomall.................. 1,887 1966 1966 9-40 Years
Glenolden................. 999 1975 1975 18-40 Years
Lancaster................. 2,824 1966 1966 12-40 Years
Levittown................. 1,091 1964 1964 7-40 Years
10th and Market Streets,
Philadelphia............ 561 1977 1994 28-30 Years
Upper Moreland............ 1,884 1974 1974 16-40 Years
York...................... 1,633 1970 1970 15-40 Years
--------
Total Pennsylvania.... 21,787
--------
MARYLAND
Baltimore (Belair Rd.).... 2,873 1962 1962 10-33 Years
Baltimore (Towson)........ 2,030 1968 1968 13-40 Years
Baltimore (Dundalk)....... 2,506 1966 1966 12-40 Years
Glen Burnie............... 1,745 1958 1958 18-33 Years
Hagerstown................ 1,310 1966 1966 9-40 Years
--------
Total Maryland........ 10,464
--------
CONNECTICUT
Newington................. 1,493 1965 1965 9-40 Years
Waterbury................. 1,741 1969 1969 21-40 Years
--------
Total Connecticut..... 3,234
--------
MASSACHUSETTS
Chicopee.................. 1,744 1969 1969 13-40 Years
Springfield(4)............ 61 1993 1966 28-30 Years
--------
Total Massachusetts... 1,805
--------
</TABLE>

(Continued)

66
<PAGE> 67

VORNADO REALTY L.P.
AND SUBSIDIARIES

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------ ------------ ------------------------ -------------- -------------------------------------
INITIAL COST TO GROSS AMOUNT AT WHICH
COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
------------------------ CAPITALIZED -------------------------------------
BUILDINGS AND SUBSEQUENT BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(2)
----------- ------------ -------- ------------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
TEXAS
Dallas
Lewisville................ 764* 2,433 2,271 676 2,469 2,911 5,380
Mesquite.................. 3,445* 3,414 4,704 1,133 3,414 5,837 9,251
Skillman.................. 1,987* 3,714 6,891 1,067 3,714 7,958 11,672
-------- -------- -------- -------- -------- ---------- ----------
Total Texas........... 6,196 9,561 13,866 2,876 9,597 16,706 26,303
-------- -------- -------- -------- -------- ---------- ----------
PUERTO RICO (SAN JUAN)
Montehiedra............... 62,698 9,182 66,701 -- 9,182 66,701 75,883
-------- -------- -------- -------- -------- ---------- ----------
TOTAL SHOPPING CENTERS........ 407,398 198,348 321,390 127,572 207,593 439,717 647,310
-------- -------- -------- -------- -------- ---------- ----------
WAREHOUSE/INDUSTRIAL
NEW JERSEY
East Brunswick............ -- -- 4,772 2,867 -- 7,639 7,639
East Hanover.............. 8,210* 576 7,752 6,977 691 14,614 15,305
Edison.................... 2,455* 705 2,839 1,212 704 4,052 4,756
Garfield.................. 378 96 8,068 4,323 97 12,390 12,487
-------- -------- -------- -------- -------- ---------- ----------
Total Warehouse/
Industrial.......... 11,043 1,377 23,431 15,379 1,492 38,695 40,187
-------- -------- -------- -------- -------- ---------- ----------
OTHER PROPERTIES
NEW JERSEY
Montclair................. -- 66 470 330 66 800 866
Rahway.................... -- -- -- 25 -- 25 25
-------- -------- -------- -------- -------- ---------- ----------
Total New Jersey...... -- 66 470 355 66 825 891
-------- -------- -------- -------- -------- ---------- ----------
NEW YORK
1135 Third Avenue......... -- 7,796 7,796 -- 7,796 7,796 15,592
Riese..................... -- 19,135 7,294 -- 19,135 7,294 26,429
-------- -------- -------- -------- -------- ---------- ----------
Total New York........ -- 26,931 15,090 -- 26,931 15,090 42,021
-------- -------- -------- -------- -------- ---------- ----------
TOTAL OTHER PROPERTIES........ -- 26,997 15,560 355 26,997 15,915 42,912
-------- -------- -------- -------- -------- ---------- ----------
LEASEHOLD IMPROVEMENTS AND
EQUIPMENT 10,061 10,061
---------- ----------
TOTAL -
DECEMBER 31, 1997........... $586,654 $426,914 $969,211 $157,907 $436,274 $1,127,819 $1,564,093
======== ======== ======== ======== ======== ========== ==========

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- ------------------------------ ---------------- --------------- -------- ----------------------

- ---------------

* These encumbrances are cross collateralized under a mortgage in the amount of
$227,000,000 at December 31, 1997.

