Vornado Realty (VNOD) 10-Q 2009 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended:    September 30, 2009

Or

o 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)

Delaware	13-3925979
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
888 Seventh Avenue, New York, New York	10019
(Address of principal executive offices)	(Zip Code)

(212) 894-7000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o Large Accelerated Filer	o Accelerated Filer
o Non-Accelerated Filer (Do not check if smaller reporting company)	o Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

PART I.		Financial Information:	Page Number
	Item 1.	Financial Statements:
		Consolidated Balance Sheets (Unaudited) as of September 30, 2009 and December 31, 2008	3
		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2009 and 2008	4
		Consolidated Statements of Changes in Partners’ Capital (Unaudited) for the Nine Months Ended September 30, 2009 and 2008	5
		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2009 and 2008	6
		Notes to Consolidated Financial Statements (Unaudited)	8
		Report of Independent Registered Public Accounting Firm	34
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71
	Item 4.	Controls and Procedures	72
PART II.		Other Information:
	Item 1.	Legal Proceedings	73
	Item 1A.	Risk Factors	74
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
	Item 3.	Defaults Upon Senior Securities	74
	Item 4.	Submission of Matters to a Vote of Security Holders	74
	Item 5.	Other Information	74
	Item 6.	Exhibits	74
Signatures			75
Exhibit Index			76

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except unit amounts) ASSETS	September 30, 2009			December 31, 2008
Real estate, at cost:
Land	$	4,551,044		$	4,491,165
Buildings and improvements		12,567,415			12,134,943
Development costs and construction in progress		841,051			966,676
Leasehold improvements and equipment		125,931			118,603
Total		18,085,441			17,711,387
Less accumulated depreciation and amortization		(2,413,803	)		(2,167,403	)
Real estate, net		15,671,638			15,543,984
Cash and cash equivalents		2,560,011			1,526,853
Restricted cash		287,575			375,888
Marketable securities		313,218			334,322
Accounts receivable, net of allowance for doubtful accounts of $48,559 and $32,834		161,097			201,566
Investments in partially owned entities, including Alexander’s of $187,272 and $137,305		812,424			790,154
Investment in Toys “R” Us		422,165			293,096
Mezzanine loans receivable, net of a $122,738 allowance in 2009		269,976			472,539
Receivables arising from the straight-lining of rents, net of allowance of $4,139 and $5,773		661,074			592,432
Deferred leasing and financing costs, net of accumulated amortization of $187,937 and $168,714		301,339			304,125
Assets related to discontinued operations		108,151			281,110
Due from officers		13,148			13,185
Other assets		768,557			688,794
	$	22,350,373		$	21,418,048
LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND PARTNERS’ CAPITAL
Notes and mortgages payable	$	8,895,328		$	8,761,640
Due to Vornado		1,989,955			2,221,743
Senior unsecured notes		711,604			617,816
Exchangeable senior debentures		482,875			478,256
Revolving credit facility debt		648,250			358,468
Accounts payable and accrued expenses		548,407			515,607
Deferred credit		701,637			764,774
Deferred compensation plan		76,777			69,945
Deferred tax liabilities		17,858			19,895
Liabilities related to discontinued operations		—			73,747
Other liabilities		97,009			143,527
Total liabilities		14,169,700			14,025,418
Commitments and contingencies
Redeemable partnership units:
Class A units – 14,245,103 and 14,627,005 units outstanding		917,527			882,740
Series D cumulative redeemable preferred units – 11,200,000 units outstanding		280,000			280,000
Series B convertible preferred units – 444,559 units outstanding		15,238			15,238
Total redeemable partnership units		1,212,765			1,177,978
Partners’ capital:
Equity		7,824,000			6,855,978
Earnings less than distributions		(1,278,727	)		(1,047,340	)
Accumulated other comprehensive income (loss)		16,489			(6,899	)
Total Vornado Realty L.P. partners’ capital		6,561,762			5,801,739
Noncontrolling interests in consolidated subsidiaries		406,146			412,913
Total partners’ capital		6,967,908			6,214,652
	$	22,350,373		$	21,418,048

See notes to consolidated financial statements (unaudited).

3

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
(Amounts in thousands, except per unit amounts)	2009			2008			2009			2008
REVENUES:
Property rentals	$	550,054		$	547,498		$	1,654,357		$	1,637,831
Tenant expense reimbursements		89,530			97,815			270,934			269,646
Fee and other income		31,635			30,755			98,284			90,056
Total revenues		671,219			676,068			2,023,575			1,997,533
EXPENSES:
Operating		265,952			276,115			814,561			793,391
Depreciation and amortization		130,503			136,550			398,845			397,807
General and administrative		51,684			49,494			180,381			149,164
Impairment losses on development projects and costs of acquisitions not consummated		—			5,000			—			8,009
Total expenses		448,139			467,159			1,393,787			1,348,371
Operating income		223,080			208,909			629,788			649,162
Income (loss) applicable to Alexander’s		21,297			(6,876	)		46,044			16,404
Income (loss) applicable to Toys “R” Us		22,077			(8,141	)		118,897			41,510
Loss from partially owned entities		(18,784	)		(3,099	)		(49,124	)		(29,167	)
Interest and other investment (loss) income, net		20,486			9,638			(63,608	)		47,535
Interest and debt expense (including amortization of deferred financing costs of $4,350 and $4,257 in each three-month period, respectively, and $12,722 and $13,181 in each nine-month period, respectively)		(158,205	)		(157,646	)		(475,028	)		(474,862	)
Net gains on early extinguishment of debt		3,407			—			26,996			—
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		4,432			5,160			4,432			8,546
Income before income taxes		117,790			47,945			238,397			259,128
Income tax (expense) benefit		(5,267	)		(5,244	)		(15,773	)		207,170
Income from continuing operations		112,523			42,701			222,624			466,298
Income from discontinued operations		43,321			846			49,276			172,814
Net income		155,844			43,547			271,900			639,112
Net (income) loss attributable to noncontrolling interests		(258	)		466			3,442			2,709
Net income attributable to Vornado Realty L.P.		155,586			44,013			275,342			641,821
Preferred unit distributions		(19,222	)		(19,082	)		(57,647	)		(57,393	)
NET INCOME attributable to Class A unitholders	$	136,364		$	24,931		$	217,695		$	584,428
INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations	$	0.48		$	0.14		$	0.89		$	2.35
Income from discontinued operations		0.22			—			0.27			0.99
Net income per Class A unit	$	0.70		$	0.14		$	1.16		$	3.34
INCOME PER CLASS A UNIT – DILUTED:
Income from continuing operations	$	0.47		$	0.13		$	0.89		$	2.28
Income from discontinued operations		0.22			—			0.26			0.96
Net income per Class A unit	$	0.69		$	0.13		$	1.15		$	3.24
DISTRIBUTIONS PER CLASS A UNIT	$	0.65		$	0.90		$	2.55		$	2.70

See notes to consolidated financial statements (unaudited).

4

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(UNAUDITED)

(Amounts in thousands)	Preferred Units			General Partner’s Class A Units				Earnings Less Than Distributions		Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total Partners’ Capital
Balance, December 31, 2007	$	825,095		$	5,284,857		$	(716,693	)	$	29,772		$	416,298		$	5,839,329
Cumulative effect of change in accounting principle		—			212,395			(35,552	)		—			—			176,843
Balance, January 1, 2008		825,095			5,497,252			(752,245	)		29,772			416,298			6,016,172
Net income (loss)		—			—			571,977			—			(2,767	)		569,210
Distributions to Vornado		—			—			(415,169	)		—			—			(415,169	)
Distributions to preferred unitholders		—			—			(42,819	)		—			—			(42,819	)
Conversion of Series A preferred units to General Partner’s Class A units		(1,312	)		1,312			—			—			—			—
Deferred compensation units and options		—			8,495			—			—			—			8,495
Class A units issued to the General Partner:
Under Vornado employee share option plan		—			20,278			—			—			—			20,278
Upon redemption of limited partners’ Class A units, at redemption value		—			61,801			—			—			—			61,801
In connection with Vornado’s dividend reinvestment plan		—			1,755			—			—			—			1,755
Sale of securities available for sale		—			—			—			6,128			—			6,128
Change in unrealized net loss on securities available for sale		—			—			—			(22,057	)		—			(22,057	)
Adjustments to redeemable Class A units		—			(26,393	)		—			—			—			(26,393	)
Other		—			(46	)		(4,932	)		(22,518	)		(1,856	)		(29,352	)
Balance, September 30, 2008	$	823,783		$	5,564,454		$	(643,188	)	$	(8,675	)	$	411,675		$	6,148,049
Balance, December 31, 2008	$	823,807		$	6,032,171		$	(1,047,340	)	$	(6,899	)	$	412,913		$	6,214,652
Net income (loss)		—			—			243,092			—			(3,442	)		239,650
Distributions to Vornado		—			237,150			(431,237	)		—			—			(194,087	)
Distributions to preferred unitholders		—			—			(42,809	)		—			—			(42,809	)
Proceeds from the issuance of Class A units to the General Partner		—			710,226			—			—			—			710,226
Conversion of Series A preferred units to General Partner’s Class A units		(89	)		89			—			—			—			—
Deferred compensation units and options		—			11,529			—			—			—			11,529
Class A units issued to the General Partner:
Under Vornado employee share option plan		—			1,205			(440	)		—			—			765
Upon redemption of limited partners’ Class A units, at redemption value		—			53,091			—			—			—			53,091
Change in unrealized net loss on securities available for sale		—			—			—			4,099			—			4,099
Our share of partially owned entities’ OCI adjustments		—			—			—			11,846			—			11,846
Voluntary surrender of equity awards on March 31, 2009		—			32,588			—			—			—			32,588
Adjustments to redeemable Class A units		—			(77,004	)		—			—			—			(77,004	)
Other		—			(763	)		7			7,443			(3,325	)		3,362
Balance, September 30, 2009	$	823,718		$	7,000,282		$	(1,278,727	)	$	16,489		$	406,146		$	6,967,908