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 $480,000,000 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 in 1993. As a result, the cost
of the buildings and improvements, net of accumulated depreciation, were
transferred to land. In addition, the cost of the land in Kearny is net of a
$1,615,000 insurance recovery.

5) Building destroyed by fire expected to be rebuilt.

67
<PAGE> 68

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:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
REAL ESTATE
Balance at beginning of period.............. $ 397,298 $382,476 $365,832
Additions during the period:
Land..................................... 374,996 -- 161
Buildings & improvements................. 792,397 14,822 16,635
---------- -------- --------
1,564,691 397,298 382,628
Less: Cost of assets written-off............ 598 -- 152
---------- -------- --------
Balance at end of period.................... $1,564,093 $397,298 $382,476
========== ======== ========
ACCUMULATED DEPRECIATION
Balance at beginning of period.............. $ 151,049 $139,495 $128,705
Additions charged to operating expenses..... 22,983 11,589 10,790
---------- -------- --------
174,032 151,084 139,495
Less: Accumulated depreciation on assets
written-off.............................. 598 35 --
---------- -------- --------
Balance at end of period.................... $ 173,434 $151,049 $139,495
========== ======== ========
</TABLE>

68
<PAGE> 69

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
2.1 -- Master Consolidation Agreement (the "Master Consolidation
Agreement"), dated March 12, 1997, among Vornado Realty
Trust, Vornado/Saddle Brook L.L.C., The Mendik Company,
L.P., and various parties defined therein -- Incorporated
by reference to Exhibit 2.1 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on March 26, 1997.... *
2.2 -- Agreement for Contribution of Interests in 1740 Broadway
Investment Company, dated as of April 15, 1997, by and
among The Mendik Company, L.P., Mendik 1740 Corp. and
Certain Partners of 1740 Broadway Investment
Company -- Incorporated by reference to Exhibit 2.1 of
Vornado's Current Report on Form 8-K (File No. 001-11954),
filed on April 30, 1997................................... *
2.3 -- Agreement for Contribution of Interests in Eleven Penn Plaza
Company, dated as of April 15, 1997, by and among The
Mendik Company, L.P., The Partners in M/F Associates, M/F
Eleven Associates and M/S Associates and M/S Eleven
Associates and Bernard H. Mendik -- Incorporated by
reference to Exhibit 2.2 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on April 30, 1997.... *
2.4 -- Agreement for Contribution of Interests in 866 UN Plaza
Associates LLC, dated as of April 15, 1997, by and among
The Mendik Company, L.P., The Members of 866 UN Plaza
Associates LLC and Bernard H. Mendik -- Incorporated by
reference to Exhibit 2.3 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on April 30, 1997.... *
2.5 -- Agreement for Contribution of Interests in M330 Associates,
dated as of April 15, 1997, by and among The Mendik
Company, L.P., The Partners in M330 Associates and The
Mendik Partnership, L.P. -- Incorporated by reference to
Exhibit 2.4 of Vornado's Current Report on Form 8-K (File
No. 001-11954), filed on April 30, 1997................... *
2.6 -- Agreement for Contribution of Interests in 570 Lexington
Interests, dated as of April 15, 1997, by and among The
Mendik Company, L.P., Mendik Realty Company and The
Partners of 570 Lexington Investors -- Incorporated by
reference to Exhibit 2.5 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on April 30, 1997.... *
2.7 -- Agreement for Contribution of Interests in B&B Park Avenue
L.P., dated as of April 15, 1997, by and among The Mendik
Company, L.P., Mendik RELP Corporation and The Partners of
B&B Park Avenue L.P. -- Incorporated by reference to
Exhibit 2.6 of Vornado's Current Report on Form 8-K (File
No. 001-11954), filed on April 30, 1997................... *
2.8 -- Agreement for Contribution of Interests in Two Penn Plaza
Associates L.P., dated as of April 15, 1997, by and among
The Mendik Company, L.P., The Partners of Two Penn Plaza
Associates L.P. and Bernard H. Mendik -- Incorporated by
reference to Exhibit 2.7 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on April 30, 1997.... *
2.9 -- Contribution Agreement (Transfer of 99% of REIT Management
Assets from Mendik/FW LLC to the Operating Partnership),
dated as of April 15, 1997, between FW/Mendik REIT, L.L.C.
and The Mendik Company, L.P. -- Incorporated by reference
to Exhibit 2.8 of Vornado's Current Report on Form 8-K
(File No. 001-11954), filed on April 30, 1997............. *
</TABLE>