See notes to consolidated financial statements (unaudited).

5

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Nine Months Ended September 30,
(Amounts in thousands)	2009			2008
Cash flows from operating activities:
Net income	$	271,900		$	639,112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of debt issuance costs)		413,697			437,567
Mezzanine loans loss accrual		122,738			—
Equity in income of partially owned entities, including Alexander’s and Toys		(115,817	)		(70,490	)
Straight-lining of rental income		(75,702	)		(63,184	)
Amortization of below market leases, net		(56,270	)		(73,655	)
Write-off of unamortized costs from the voluntary surrender of equity awards		32,588			—
Net gains on early extinguishment of debt		(26,996	)		—
Distributions of income from partially owned entities		21,484			12,021
Reversal of H Street deferred tax liability		—			(222,174	)
Net gain on sale of Americold Realty Trust		—			(112,690	)
Write-off of real estate joint ventures’ development costs		—			34,200
Net loss on derivative positions		—			25,812
Impairment losses – marketable securities		—			20,881
Net gains on sale of real estate		(42,655	)		(57,523	)
Net gains on dispositions of wholly owned and partially owned assets other than depreciable real estate		(4,432	)		(8,546	)
Impairment losses on development projects and costs of acquisitions not consummated		—			8,009
Amortization of discount on convertible and exchangeable senior debentures		29,106			28,328
Other non-cash adjustments		119			32,812
Changes in operating assets and liabilities:
Accounts receivable, net		11,611			(8,825	)
Prepaid assets		(119,608	)		(46,823	)
Other assets		(43,004	)		(26,706	)
Accounts payable and accrued expenses		70,511			88,973
Other liabilities		217			10,510
Net cash provided by operating activities		489,487			647,609
Cash flows from investing activities:
Development costs and construction in progress		(384,655	)		(413,947	)
Additions to real estate		(145,981	)		(158,434	)
Restricted cash		81,195			(22,674	)
Investments in partially owned entities		(28,738	)		(115,250	)
Proceeds from sales of real estate and related investments		291,652			352,511
Proceeds received from repayment of notes and mortgage loans receivable		46,339			52,032
Distributions of capital from partially owned entities		13,112			182,090
Acquisitions of real estate and other		—			(36,566	)
Deposits in connection with real estate acquisitions		1,000			(10,616	)
Proceeds from sales of, and return of investment in, marketable securities		59,873			47,723
Investments in notes and mortgage loans receivable		—			(7,397	)
Purchases of marketable securities		(11,597	)		(8,035	)
Net cash used in investing activities		(77,800	)		(138,563	)

See notes to consolidated financial statements (unaudited).

6

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

(Amounts in thousands)	For The Nine Months Ended September 30,
	2009			2008
Cash flows from financing activities:
Proceeds from issuance of Class A units		710,226			—
Proceeds from borrowings		1,208,204			1,424,458
Repayments of borrowings		(996,218	)		(1,043,734	)
Distributions to Vornado		(194,087	)		(415,169	)
Distributions to redeemable security-holders		(30,291	)		(65,925	)
Distributions to preferred unitholders		(42,809	)		(42,841	)
Debt issuance costs		(9,246	)		(13,399	)
Proceeds from the exercise of Vornado share options and other		22			21,981
Purchase of outstanding Series G preferred units		(24,330	)		—
Net cash provided by (used in) financing activities		621,471			(134,629	)
Net increase in cash and cash equivalents		1,033,158			374,417
Cash and cash equivalents at beginning of period		1,526,853			1,154,595
Cash and cash equivalents at end of period	$	2,560,011		$	1,529,012
Supplemental disclosure of cash flow information:
Cash payments for interest (including capitalized interest of $14,054 and $49,241)	$	461,802		$	463,458
Cash payments for income taxes	$	6,880		$	6,153
Non-cash transactions:
Adjustments to redeemable Class A units	$	(77,004	)	$	(26,393	)
Issuance of General Partners’ Class A units upon redemption of Limited Partners’ Class A units		53,091			61,801
Distributions to Vornado paid in Class A units		237,150			—
Distributions to redeemable security-holders paid in Class A units		20,072			—
Unrealized net (gain) loss on securities available for sale		(4,099	)		22,057

See notes to consolidated financial statements (unaudited).

7

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization

Vornado Realty L.P.(the “Operating Partnership” and/or the “Company”) is a Delaware limited partnership. Vornado is the sole general partner of, and owned approximately 92.1% of the common limited partnership interest in the Operating Partnership at September 30, 2009. All references to “we,” “us,” “our,” the “Operating Partnership” and the “Company” refer to Vornado Realty L.P. and its consolidated subsidiaries.

2. Basis of Presentation

The accompanying consolidated financial statements are unaudited. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K and 10-K/A for the year ended December 31, 2008, as filed with the SEC. The results of operations for the three and nine months ended September 30, 2009, are not necessarily indicative of the operating results for the full year.

The accompanying consolidated financial statements include the accounts of the Operating Partnership, as well as certain partially owned entities in which we own more than 50%, unless a partner has shared board and management representation and substantive participation rights on all significant business decisions, or 50% or less when (i) we are the primary beneficiary and the entity qualifies as a variable interest entity, as defined by GAAP, or (ii) when we are a general partner and meet certain criteria under GAAP.All significant inter-company amounts have been eliminated. Equity interests in partially owned entities are accounted for under the equity method of accounting if they do not meet the criteria for consolidation and we have the ability to exercise significant influence over the operating and financial policies of the company. Generally an ownership interest of 20% or more is sufficient to demonstrate the ability to exercise significant influence. When partially owned investments are in partnership form, the 20% threshold for equity method accounting is generally reduced to 3% to 5%, based on our ability to influence the operating and financial policies of the partnership. Investments accounted for under the equity method are initially recorded at cost and subsequently adjusted for our share of the net income or loss and cash contributions and distributions to or from these entities. Investments in partially owned entities that do not meet the criteria for consolidation or for equity method accounting are accounted for on the cost method.

We have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Effective July 1, 2009, the Financial Accounting Standards Board (“FASB”) established the Accounting Standards Codification (“ASC”) as the primary source of authoritative GAAP recognized by the FASB to be applied to nongovernmental entities. Although the establishment of the ASC did not change current GAAP, it did change the way we refer to GAAP throughout this document to reflect the updated referencing convention.

On January 1, 2009, we adopted the guidance in ASC 470-20, Debt with Conversion and Other Options. The guidance contained in ASC 470-20 was required to be applied retrospectively. Accordingly, net income for the three and nine months ended September 30, 2008 has been adjusted to include $9,600,000 and $28,300,000, respectively, of additional interest expense. In addition, in accordance with ASC 260, Earnings Per Share, we have included 6,230,000 additional Class A units in the computation of income per Class A unit retroactively to the three and nine months ended September 30, 2008, as a result of the unit portion of our Class A unit distributions during 2009. Furthermore, certain prior year balances have been reclassified in order to conform to current year presentation as a result of an update to ASC 810, Consolidation.