69
<PAGE> 70

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
2.10 -- Assignment and Assumption Agreement (Transfer of 1% Interest
in REIT Management Assets and Third-Party Management
Assets from Mendik/FW LLC to the Management Corporation),
dated as of April 15, 1997, between FW/Mendik REIT, L.L.C.
and Mendik Management Company, Inc. -- Incorporated by
reference to Exhibit 2.9 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on April 30, 1997.... *
2.11 -- Agreement and Plan of Merger, dated as of August 22, 1997,
among Vornado Realty Trust, Trees Acquisition Subsidiary,
Inc. and Arbor Property Trust -- Incorporated by reference
to Exhibit 99.3 of Vornado's Current Report on Form 8-K
(File No. 001-11954), dated August 21, 1997, as amended by
Form 8-K/A, dated August 21, 1997 and filed on September
11, 1997.................................................. *
2.12 -- Amendment to Agreement and Plan of Merger, dated as of
October 15, 1997, among Vornado Realty Trust, Trees
Acquisition Subsidiary, Inc. and Arbor Property
Trust -- Incorporated by reference to Exhibit 2.2 of
Vornado's Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-36835), filed on October 27,
1997...................................................... *
2.13 -- Agreement and Plan of Merger, dated as of September 26,
1997, among Vornado Realty Trust, Atlanta Parent, Inc.,
Atlanta Storage Acquisition Co. and URS Logistics,
Inc. -- Incorporated by reference to Exhibit 99.4 of
Vornado's Current Report on Form 8-K (File No. 001-11954),
filed on October 8, 1997.................................. *
2.14 -- Agreement and Plan of Merger, dated as of September 26,
1997, among Vornado Realty Trust, Portland Parent, Inc.,
Portland Storage Acquisition Co. and Americold
Corporation -- Incorporated by reference to Exhibit 99.5
of Vornado's Current Report on Form 8-K (File No.
001-11954), filed on October 8, 1997...................... *
3.1 -- Amended and Restated Declaration of Trust of Vornado,
amended April 3, 1997 -- Incorporated by reference to
Exhibit 3.1 of Vornado's Registration Statement on Form
S-8 (File No. 333-29011), filed on June 12, 1997.......... *
3.2 -- By-laws of Vornado, as amended on April 28, 1997 to Exhibit
3(b) of Vornado's Quarterly Report on Form 10-Q for the
period ended March 31, 1997 (File No. 001-11954), filed on
May 14, 1997.............................................. *
3.3 -- First Amended and Restated Agreement of Limited Partnership
of the Operating Partnership, dated as of April 15,
1997 -- Incorporated by reference to Exhibit 3.1 of the
Operating Partnership's Registration Statement on Form 10
(File No. 000-22685), filed on June 12, 1997.............. *
3.4 -- Second Amended and Restated Agreement of Limited Partnership
of the Operating Partnership, dated as of October 20,
1997 -- Incorporated by reference from the Annual Report
on Form 10-K for the year ended December 31, 1997, filed
by Vornado Realty Trust on March 31, 1998................. *
3.5 -- Amendment to Second Amended and Restated Agreement of
Limited Partnership, dated as of December 16,
1997 -- Incorporated by reference from the Annual Report
on Form 10-K for the year ended December 31, 1997, filed
by Vornado Realty Trust on March 31, 1998................. *
4.1 -- Indenture dated as of November 24, 1993 between Vornado
Finance Corp. and Bankers Trust Company, as
Trustee -- Incorporated by reference to Vornado's current
Report on Form 8-K dated November 24, 1993 (File No.
001-11954), filed December 1, 1993........................ *
4.2 -- Specimen certificate representing Vornado's Common Shares of
Beneficial Interest, par value $0.04 per
share -- Incorporated by reference to Exhibit 4.1 of
Amendment No. 1 to Registration Statement on Form S-3
(File No. 33-62395), filed on October 26, 1995............ *
</TABLE>