8

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

2. Basis of Presentation – continued

In connection with purchase accounting for H Street, in July 2005 and April 2007 we recorded an aggregate of $222,174,000 of deferred tax liabilities representing the differences between the tax basis and the book basis of the acquired assets and liabilities multiplied by the effective tax rate. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

3. Recently Issued Accounting Literature

In December 2007, the FASB issued an update to ASC 805, Business Combinations. The amended guidance contained in ASC 805 applies to all transactions and other events in which one entity obtains control over one or more other businesses. It also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. The amended guidance also expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. The amended guidance became effective for all transactions entered into on or after January 1, 2009. The adoption of this guidance on January 1, 2009 did not have any effect on our consolidated financial statements because there have been no acquisitions during 2009.

In December 2007, the FASB issued an update to ASC 810, Consolidation. The amended guidance contained in ASC 810 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. The amended guidance became effective on January 1, 2009 and resulted in (i) the reclassification of minority interests in consolidated subsidiaries to noncontrolling interests in consolidated subsidiaries, a component of permanent equity on our consolidated balance sheets, (ii) the reclassification of minority interest expense to net income attributable to noncontrolling interests, on our consolidated statements of income, and (iii) additional disclosures, including a consolidated statement of changes in partners’ capital in quarterly reporting periods.

In March 2008, the FASB issued an update to ASC 815, Derivatives and Hedging. The amended guidance contained in ASC 815 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows. It also provided a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock. The amended guidance became effective on January 1, 2009. The adoption of this guidance on January 1, 2009 did not have a material effect on our consolidated financial statements.

In June 2008, the FASB issued an update to ASC 260, Earnings Per Share. The amended guidance contained in ASC 260 requires companies to treat unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” and include such securities in the computation of earnings per share pursuant to the two-class method as described in ASC 260. The amended guidance became effective on January 1, 2009 and required all prior period earnings per Class A unit data presented, to be adjusted retroactively. The adoption of this guidance on January 1, 2009 did not have a material effect on our computation of income per Class A unit.

9

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. Recently Issued Accounting Literature - continued

On January 1, 2009, we adopted the provisions of ASC 470-20, which was required to be applied retrospectively. The adoption affected the accounting for our convertible senior debentures due to Vornado and exchangeable senior debentures by requiring the initial proceeds from their sale to be allocated between a debt component and an equity component in a manner that results in interest expense on the debt component at our nonconvertible debt borrowing rate on the date of issue. The initial debt components of our $1.4 billion Convertible Senior Debentures due to Vornado, $1 billion Convertible Senior Debentures due to Vornado and $500 million Exchangeable Senior Debentures were $1,241,286,000, $926,361,000 and $457,699,000, respectively, based on the fair value of similar nonconvertible instruments issued at that time. The aggregate initial debt discount of $216,655,000 after original issuance costs allocated to the equity component was recorded in “General Partner’s Class A units” as a cumulative effect of change in accounting principle in our consolidated statement of changes in partners’ capital. We are amortizing the discount using the effective interest method over the period the debt is expected to remain outstanding (i.e., the earliest date the holders may require us to repurchase the debentures), as additional interest expense. Accordingly, interest expense for the three and nine months ended September 30, 2008 has been adjusted to include $9,600,000 and $28,300,000 of amortization. Amortization for periods prior to December 31, 2007 (not presented herein) aggregating $35,552,000 has been reflected as a cumulative effect of change in accounting principle in “earnings less than distributions” on our consolidated statement of changes in partners’ capital. Below is a summary of the financial statement effects of implementing the provisions of ASC 470-20 and related disclosures.

		Due to Vornado
		$1.4 Billion Convertible Senior Debentures				$1 Billion Convertible Senior Debentures				$500 Million Exchangeable Senior Debentures
(Amounts in thousands, except per unit amounts) Balance Sheet:		September 30, 2009		December 31, 2008		September 30, 2009		December 31, 2008		September 30, 2009		December 31, 2008
Principal amount of debt component	$	1,204,359	$	1,382,700	$	888,219	$	989,800	$	499,982	$	499,982
Unamortized discount		(72,664	)	(106,415	)	(29,959	)	(44,342	)	(17,107	)	(21,726	)
Carrying amount of debt component	$	1,131,695	$	1,276,285	$	858,260	$	945,458	$	482,875	$	478,256
Carrying amount of equity component	$	130,714	$	130,714	$	53,640	$	53,640	$	32,301	$	32,301
Effective interest rate		5.45	%	5.45	%	5.32	%	5.32	%	5.32	%	5.32	%
Maturity date (period through which discount is being amortized)		4/1/12				11/15/11				4/15/12
Conversion price per Class A unit, as adjusted	$	157.18			$	148.46			$	87.17
Number of Class A units on which the aggregate consideration to be delivered upon conversion is determined		—	(1)			—	(1)			5,736

__________________

(1) Pursuant to the provisions of ASC 470-20, we are required to disclose the conversion price and the number of Class A units on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value). Our convertible senior debentures due to Vornado require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or Class A units. Based on the September 30, 2009 closing share price of Vornado’s common shares and the conversion prices in the table above, there was no excess value; accordingly, no Class A units would be issued if these securities were settled on this date. The number of Class A units on which the aggregate consideration to be delivered upon conversion is 7,662 and 5,983 Class A units, respectively.

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(UNAUDITED)

3. Recently Issued Accounting Literature - continued

(Amounts in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
Income Statement:		2009		2008		2009		2008
$1.4 Billion Convertible Senior Debentures Due to Vornado:
Coupon interest	$	8,693	$	9,975	$	28,204	$	29,925
Discount amortization – original issue		1,203		1,307		3,836		3,869
Discount amortization – ASC 470-20 implementation		5,631		6,121		17,958		18,116
	$	15,527	$	17,403	$	49,998	$	51,910
$1 Billion Convertible Senior Debentures Due to Vornado:
Coupon interest	$	8,102	$	9,063	$	25,929	$	27,188
Discount amortization – original issue		908		962		2,846		2,848
Discount amortization – ASC 470-20 implementation		2,430		2,574		7,616		7,621
	$	11,440	$	12,599	$	36,391	$	37,657
$500 Million Exchangeable Senior Debentures:
Coupon interest	$	4,844	$	4,844	$	14,585	$	14,531
Discount amortization – original issue		369		350		1,091		1,035
Discount amortization – ASC 470-20 implementation		1,193		1,131		3,532		3,350
	$	6,406	$	6,325	$	19,208	$	18,916

On May 28, 2009, the FASB issued ASC 855, Subsequent Events. Although ASC 855 does not significantly change current practice surrounding the disclosure of subsequent events, it provides guidance on management’s assessment of subsequent events and the requirement to disclose the date through which subsequent events have been evaluated. ASC 855 became effective on June 30, 2009. We have evaluated subsequent events through November 6, 2009, the date our consolidated financial statements were available to be issued for this Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

On June 12, 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. SFAS 167 becomes effective for all new and existing VIEs on January 1, 2010. We are currently evaluating the impact SFAS 167 will have on our consolidated financial statements.

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(UNAUDITED)

4. Fair Value Measurements

ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial assets and liabilities measured at fair value in our consolidated financial statements consist primarily of (i) marketable equity securities and (ii) the assets of our deferred compensation plan (primarily marketable equity securities and equity investments in limited partnerships), for which there is a corresponding liability on our consolidated balance sheets. Financial assets and liabilities measured at fair value as of September 30, 2009 are presented in the table below based on their level in the fair value hierarchy.

				Fair Value Hierarchy
(Amounts in thousands)		Total		Level 1	Level 2		Level 3
Marketable equity securities	$	85,717	$	85,717	$	—	$	—
Deferred compensation plan assets		76,777		39,554		—		37,223
Total assets	$	162,494	$	125,271	$	—	$	37,223
Mandatorily redeemable instruments (included in other liabilities)	$	59,762	$	59,762	$	—	$	—

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships, for which there is a corresponding Level 3 liability to the plan’s participants. The following is a summary of changes in Level 3 deferred compensation plan assets and liabilities, for the three and nine months ended September 30, 2009.

(Amounts in thousands)		Beginning Balance		Total Realized/ Unrealized Gains	Purchases, Sales, Other Settlements and Issuances, net		Ending Balance
For the three months ended September 30, 2009	$	36,168	$	688	$	367	$	37,223
For the nine months ended September 30, 2009	$	34,176	$	1,998	$	1,049	$	37,223

We have estimated the fair value of all financial instruments reflected in the accompanying consolidated balance sheets at amounts which are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with respect to our mezzanine loans and debt). Below is a table that sets forth the carrying amounts and fair values of our financial instruments as of September 30, 2009 and December 31, 2008. These fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of our financial instruments.

	As of September 30, 2009				As of December 31, 2008
(Amounts in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Mezzanine loans receivable	$	269,976	$	231,763	$	472,539	$	417,087
Debt:
Notes and mortgages payable	$	8,895,328	$	8,254,482	$	8,761,640	$	8,161,922
Due to Vornado		1,989,955		2,096,126		2,221,743		1,874,058
Senior unsecured notes		711,604		729,222		617,816		578,238
Exchangeable senior debentures		482,875		523,106		478,256		428,895
Revolving credit facility		648,250		648,250		358,468		358,468
	$	12,728,012	$	12,251,186	$	12,437,923	$	11,401,581

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VORNADO REALTY L.P.

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(UNAUDITED)

5. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of September 30, 2009, we own 32.7% of Toys. We account for our investment in Toys under the equity method and record our 32.7% share of Toys’ income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. As of September 30, 2009, the carrying amount of our investment in Toys does not differ materially from our share of the equity in Toys’ net assets on a purchase accounting basis.

Below is a summary of Toys’ latest available financial information on a “purchase accounting” basis.

(Amounts in millions)
Balance Sheet:	As of August 1, 2009		As of November 1, 2008
Total assets	$	11,449	$	12,410
Total liabilities	$	9,999	$	11,393
Toys stockholders’ equity	$	1,341	$	929

	For the Three Months Ended					For the Nine Months Ended
Income Statement:	August 1, 2009		August 2, 2008			August 1, 2009		August 2, 2008
Total revenues	$	2,567	$	2,771		$	10,505	$	11,317
Net income (loss) attributable to Toys	$	62	$	(31	)	$	304	$	113

Alexander’s (NYSE: ALX)

As of September 30, 2009, we own 32.4% of the outstanding common stock of Alexander’s. We manage, lease and develop Alexander’s properties pursuant to agreements, which expire in March of each year and are automatically renewable. As of September 30, 2009 and December 31, 2008, Alexander’s owed us $57,197,000 and $44,086,000, respectively, in fees under these agreements.

Based on Alexander’s September 30, 2009 closing share price of $295.88, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s is $489,406,000, or $302,134,000 in excess of the carrying amount on our consolidated balance sheet.

As of September 30, 2009, the carrying amount of our investment in Alexander’s exceeds our share of the equity in the net assets of Alexander’s by approximately $35,249,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income or loss. The basis difference related to the land will be recognized upon disposition of our investment.

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(UNAUDITED)

5. Investments in Partially Owned Entities - continued

Lexington Realty Trust (“Lexington”) (NYSE: LXP)

As of September 30, 2009, we own 18,468,969 Lexington common shares, or approximately 16.1% of Lexington’s common equity. We account for our investment in Lexington under the equity method because we believe we have the ability to exercise significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to that of other shareholders. We record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements.

As of September 30, 2009, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $93,668,000. This basis difference resulted primarily from $107,882,000 of non-cash impairment charges we recognized in 2008 based on our conclusion that the decline in the value of Lexington’s common shares was “other-than-temporary.” The remainder of the basis difference related to purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real estate (land and buildings) as compared to their carrying amounts in Lexington’s consolidated financial statements. We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Lexington’s net income or loss. The basis difference attributable to the land will be recognized upon disposition of our investment.

Based on Lexington’s September 30, 2009 closing share price of $5.10, the market value (“fair value” pursuant to ASC 820) of our investment in Lexington was $94,192,000, or $38,465,000 in excess of the carrying amount on our consolidated balance sheet. During the three months ended September 30, 2008, we concluded that our investment in Lexington was “other-than-temporarily” impaired and recognized a $7,175,000 non-cash impairment loss based on the difference between the fair value of our investment in Lexington and the carrying amount on our consolidated balance sheet.

The following is a summary of Lexington’s financial information as of June 30, 2009 and September 30, 2008 and for the three and nine months ended June 30, 2009 and 2008.

(Amounts in millions)	As of		As of
Balance Sheet:	June 30, 2009		September 30, 2008
Total assets	$	3,791	$	4,294
Total liabilities	$	2,419	$	2,745
Lexington shareholders’ equity	$	1,278	$	924

	For the Three Months Ended June 30,					For the Nine Months Ended June 30,
Income Statement:	2009			2008		2009			2008
Total revenues	$	99		$	125	$	305		$	349
(Loss) income from continuing operations	$	(79	)	$	2	$	(150	)	$	17
Net (loss) income attributable to Lexington	$	(77	)	$	15	$	(153	)	$	52

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(UNAUDITED)

5. Investments in Partially Owned Entities - continued

The carrying amount of our investments in partially owned entities and income (loss) recognized from such investments are as follows:

Investments:	Balance as of
(Amounts in thousands)	September 30, 2009		December 31, 2008
Toys	$	422,165	$	293,096
Alexander’s	$	187,272	$	137,305
Partially owned office buildings		159,041		157,468
India Real Estate Ventures		83,531		88,858
Lexington		55,727		80,748
Other equity method investments		326,853		325,775
	$	812,424	$	790,154

Our Share of Net Income (Loss): (Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Toys:	2009			2008			2009			2008
32.7% share of:
Equity in net (loss) income, before income taxes	$	(15,985	) (1)	$	(21,051	)	$	106,545	(1)	$	133,228
Income tax benefit (expense)		36,122			10,944			(7,335	)		(82,778	)
Equity in net income (loss)		20,137			(10,107	)		99,210			50,450
Non-cash purchase price accounting adjustments		—			—			13,946			(14,900	)
Interest and other income		1,940			1,966			5,741			5,960
	$	22,077		$	(8,141	)	$	118,897		$	41,510
Alexander’s:
32.4% share in 2009 and 32.6% share in 2008:
Equity in net income before stock appreciation rights	$	18,756	(2)	$	4,294		$	26,574	(2)	$	14,752
Stock appreciation rights compensation (expense) income		—	(3)		(14,557	)		11,105			(7,605	)
Equity in net income (loss)		18,756			(10,263	)		37,679			7,147
Management and leasing fees		2,084			2,054			5,980			6,160
Development fees		457			1,333			2,385			3,097
	$	21,297		$	(6,876	)	$	46,044		$	16,404
Lexington – 16.1% share in 2009 and 7.7% share in 2008 of equity in net loss (4)	$	(15,054	)	$	(6,040	)	$	(24,969	)	$	(4,153	)
India Real Estate Ventures – 4% to 36.5% share of equity in net loss		(465	)		(835	)		(1,386	)		(1,863	)
Other, net (5)		(3,265	)		3,776			(22,769	) (6)		(23,151	) (7)
	$	(18,784	)	$	(3,099	)	$	(49,124	)	$	(29,167	)

_________________________

(1) Includes $10,200 for our share of income from a litigation settlement.

(2) Includes $13,668 for our share of an income tax benefit.

(3) During the first quarter of 2009, all of the remaining stock appreciation rights were exercised.

(4) The three and nine months ended September 30, 2009, include $14,541 and $19,121, respectively, for our share of non-cash impairment losses recorded by Lexington related to its investment in Concord Debt Holdings LLC. The three and nine months ended September 30, 2008 includes a $7,175 non-cash impairment loss on our investment in Lexington.

(5) Includes our equity in net earnings of partially owned entities including partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Realty MLP, 85 10^th Avenue and others.

(6) Includes $7,650 of expense for our share of the Filene’s Boston lease termination payment.

(7) Includes $34,200 of non-cash charges for the write-off of our share of certain partially owned entities’ pre-development costs.

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(UNAUDITED)

5. Investments in Partially Owned Entities - continued

Below is a summary of the debt of partially owned entities as of September 30, 2009 and December 31, 2008, none of which is guaranteed by us.