70
<PAGE> 71

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
4.3 -- Specimen certificate representing Vornado's $3.25 Series A
Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share -- Incorporated by reference
to Exhibit 4.2 of Vornado's Current Report on Form 8-K,
dated April 3, 1997 (File No. 001-11954), filed on April
8, 1997................................................... *
4.4 -- 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 4.1 of Vornado's Current Report on Form 8-K,
dated April 3, 1997 (File No. 001-11954), filed on April
8, 1997................................................... *
10.1 -- 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............... *
10.2 -- 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......................... *
10.2 -- 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...................................................... *
10.3** -- 1985 Stock Option Plan as amended -- Incorporated by
reference to Vornado's Quarterly Report on Form 10-Q for
quarter ended May 2, 1987 (File No. 001-11954), filed June
9, 1987................................................... *
10.4** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan -- Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9,
1985...................................................... *
10.5** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan -- Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
May 2, 1987 (File No. 001-11954), filed June 9, 1987...... *
10.6** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan -- Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9,
1985...................................................... *
10.7** -- Employment Agreement between Vornado, Inc. and Joseph Macnow
dated January 1, 1992 -- Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 001-11954), filed March 30,
1992...................................................... *
10.8** -- Employment Agreement between Vornado, Inc. and Richard Rowan
dated January 1, 1992 -- Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 001-11954), filed March 30,
1992...................................................... *
10.9** -- Employment Agreement between Vornado Realty Trust and Irwin
Goldberg, dated December 11, 1997 -- Incorporated by
reference from the Annual Report on Form 10-K for the year
ended December 31, 1997, filed by Vornado Realty Trust on
March 31, 1998............................................ *
</TABLE>

- ---------------

<TABLE>
<C> <S> <C>
* Incorporated by reference
** Management contract or compensatory plan
</TABLE>

71
<PAGE> 72

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
10.10** -- 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................ *
10.11 -- Promissory Notes from Steven Roth to Vornado, Inc. dated
December 29, 1992 and January 15, 1993 -- 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......................................... *
10.12 -- 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......................................... *
10.13 -- 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...................................................... *
10.14 -- Promissory Note from Steven Roth to Vornado Realty Trust
dated April 15, 1993 and June 17, 1993 -- 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............................................ *
10.15 -- Promissory Note from Richard Rowan to Vornado Realty
Trust -- 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................ *
10.16 -- Promissory Note from Joseph Macnow to Vornado Realty
Trust -- 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................ *
10.17 -- 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......................................... *
10.18 -- 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........ *
10.19 -- 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................ *
10.20 -- 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................ *
10.21 -- 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...................................................... *
</TABLE>

- ---------------

<TABLE>
<C> <S> <C>
* Incorporated by reference
</TABLE>

72
<PAGE> 73

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
10.22 -- 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....................... *
10.23 -- 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................... *
10.24 -- 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...................... *
10.25 -- 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........... *
10.26 -- Revolving Credit Agreement dated as of February 27, 1995
among Vornado Realty Trust, as borrower, and Union Bank of
Switzerland, as Bank and Administrative
Agent -- Incorporated by reference to Exhibit 10(F)9 of
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 001-11954), filed March 23,
1995...................................................... *
10.27 -- 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..................... *
10.28 -- 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)... *
10.29 -- Amended and Restated Revolving Credit Agreement, dated as of
February 23, 1998, between Vornado Realty L.P., as
Borrower, Vornado Realty Trust, as General Partner and
Union Bank of Switzerland (New York Branch), as Bank, the
other banks signatory hereto, each as a bank, Union Bank
of Switzerland (New York Branch), as Administrative Agent
and Citicorp Real Estate, Inc., The Chase Manhattan Bank
and Nationsbank, as Syndication Agents -- Incorporated by
reference from the Annual Report on Form 10-K for the year
ended December 31, 1997, filed by Vornado Realty Trust on
March 31, 1998............................................ *
10.30 -- 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............. *
10.31 -- 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....................... *
10.32 -- 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....................... *
</TABLE>

73
<PAGE> 74

<TABLE>
<CAPTION>
PAGE NUMBER
IN
EXHIBIT SEQUENTIAL
NO. NUMBERING
------- -----------
<C> <S> <C>
10.33 -- 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...................................................... *
12 -- Consolidated Ratios of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Share Dividend
Requirements.............................................. 75
13 -- Not applicable..............................................
16 -- Not applicable..............................................
18 -- Not applicable..............................................
19 -- Not applicable..............................................
21 -- Subsidiaries of the Registrant.............................. 76
22 -- Not applicable..............................................
23 -- Consent of independent auditors to incorporation by
reference................................................. 80
25 -- Not applicable..............................................
27.1 -- Financial Data Schedule..................................... 81
27.2 -- Financial Data Schedule..................................... 82
29 -- Not applicable..............................................
</TABLE>

<PAGE> 1

EXHIBIT 12

VORNADO REALTY L.P.

CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from continuing
operations before income
taxes.................... $ 45,474 $61,364 $53,008 $41,240 $25,386
Fixed charges.............. 59,104 17,214 17,333 16,229 31,892
-------- ------- ------- ------- -------
Income from continuing
operations before income
taxes and fixed
charges.................. $104,578 $78,578 $70,341 $57,469 $57,278
======== ======= ======= ======= =======
Fixed charges:
Interest and debt
expense............... 42,888 $16,726 $16,426 $14,209 $31,155
Preferred stock
dividends............. 15,549 -- -- -- --
1/3 of rent
expense -- interest
factor................ 667 488 465 438 455
-------- ------- ------- ------- -------
59,104 17,214 16,891 14,647 31,610
Capitalized interest..... -- -- 442 1,582 282
-------- ------- ------- ------- -------
$ 59,104 $17,214 $17,333 $16,229 $31,892
======== ======= ======= ======= =======
Ratio of earnings to fixed
charges.................. 1.76 4.56 4.06 3.54 1.80
</TABLE>

Note: For purposes of this calculation, earnings before fixed charges consist of
earnings before income taxes plus fixed charges. Fixed charges consist of
interest expense on all indebtedness (including amortization of deferred
debt issuance costs) preferred stock dividends and the portion of
operating lease rental expense that is representative of the interest
factor (deemed to be one third of operating lease rentals).

<TABLE>
<S> <C> <C> <C> <C> <C>
Rent Expense........ $ 2,001 $ 1,465 $ 1,395 $ 1,313 $ 1,366
======== ======= ======= ======= =======
</TABLE>

<PAGE> 1

EXHIBIT 21

VORNADO REALTY TRUST L.P.
SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
------------------ ---------------------
<S> <C>
150 East 58th Street L.L.C. ................................ New York
1740 Broadway Associates L.P. .............................. Delaware
20 Broad Lender L.L.C. ..................................... New York
201 East 66th Street L.L.C. ................................ New York
330 Madison Company......................................... New York
40 East 14 Realty Associates L.L.C. ........................ New York
401 Commercial Son, L.L.C. ................................. Delaware
401 Commercial, L.P. ....................................... Delaware
401 General Partner, L.L.C. ................................ Delaware
401 Hotel General Partner, L.L.C. .......................... Delaware
401 Hotel, L.P. ............................................ Delaware
570 Lexington Associates, L.P. ............................. New York
570 Lexington Company, L.P. ................................ New York
825 Seventh Avenue Holding L.L.C. .......................... New York
866 U.N. Plaza Associates L.L.C. ........................... New York
909 Third Avenue Assignee L.L.C. ........................... New York
Americold Corporation....................................... Oregon
Americold Services Corporation.............................. Delaware
Amherst Holding L.L.C. ..................................... New York
Amherst Industries L.L.C. .................................. New York
Arbor Property, L.P. ....................................... Delaware
Atlanta Parent, Inc. ....................................... 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
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
Bordentown Holding L.L.C. .................................. New Jersey
Brentwood Development L.L.C. ............................... New York
Bridgeland Warehouses L.L.C. ............................... New Jersey
Camden Holding L.L.C. ...................................... New Jersey
Charles E. Smith Commercial Realty L.P. .................... Delaware
Chicopee Holding L.L.C. .................................... Massachusetts
Clementon Holding L.L.C. ................................... New Jersey
Cumberland Holding L.L.C. .................................. New Jersey
Darby Development Corp. .................................... Florida
Delran Holding L.L.C. ...................................... New Jersey
Dover Holding L.L.C. ....................................... New Jersey
DSAC L.L.C. ................................................ Texas
DUN L.L.C. ................................................. Maryland
Durham Leasing L.L.C. ...................................... New Jersey
EH L.L.C. .................................................. Maryland
Eleven Penn Plaza L.L.C. ................................... New York
</TABLE>