	100% of Partially Owned Entities’ Debt at
(Amounts in thousands)	September 30, 2009		December 31, 2008
Toys (32.7% interest) (as of August 1, 2009 and November 1, 2008, respectively):
10.75% senior unsecured notes, due 2017 (Face value – $950,000) (1)	$	925,000	$	—
$1.3 billion senior credit facility, due 2010, (1)		—		1,300,000
$2.0 billion credit facility, due 2012, LIBOR plus 1.00% – 4.25% (2)		23,000		367,000
Mortgage loan, due 2010, LIBOR plus 1.30% (1.55% at September 30, 2009)		800,000		800,000
$804 million secured term loan facility, due 2012, LIBOR plus 4.25% (4.50% at September 30, 2009)		798,000		797,000
Senior U.K. real estate facility, due 2013, with interest at 5.02%		588,900		568,000
7.625% bonds, due 2011 (Face value – $500,000)		489,400		486,000
7.875% senior notes, due 2013 (Face value – $400,000)		380,100		377,000
7.375% senior notes, due 2018 (Face value – $400,000)		337,900		335,000
4.51% Spanish real estate facility, due 2013		185,900		167,000
$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00% (5.25% at September 30, 2009)		180,000		180,000
Japan bank loans, due 2011 – 2014, 1.20% – 2.80%		159,200		158,000
Japan borrowings, due 2010 – 2011 (weighted average rate of 0.96% at September 30, 2009)		248,000		289,000
6.84% Junior U.K. real estate facility, due 2013		103,700		101,000
4.51% French real estate facility, due 2013		89,700		81,000
8.750% debentures, due 2021 (Face value – $22,000)		21,000		21,000
Other		132,000		73,000
		5,461,800		6,100,000
Alexander’s (32.4% interest):
731 Lexington Avenue mortgage note payable collateralized by the office space, due in February 2014, with interest at 5.33% (prepayable without penalty after December 2013)		365,718		373,637
731 Lexington Avenue mortgage note payable, collateralized by the retail space, due in July 2015, with interest at 4.93% (prepayable without penalty after December 2013)		320,000		320,000
Rego Park construction loan payable, due in December 2010, LIBOR plus 1.20% (1.46% at September 30, 2009)		237,968		181,695
Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at 7.46% (prepayable without penalty after December 2013)		196,374		199,537
Rego Park mortgage note payable, due in March 2012 (prepayable without penalty) (3)		78,246		78,386
Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable without penalty)		68,000		68,000
		1,266,306		1,221,255
Lexington (16.1% interest) (as of June 30, 2009 and September 30, 2008, respectively) Mortgage loans collateralized by the trust’s real estate, due from 2009 to 2037, with a weighted average interest rate of 5.45% at June 30, 2009 (various prepayment terms)		2,203,951		2,486,370

_____________________________

(1) On July 9, 2009, Toys issued $950 million aggregate principal amount of 10.75% Senior Unsecured Notes due 2017 at 97.399%. The proceeds from the issuance, along with existing cash, were used to repay the outstanding balance under its $1.3 billion senior credit facility, which was subsequently terminated.

(2) On June 24, 2009, Toys extended this credit facility, which was to expire in July 2010, to May 2012. The borrowing capacity under the amended facility will remain at $2.0 billion through the original maturity date in July 2010 and will continue at $1.5 billion thereafter. The interest rate will be LIBOR plus 3.20%, which may vary based on availability, through July 2010 and LIBOR plus 4.00%, subject to usage, thereafter.

(3) On March 10, 2009, the $78,246 outstanding balance of the Rego Park I mortgage loan, which was scheduled to mature in June 2009, was repaid and simultaneously refinanced in the same amount. The new loan bears interest at 75 basis points, is secured by the property and is 100% cash collateralized. The proceeds of the new loan were placed in a non-interest bearing restricted mortgage escrow account.

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(UNAUDITED)

5. Investments in Partially Owned Entities - continued

(Amounts in thousands)	100% of Partially Owned Entities’ Debt at
Partially owned office buildings:		September 30, 2009		December 31, 2008
Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable, collateralized by the partnerships’ real estate, due 2011, with a weighted average interest rate of 5.82% at September 30, 2009 (various prepayment terms)	$	141,905	$	143,000
100 Van Ness, San Francisco office complex (9% interest) up to $132 million construction loan payable, due in July 2013, LIBOR plus 2.75% (3.00% at September 30, 2009) with an interest rate floor of 6.50% and interest rate cap of 7.00%		85,249		85,249
330 Madison Avenue (25% interest) $150,000 mortgage note payable, due in June 2015, LIBOR plus 1.50% (1.75% at September 30, 2009)		150,000		70,000
Fairfax Square (20% interest) mortgage note payable, due in November 2009, with interest at 7.50%		61,831		62,815
Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011, LIBOR plus 1.0% (1.26% at September 30, 2009)		56,680		56,680
West 57th Street (50% interest) mortgage note payable, due in December 2009(1), with interest at 4.94% (prepayable without penalty after July 2009)		29,000		29,000
825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014, with interest at 8.07% (prepayable without penalty after April 2014)		20,880		21,426
India Real Estate Ventures:
TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity’s real estate, due from 2010 to 2022, with a weighted average interest rate of 14.06% at September 30, 2009 (various prepayment terms)		159,803		148,792
India Property Fund L.P. (36.5% interest) $120 million secured revolving credit facility, due in December 2009, LIBOR plus 2.75% (3.00% at September 30, 2009)		98,000		90,500
Waterfront Associates, LLC (2.5% interest) construction and land loan up to $250 million payable, due in September 2011 with a six month extension option, LIBOR plus 2.00% - 3.50% (2.53% at September 30, 2009)		160,403		57,600
Verde Realty Master Limited Partnership (8.5% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2025, with a weighted average interest rate of 5.88% at September 30, 2009 (various prepayment terms)		601,201		559,840
Green Courte Real Estate Partners, LLC (8.3% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2017, with a weighted average interest rate of 5.10% at September 30, 2009 (various prepayment terms)		307,365		307,098
Monmouth Mall (50% interest) mortgage note payable, due in September 2015, with interest at 5.44% (prepayable without penalty after July 2015)		165,000		165,000
San Jose, California Ground-up Development (45% interest) construction loan, due in March 2010, $100 million fixed at 3.30%, balance at LIBOR plus 2.54% (2.86% at September 30, 2009)		132,570		132,128
Wells/Kinzie Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		14,696		14,800
Orleans Hubbard Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		10,128		10,200
Other		419,529		468,559

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $3,012,310,000 and $3,196,585,000 as of September 30, 2009 and December 31, 2008, respectively.

_________________________

(1)   Result of a forbearance agreement while in negotiation with the lender for an extension or refinancing.

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(UNAUDITED)

6. Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of September 30, 2009 and December 31, 2008.

(Amounts in thousands)		Interest Rate as of	Carrying Amount as of
Mezzanine Loans Receivable:	Maturity	September 30, 2009	September 30, 2009			December 31, 2008
Equinox	02/13	14.00%	$	95,325		$	85,796
Tharaldson Lodging Companies	04/10 (1)	4.49%		75,573			76,341
Riley HoldCo Corp	02/15	10.00%		74,438			74,381
280 Park Avenue	06/16	10.25%		73,750			73,750
Charles Square Hotel, Cambridge	(2)	(2)		—			41,796
Other, net	01/14-12/18	5.86%-12.00%		73,628			120,475
				392,714			472,539
Valuation allowance (3)				(122,738	)		—
			$	269,976		$	472,539

__________________

(1) The borrower has a one-year extension option.

(2) On June 1, 2009, this loan, which was scheduled to mature in September 2009, was repaid.

(3) Represents loan loss accruals on mezzanine loans based on our estimate of the net realizable value of each loan. Our estimates are based on the present value of expected cash flows, discounted at each loan’s effective interest rate, or if a loan is collateralized, based on the fair value of the underlying collateral, adjusted for estimated costs to sell. The excess of the carrying amount over the net realizable value of a loan is recognized as a reduction of “interest and other investment (loss) income, net” in our consolidated statement of income.

7. Discontinued Operations

On September 1, 2009, we sold 1999 K Street, a newly developed 250,000 square foot office building, in Washington’s Central Business District, for $207,800,000 in cash, which resulted in a net gain of $41,211,000. Accordingly, during the third quarter of 2009, we classified this property as a discontinued operation. In addition, we have classified the revenues and expenses of other properties sold or to be sold as “income from discontinued operations” and the related assets and liabilities as “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements. The tables below set forth the assets and liabilities related to discontinued operations at September 30, 2009 and December 31, 2008, and the combined results of operations related to discontinued operations for the three and nine months ended September 30, 2009 and 2008.