76
<PAGE> 2

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
------------------ ---------------------
<S> <C>
Evesham Holding L.L.C. ..................................... New Jersey
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
GBSPI L.L.C. ............................................... Maryland
Green Acres Mall, L.L.C. ................................... Delaware
Hackbridge L.L.C. .......................................... New Jersey
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
Henrietta Holding L.L.C. ................................... New York
HHC L.L.C. ................................................. Maryland
Jersey City Leasing L.L.C. ................................. New Jersey
Kearny Holding L.L.C. ...................................... New Jersey
Kearny Leasing L.L.C. ...................................... New Jersey
Lancaster Leasing Company L.L.C. ........................... Pennsylvania
Lancaster Leasing Company L.P. ............................. Pennsylvania
Landthorp Enterprises L.L.C. ............................... Delaware
Lawnside Holding L.L.C. .................................... New Jersey
Lawnwhite Holding L.L.C. ................................... New Jersey
Lewisville Centre L.P. ..................................... Texas
Lewisville TC L.L.C. ....................................... Texas
Littleton Holding L.L.C. ................................... New Jersey
Lodi Industries L.L.C. ..................................... New Jersey
Lodi Leasing L.L.C. ........................................ New Jersey
M 330 Associates, L.P. ..................................... New York
M 393 Associates L.L.C. .................................... New York
Manalapan Industries 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
Menands Holding L.L.C. ..................................... New York
Mendik Management Company Inc. ............................. New York
Merchandise Mart Enterprises, Inc. ......................... Delaware
Merchandise Mart Properties, Inc. .......................... Illinois
Merchandise Mart Properties, Inc. (DE)...................... Delaware
Mesquite - Texas Crossing L.P. ............................. Texas
Mesquite TC L.L.C. ......................................... Texas
Middletown Holding L.L.C. .................................. New Jersey
Montclair Holding L.L.C. ................................... New Jersey
Morris Plains Leasing L.L.C. ............................... New Jersey
MRC Management L.L.C. ...................................... New York
National Hydrant L.L.C. .................................... New York
New Hanover L.L.C. ......................................... New Jersey
New Woodbridge L.L.C. ...................................... New Jersey
Newington Connecticut Holding L.L.C. ....................... Connecticut
Ninety Park Lender LLC ..................................... New York
Ninety Park Manager LLC..................................... New York
Ninety Park Option LLC...................................... New York
</TABLE>

77
<PAGE> 3

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
------------------ ---------------------
<S> <C>
Ninety Park Property LLC.................................... New York
No. Plainfield Holding L.L.C. .............................. New Jersey
North Bergen Stores L.L.C. ................................. New Jersey
One Penn Plaza LLC.......................................... New York
Philadelphia Holding Company L.L.C. ........................ Pennsylvania
Philadelphia Holding Company L.P. .......................... Pennsylvania
Phillipsburg Holding L.L.C. ................................ New Jersey
Pike Holding Company L.L.C. ................................ Pennsylvania
Pike Holding Company L.P. .................................. Pennsylvania
Portland Parent, Inc. ...................................... Delaware
Rahway Leasing L.L.C. ...................................... New Jersey
Rochester Holding L.L.C. ................................... New York
Skillman Abrams Crossing L.P. .............................. Texas
Springfield Holding L.L.C. ................................. Massachusetts
Star Universal L.L.C. ...................................... New Jersey
T53 Condominium L.L.C. ..................................... New York
T.G. Hanover L.L.C. ........................................ New Jersey
TGSI L.L.C. ................................................ Maryland
The Second Lawnside L.L.C. ................................. New Jersey
The Second Rochester Holding L.L.C. ........................ New York
Turnersville Holding L.L.C. ................................ New Jersey
Two Guys From Harrison Holding Co. L.P. .................... Pennsylvania
Two Guys From Harrison Holding Co. LLC...................... Pennsylvania
Two Guys From Harrison L.L.C. .............................. New Jersey
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
Unado L.L.C. ............................................... New Jersey
Upper Moreland Holding Company L.L.C. ...................... Pennsylvania
Upper Moreland Holding Company L.P. ........................ Pennsylvania
URS Logistics, Inc. ........................................ Delaware
VFC Connecticut Holding L.L.C. ............................. Delaware
VFC Massachusetts Holding L.L.C. ........................... Delaware
VFC New Jersey Holding L.L.C. .............................. Delaware
Vornado - Westport L.L.C. .................................. Connecticut
Vornado 1740 Broadway L.L.C. ............................... New York
Vornado 401 Commercial L.L.C. .............................. New York
Vornado 401 Hotel, Inc. .................................... New York
Vornado 570 Lexington L.L.C. ............................... New York
Vornado 640 Fifth Avenue L.L.C. ............................ New York
Vornado 90 Park Avenue L.L.C. .............................. New York
Vornado B&B L.L.C. ......................................... New York
Vornado Center Building L.L.C. ............................. New York
Vornado CESCR II L.L.C. .................................... Delaware
Vornado CESCR L.L.C. ....................................... Delaware
Vornado Crescent Atlanta Partnership........................ Delaware
Vornado Crescent Holding L.P. .............................. Delaware
Vornado Crescent Portland Partnership....................... Delaware
Vornado Finance GP L.L.C. .................................. Delaware
Vornado Finance L.P. ....................................... Delaware
</TABLE>

78
<PAGE> 4

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
------------------ ---------------------
<S> <C>
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 Investments L.L.C. ................................. Delaware
Vornado Lending L.L.C. ..................................... New Jersey
Vornado M 330 L.L.C. ....................................... New York
Vornado M 393 L.L.C. ....................................... New York
Vornado Management Corp. ................................... New Jersey
Vornado Montehiedra OP L.P. ................................ Delaware
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 New York RR One L.L.C. ............................. New York
Vornado Realty L.L.C. ...................................... Delaware
Vornado RR Midtown L.L.C. .................................. New York
Vornado Two Penn Plaza L.L.C. .............................. New York
VR Retail Holdings LLC...................................... New York
VRT Massachusetts Holding L.L.C. ........................... Delaware
VRT New Jersey Holding L.L.C. .............................. Delaware
Watchung Holding L.L.C. .................................... New Jersey
West Windsor Holding L.L.C. ................................ New Jersey
Whitehorse Lawnside L.L.C. ................................. New Jersey
York Holding Company L.L.C. ................................ Pennsylvania
York Holding Company L.P. .................................. Pennsylvania
</TABLE>

<PAGE> 1

EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Amendment No. 4 to
Registration Statement No. 333-40787 and Amendment No. 2 to Registration
Statement No. 333-29013 both on Form S-3 of Vornado Realty Trust and Vornado
Realty L.P. of our report dated March 25, 1998, appearing in this Annual Report
on Form 10-K of Vornado Realty L.P. for the year ended December 31, 1997.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 25, 1998

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the year ended December 31, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 355,954
<SECURITIES> 34,469
<RECEIVABLES> 16,663
<ALLOWANCES> 658
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,564,093
<DEPRECIATION> 173,434
<TOTAL-ASSETS> 2,524,089
<CURRENT-LIABILITIES> 0
<BONDS> 956,654
0
279,884
<COMMON> 0
<OTHER-SE> 1,218,278
<TOTAL-LIABILITY-AND-EQUITY> 2,524,089
<SALES> 0
<TOTAL-REVENUES> 209,131
<CGS> 0
<TOTAL-COSTS> 74,745
<OTHER-EXPENSES> 59,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,888
<INCOME-PRETAX> 68,316
<INCOME-TAX> 0
<INCOME-CONTINUING> 68,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,474
<EPS-PRIMARY> .83<F1>
<EPS-DILUTED> .79
<FN>
<F1>THE AMOUNT IS REPORTED AS EPS BASIC, NOT PRIMARY.
</FN>

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited financial statements for the periods shown below and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1997 JUN-30-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997
<CASH> 58,367 199,826
<SECURITIES> 31,277 31,225
<RECEIVABLES> 15,331 15,171
<ALLOWANCES> 917 631
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 1,231,386 1,047,477
<DEPRECIATION> 166,072 159,450
<TOTAL-ASSETS> 1,551,506 1,646,296
<CURRENT-LIABILITIES> 0 0
<BONDS> 772,156 862,883
0 0
277,168 276,599
<COMMON> 0 0
<OTHER-SE> 436,145 440,835
<TOTAL-LIABILITY-AND-EQUITY> 1,551,506 1,646,296
<SALES> 0 0
<TOTAL-REVENUES> 141,827 79,959
<CGS> 0 0
<TOTAL-COSTS> 48,557 26,658
<OTHER-EXPENSES> 41,995 25,675
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,972 17,350
<INCOME-PRETAX> 43,704 25,578
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 43,704 25,578
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 29,008 18,623
<EPS-PRIMARY> .56 .36
<EPS-DILUTED> .54 .35

</TABLE>