(Amounts in thousands)	Assets Related to Discontinued Operations as of				Liabilities Related to Discontinued Operations as of
	September 30, 2009		December 31, 2008		September 30, 2009		December 31, 2008
H Street – land under sales contract	$	108,151	$	108,292	$	—	$	—
1999 K Street		—		124,402		—		73,747
Retail properties		—		48,416		—		—
Total	$	108,151	$	281,110	$	—	$	73,747
(Amounts in thousands)	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2009		2008		2009		2008
Revenues	$	1,356	$	1,077	$	9,846	$	225,620
Expenses		690		343		3,225		223,019
Net income		666		734		6,621		2,601
Net gain on sale of 1999 K Street		41,211		—		41,211		—
Net gain on sale of our 47.6% interest in Americold Realty Trust		—		—		—		112,690
Net gain on sale of Tysons Dulles Plaza		—		—		—		56,831
Net gains on sale of other real estate		1,444		112		1,444		692
Income from discontinued operations	$	43,321	$	846	$	49,276	$	172,814

18

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8. Identified Intangible Assets and Intangible Liabilities

The following summarizes our identified intangible assets (primarily acquired above-market leases) and intangible liabilities (primarily acquired below-market leases) as of September 30, 2009 and December 31, 2008.

	Balance as of
(Amounts in thousands)	September 30, 2009			December 31, 2008
Identified intangible assets (included in other assets):
Gross amount	$	768,364		$	780,476
Accumulated amortization		(304,309	)		(257,757	)
Net	$	464,055		$	522,719
Identified intangible liabilities (included in deferred credit):
Gross amount	$	955,651		$	998,179
Accumulated amortization		(303,350	)		(278,357	)
Net	$	652,301		$	719,822

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $18,728,000 and $24,526,000 for the three months ended September 30, 2009 and 2008, respectively, and $56,270,000 and $73,655,000 for the nine months ended September 30, 2009 and 2008, respectively. Estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years, commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	63,104
2011		58,966
2012		54,771
2013		46,798
2014		40,995

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $15,698,000 and $21,207,000 for the three months ended September 30, 2009 and 2008, respectively, and $49,262,000 and $65,417,000 for the nine months ended September 30, 2009 and 2008, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years, commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	55,898
2011		53,264
2012		48,828
2013		41,651
2014		23,577

We are a tenant under ground leases for certain of our properties. Amortization of these acquired below-market leases resulted in an increase to rent expense of $533,000 and $1,599,000 in each of the three-month and nine-month periods ended September 30, 2009 and 2008, respectively. Estimated annual amortization of these below market leases for each of the five succeeding years, commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	2,133
2011		2,133
2012		2,133
2013		2,133
2014		2,133

19

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt

The following is a summary of our debt:

(Amounts in thousands)			Balance at
Notes and mortgages payable:	Maturity (1)	Interest Rate at September 30, 2009	September 30, 2009		December 31, 2008
Fixed rate:
New York Office:
1290 Avenue of the Americas	01/13	5.97%	$	437,210	$	444,667
350 Park Avenue	01/12	5.48%		430,000		430,000
770 Broadway	03/16	5.65%		353,000		353,000
888 Seventh Avenue	01/16	5.71%		318,554		318,554
Two Penn Plaza	02/11	4.97%		283,748		287,386
909 Third Avenue	04/15	5.64%		211,540		214,074
Eleven Penn Plaza	12/11	5.20%		204,114		206,877
Washington, DC Office:
Skyline Place	02/17	5.74%		678,000		678,000
Warner Building	05/16	6.26%		292,700		292,700
River House Apartments	04/15	5.43%		195,546		195,546
1215 Clark Street, 200 12th Street and 251 18th Street	01/25	7.09%		113,992		115,440
Bowen Building	06/16	6.14%		115,022		115,022
Reston Executive I, II and III	01/13	5.57%		93,000		93,000
1101 17th , 1140 Connecticut, 1730 M and 1150 17th Street	08/10	6.74%		86,401		87,721
1550 and 1750 Crystal Drive	11/14	7.08%		82,399		83,912
Universal Buildings (2)	04/14	6.33%		107,553		59,728
1235 Clark Street	07/12	6.75%		53,479		54,128
2231 Crystal Drive	08/13	7.08%		49,054		50,394
1750 Pennsylvania Avenue	06/12	7.26%		46,057		46,570
241 18th Street	10/10	6.82%		45,860		46,532
2011 Crystal Drive (3)	8/17	7.30%		82,436		38,338
1225 Clark Street	08/13	7.08%		29,342		30,145
1800, 1851 and 1901 South Bell Street	12/11	6.91%		21,524		27,801
Retail:
Cross-collateralized mortgages on 42 shopping centers (4)	03/10	7.86%		394,876		448,115
Springfield Mall (including present value of purchase option)	10/12-04/13	5.45%		249,683		252,803
Montehiedra Town Center	07/16	6.04%		120,000		120,000
Broadway Mall	07/13	5.40%		93,183		94,879
828-850 Madison Avenue Condominium	06/18	5.29%		80,000		80,000
Las Catalinas Mall	11/13	6.97%		59,680		60,766
Other	12/10-05/36	4.75%-7.33%		157,452		159,597
Merchandise Mart:
Merchandise Mart	12/16	5.57%		550,000		550,000
High Point Complex	09/16	6.34%		218,475		220,361
Boston Design Center	09/15	5.02%		69,943		70,740
Washington Design Center	11/11	6.95%		44,440		44,992
Other:
555 California Street (5)	05/10-09/11	5.94%		663,545		720,671
Industrial Warehouses	10/11	6.95%		24,956		25,268
Total fixed interest notes and mortgages payable		5.97%		7,056,764		7,117,727

_______________________

See notes on page 22.

20

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt - continued

(Amounts in thousands)				Balance at
Notes and mortgages payable:	Maturity (1)	Spread over LIBOR	Interest Rate at September 30, 2009	September 30, 2009		December 31, 2008
Variable rate:
New York Office:
Manhattan Mall	02/12	L+55	.79%	$	232,000	$	232,000
866 UN Plaza	05/11	L+40	.71%		44,978		44,978
Washington, DC Office:
2101 L Street	02/13	L+120	1.45%		150,000		150,000
Courthouse Plaza One and Two	01/15	L+75	1.00%		66,592		70,774
220 20th Street (construction loan)	01/11	L+115	1.39%		73,038		40,701
West End 25 (construction loan)	02/11	L+130	1.55%		69,970		24,620
River House Apartments	04/18	(6)	1.66%		64,000		64,000
Commerce Executive III, IV and V	(7)	(7)			—		50,223
Retail:
Green Acres Mall	02/13	L+140	1.66%		335,000		335,000
Bergen Town Center(construction loan)	03/13	L+150	1.76%		261,903		228,731
Beverly Connection (8)	07/12	L+350	5.00%		100,000		100,000
4 Union Square South (9)	04/14	L+325	3.50%		75,000		—
435 Seventh Avenue (10)	08/14	L+300	5.00%		52,000		—
Other (11)	11/11	L+175	2.07%		22,758		—
Other:
220 Central Park South	11/10	L+235 – L+245	2.64%		130,000		130,000
Other (12)	10/09(12) – 11/11	Various	1.76% - 3.01%		161,325		172,886
Total Variable Interest Notes and Mortgages Payable			1.95%		1,838,564		1,643,913
Total Notes and Mortgages Payable			5.14%	$	8,895,328	$	8,761,640
Due to Vornado: (see page 10)
2.85% due 2027	04/12		5.45%	$	1,131,695	$	1,276,285
3.63% due 2026	11/11		5.32%		858,260		945,458
Total due to Vornado (13)			5.39%	$	1,989,955	$	2,221,743
Senior unsecured notes:
Senior unsecured notes due 2039 (14)	10/39		7.88%	$	446,056	$	—
Senior unsecured notes due 2010 (15)	12/10		4.75%		148,215		199,625
Senior unsecured notes due 2011 (15)	02/11		5.60%		117,333		249,902
Senior unsecured notes due 2009 (15)	08/09		4.50%		—		168,289
Total senior unsecured notes			6.85%	$	711,604	$	617,816
3.88% exchangeable senior debentures due 2025 (see page 10)	04/12		5.32%	$	482,875	$	478,256
Unsecured revolving credit facilities:
$1.595 billion unsecured revolving credit facility	09/12	L+55	0.76%	$	600,000	$	300,000
$.965 billion unsecured revolving credit facility ($39,282 reserved for outstanding letters of credit)	06/11	L+55	0.76%		48,250		58,468
Total unsecured revolving credit facilities (16)			0.76%	$	648,250	$	358,468

_______________________

See notes on the following page.

21

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt - continued

Notes to preceding tabular information (Amounts in thousands):

(1) Represents the extended maturity for certain loans in which we have the unilateral right, ability and intent to extend. In the case of our convertible and exchangeable debt, represents the earliest date holders may require us to repurchase the debentures.

(2) On September 14, 2009, we completed a $50,000 additional financing of the Universal Buildings. The additional financing has a fixed interest rate of 8.0% and matures on the same date as the existing loans in April 2014.

(3) On July 30, 2009, we completed an $82,500 refinancing of 2011 Crystal Drive. This loan has a fixed interest rate of 7.30% and matures in August 2017, with two one-year extension options. We retained net proceeds of approximately $44,500 after repaying the existing loan and closing costs.

(4) In the first quarter of 2009, we purchased $47,000 of this debt for $46,231 in cash, resulting in a net gain of $769.

(5) In June 2009, we purchased $58,399 (aggregate carrying amount) of this loan for $55,814 in cash, resulting in a net gain of $2,585.

(6) This loan bears interest at the Freddie Mac Reference Note Rate plus 1.53%.

(7) On June 1, 2009, we repaid the $50,223 outstanding balance of this loan, which was scheduled to mature on July 31, 2009.

(8) On July 7, 2009, we refinanced this loan, which was scheduled to mature on July 9, 2009. The new loan has a two-year term and an interest rate of LIBOR plus 3.50%, with a LIBOR floor of 1.50% (5.00% at September 30, 2009), and provides for a one-year extension through July 2012, at LIBOR plus 5.00%.

(9) On April 7, 2009, we completed a $75,000 financing of 4 Union Square South. This interest-only loan has a rate of LIBOR plus 3.25%, (3.50% at September 30, 2009) and matures in April 2012, with two one-year extension options. The property was previously unencumbered.

(10) On August 11, 2009, we completed a $52,000 financing of 435 Seventh Avenue. This loan has a rate of LIBOR plus 3.00% with a LIBOR floor of 2.00% (5.00% at September 30, 2009) and matures in August 2012, with two one-year extension options. The property was previously unencumbered.

(11) On August 20, 2009, the fixed interest rate swap on this loan expired and the loan was reclassified from fixed rate to variable rate debt. In addition, on October 15, 2009, we refinanced the principal amount of this loan at LIBOR plus 3.75%. The loan has an initial maturity of November 2011, with a one-year extension option.

(12) We are currently in negotiations with the lender to extend or refinance a loan with an outstanding balance of $36,000, which matured on October 29, 2009.

(13) During 2009, we purchased $279,922 (aggregate face amount) of our convertible senior debentures due to Vornado for $247,728 in cash, resulting in net gains of $16,072, of which $12,665 and $3,407 were recognized in the second and third quarters, respectively. In October 2009, we purchased an additional $79,671 (aggregate face amount) of our convertible senior debentures due to Vornado for $76,651 in cash. Furthermore, on November 2, 2009, we commenced a cash tender offer for any and all of our convertible senior debentures due to Vornado. Upon the terms and subject to the conditions of the tender offer, we are offering to purchase the convertible senior debentures due to Vornado at par, plus accrued and unpaid interest. The tender offer expires on December 1, 2009.

(14) On September 30, 2009, we completed a public offering of $460,000 principal amount of 7.875% callable senior unsecured 30-year notes due October 1, 2039. Interest on the notes is payable quarterly in arrears on each January 1, April 1, July 1 and October 1, commencing January 1, 2010. The notes were sold to the public at par and may be redeemed at our option in whole or in part beginning October 1, 2014, at a price equal to the principal amount plus accrued and unpaid interest.  These notes are subject to substantively the same financial covenants as our previously issued senior unsecured notes. We retained net proceeds of approximately $446,000 from the offering, which will be used for general corporate purposes.

(15) In the first quarter of 2009 we purchased $81,534 (aggregate face amount) of our senior unsecured notes for $75,977 in cash, resulting in a net gain of $5,136. In the second quarter of 2009, pursuant to our April 30, 2009 tender offer, we purchased $173,321 (aggregate face amount) of our senior unsecured notes for $169,832 in cash, resulting in a net gain of $2,434. In addition, upon maturity in August 2009, we repaid the remaining $97,900 of our 4.5% senior unsecured notes.

(16) In October 2009, we repaid $400,000 of the amount outstanding under our unsecured revolving credit facilities.

22

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

10. Redeemable Partnership Units

Redeemable partnership units on our consolidated balance sheets represent Operating Partnership units not owned by Vornado and are comprised of (i) Class A units, (ii) Series B convertible preferred units, and (iii) Series D-10, D-11, D-12, D-14 and D-15 (collectively, “Series D”) cumulative redeemable preferred units. Redeemable partnership units are presented at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to period are charged to “equity” on our consolidated balance sheets. As of September 30, 2009 and December 31, 2008, the aggregate value of the redeemable partnership units was $1,212,765,000 and $1,177,978,000, respectively. Below is a table reflecting the activity of the redeemable partnership units.

(Amounts in thousands)
Balance at December 31, 2007	$	1,658,303
Net income		69,844
Distributions		(56,445	)
Class A unit redemptions, at redemption value		(61,801	)
Mark-to-market adjustments on Class A units		26,393
Other, net		19,812
Balance at September 30, 2008	$	1,656,106
Balance at December 31, 2008	$	1,177,978
Net income		32,250
Distributions		(31,313	)
Class A unit redemptions, at redemption value		(53,091	)
Mark-to-market adjustments on Class A units		77,004
Other, net		9,937
Balance at September 30, 2009	$	1,212,765

Redeemable partnership units exclude our Series G convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with GAAP, because of their possible settlement by issuing a variable number of Vornado common shares. Accordingly the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $59,762,000 and $83,079,000 as of September 30, 2009 and December 31, 2008, respectively.

On October 30, 2009, all of the Series B convertible preferred units were redeemed by us in exchange for 139,798 Class A units.

23

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

11. Income Per Class A Unit

During 2009, we paid a portion of our distributions in Class A units. Consequently, we have included the 6,230,000 newly issued Class A units in the computation of income per Class A unit retroactively for the three and nine months ended September 30, 2008.

On April 22, 2009, Vornado sold 17,250,000 common shares, including underwriters’ over-allotment, in an underwritten public offering pursuant to an effective registration statement at an initial public offering price of $43.00 per share. Vornado received net proceeds of approximately $710,226,000, after the underwriters’ discount and offering expenses and contributed the net proceeds to us in exchange for 17,250,000 Class A units.

The following table provides a reconciliation of both net income and the number of Class A units used in the computation of (i) basic income per Class A unit, which utilizes the weighted average number of Class A units outstanding without regard to dilutive potential units, and (ii) diluted income per Class A unit, which includes the weighted average Class A units and potentially dilutive unit equivalents. Potentially dilutive unit equivalents include our Series A convertible preferred units, employee unit options, restricted unit awards and exchangeable senior debentures due 2025.

(Amounts in thousands, except per unit amounts)	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2009			2008			2009			2008
Numerator:
Income from continuing operations	$	112,523		$	42,701		$	222,624		$	466,298
Income from discontinued operations		43,321			846			49,276			172,814
Net income		155,844			43,547			271,900			639,112
Net (income) loss attributable to noncontrolling interests		(258	)		466			3,442			2,709
Net income attributable to Vornado Realty L.P.		155,586			44,013			275,342			641,821
Preferred unit distributions		(19,222	)		(19,082	)		(57,647	)		(57,393	)
Net income attributable to Class A unitholders		136,364			24,931			217,695			584,428
Earnings allocated to unvested participating securities		(767	)		(1,117	)		(3,027	)		(3,192	)
Numerator for basic income per Class A unit		135,597			23,814			214,668			581,236
Impact of assumed conversions:
Convertible preferred unit distributions		43			—			—			1,196
Numerator for diluted income per Class A unit	$	135,640		$	23,814		$	214,668		$	582,432
Denominator:
Denominator for basic income per Class A unit – weighted average units		192,671			174,306			185,182			174,162
Effect of dilutive securities (1):
Employee unit options and restricted unit awards		2,854			5,377			2,110			5,761
Convertible preferred units		75			—			—			85
Denominator for diluted income per Class A unit – weighted average units and assumed conversions		195,600			179,683			187,292			180,008
INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations	$	0.48		$	0.14		$	0.89		$	2.35
Income from discontinued operations		0.22			—			0.27			0.99
Net income per Class A units	$	0.70		$	0.14		$	1.16		$	3.34
INCOME PER CLASS A UNIT – DILUTED:
Income from continuing operations	$	0.47		$	0.13		$	0.89		$	2.28
Income from discontinued operations		0.22			—			0.26			0.96
Net income per Class A unit	$	0.69		$	0.13		$	1.15		$	3.24

__________________

(1) The effect of dilutive securities above excludes anti-dilutive weighted average unit equivalents. Accordingly, the three and nine months ended September 30, 2009 exclude 7,594 and 7,537 weighted average unit equivalents, respectively, and the three and nine months ended September 30, 2008, exclude 9,607 and 9,018 weighted average unit equivalents, respectively.

24

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

12. Comprehensive Income

(Amounts in thousands)	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2009			2008		2009		2008
Net income	$	155,844		$	43,547	$	271,900	$	639,112
Other comprehensive income (loss)		52,340			19,656		23,388		(38,447	)
Comprehensive income		208,184			63,203		295,288		600,665
Comprehensive (income) loss attributable to noncontrolling interests		(258	)		466		3,442		2,709
Comprehensive income attributable to Vornado Realty, LP	$	207,926		$	63,669	$	298,730	$	603,374

Substantially all of the other comprehensive income (loss) for the three and nine months ended September 30, 2009 and 2008 relates to the mark-to-market of marketable equity securities classified as available-for-sale and our share of other comprehensive income of partially owned entities (primarily Toys).

13. Fee and Other Income

The following table sets forth the details of our fee and other income:

(Amounts in thousands)	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2009		2008		2009		2008
Tenant cleaning revenue	$	14,514	$	13,627	$	43,372	$	41,431
Management and leasing fees		2,837		2,518		8,255		10,326
Lease termination fees		1,608		1,455		4,356		4,469
Other income		12,676		13,155		42,301		33,830
	$	31,635	$	30,755	$	98,284	$	90,056

Fee and other income above include management fee income from Interstate Properties, a related party, of $197,000 and $196,000 for the three months ended September 30, 2009 and 2008, respectively, and $578,000 and $604,000 for the nine months ended September 30, 2009 and 2008, respectively. The above table excludes fee income from partially owned entities, which is included in income from partially owned entities (see Note 5 – Investments in Partially Owned Entities).

14. Stock-based Compensation

Vornado’s Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights, performance shares and limited partnership units to certain of our employees and officers. We account for all stock-based compensation in accordance GAAP. Stock based compensation expense for the three months ended September 30, 2009 and 2008 consists of stock option awards, restricted share and unit awards and out-performance plan awards. During the three and nine months ended September 30, 2009, we recognized $5,639,000 and $21,539,000 of stock-based compensation expense, respectively. During the three and nine months ended September 30, 2008 we recognized $8,789,000 and $25,762,000 of stock based compensation expense, respectively.

On March 31, 2009, Vornado’s nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-performance plan awards. Accordingly, we recognized $32,588,000 of expense in the first quarter of 2009 representing the unamortized portion of these awards, which is included as a component of “general and administrative” expense on our consolidated statement of income. As a result of these voluntary surrenders, stock-based compensation expense will be approximately $7,000,000 lower in 2009 and $9,400,000, $9,400,000, $5,700,000 and $1,000,000 lower in 2010, 2011, 2012 and 2013, respectively.

25

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

15. Commitments and Contingencies

Insurance

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”), which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage in effect through February 15, 2011. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Our coverage for NBCR losses is up to $2 billion, per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

Our debt instruments, consisting of mortgage loans secured by our properties (which are generally non-recourse to us), senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

Other Contractual Obligations

At September 30, 2009, there were $39,282,000 of outstanding letters of credit under our $965,000,000 revolving credit facility. Our credit facilities and our senior unsecured notes contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities and our senior unsecured notes also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including items such as the failure to pay interest or principal.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $201,550,000. Of this amount, $80,923,000 is committed to the India Property Fund and is pledged as collateral to its lender.

From time to time, we have disposed of substantial amounts of real estate to third parties for which, as to certain properties, we remain contingently liable for rent payments or mortgage indebtedness that we cannot quantify.

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(UNAUDITED)

15. Commitments and Contingencies - continued

We are from time to time involved in various other legal actions in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters individually or in the aggregate, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. Discovery is now complete and we anticipate that a trial date will be set for some time in 2010. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above.   Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records; that claim was dismissed by virtue of a decision dated October 1, 2007 and an Order dated January 28, 2009. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with the 2006 decision.  In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump filed an additional appeal of the 2006, 2007 and 2009 decisions. Mr. Trump’s appeals were denied on all grounds on June 30, 2009. Thereafter, Mr. Trump moved to reargue the appellate decisions but later withdrew the motion. On July 24, 2009 Mr. Trump moved for leave to appeal the June 30, 2009 decision to the New York Court of Appeals, which was denied on October 27, 2009. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

16. Retirement Plans

In the first quarter of 2009, we finalized the termination of the Merchandise Mart Properties Pension Plan, which resulted in a $2,800,000 pension settlement expense that is included as a component of “general and administrative” expense on our consolidated statement of income for the nine months ended September 30, 2009.

17. Impairment Losses on Development Projects and Costs of Acquisitions Not Consummated

During the three months ended September 30, 2008, we recognized a $5,000,000 non-cash impairment charge to write down the carrying amount of land held for development to its fair value. During the first and second quarters of 2008, we wrote-off an aggregate of $3,009,000 of costs associated with acquisitions not consummated (primarily Hudson Rail Yards).

18. Marketable Securities

At September 30, 2009 and December 31, 2008, we had $4,099,000 of net unrealized gains and $2,061,000 of net unrealized losses, respectively, on our marketable equity securities. During 2008, we concluded that certain of the investments in our marketable equity securities portfolio were “other-than-temporarily” impaired; accordingly, we recognized non-cash impairment charges, aggregating $20,881,000, of which $9,073,000 and $11,808,000 were recognized in the first and third quarters of 2008, respectively. Our conclusions were based on the severity of the declines in the market value of those securities and our inability to forecast a recovery in the near-term.

The following table sets forth the details of our marketable securities:

	As of September 30, 2009				As of December 31, 2008
(Amounts in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Marketable equity securities	$	85,717	$	85,717	$	118,438	$	118,438
Debt securities held-to-maturity		227,501		242,848		215,884		164,728
	$	313,218	$	328,565	$	334,322	$	283,166

28

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information

Below is a summary of net income and a reconciliation of our net income to EBITDA⁽¹⁾ by segment for the three and nine months ended September 30, 2009 and 2008.

(Amounts in thousands)		For the Three Months Ended September 30, 2009
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys			Other (3)
Property rentals	$	509,968		$	189,896		$	137,139		$	91,286		$	52,269		$	—		$	39,378
Straight-line rents:
Contractual rent increases		16,676			10,126			3,573			2,827			135			—			15
Amortization of free rent		4,682			(98	)		2,760			1,963			19			—			38
Amortization of acquired below- market leases, net		18,728			10,710			1,069			4,826			30			—			2,093
Total rentals		550,054			210,634			144,541			100,902			52,453			—			41,524
Tenant expense reimbursements		89,530			36,360			14,892			32,121			3,661			—			2,496
Fee and other income:
Tenant cleaning revenue		14,514			20,661			—			—			—			—			(6,147	)
Management and leasing fees		2,837			1,269			1,984			557			11			—			(984	)
Lease termination fees		1,608			1,226			234			—			9			—			139
Other		12,676			3,182			4,979			648			3,461			—			406
Total revenues		671,219			273,332			166,630			134,228			59,595			—			37,434
Operating expenses		265,952			117,362			57,889			49,304			26,469			—			14,928
Depreciation and amortization		130,503			42,621			35,187			24,091			13,654			—			14,950
General and administrative		51,684			4,895			6,079			6,802			7,198			—			26,710
Total expenses		448,139			164,878			99,155			80,197			47,321			—			56,588
Operating income (loss)		223,080			108,454			67,475			54,031			12,274			—			(19,154	)
Income applicable to Alexander’s		21,297			192			—			187			—			—			20,918
Income applicable to Toys		22,077			—			—			—			—			22,077			—
(Loss) income from partially owned entities		(18,784	)		1,454			1,876			580			26			—			(22,720	)
Interest and other investment income, net		20,486			190			254			10			12			—			20,020
Interest and debt expense		(158,205	)		(33,644	)		(32,454	)		(22,315	)		(13,088	)		—			(56,704	)
Net gains of early extinguishment of debt		3,407			—			—			—			—			—			3,407
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		4,432			—			—			—			—			—			4,432
Income (loss) before income taxes		117,790			76,646			37,151			32,493			(776	)		22,077			(49,801	)
Income tax expense		(5,267	)		(585	)		(44	)		(39	)		(847	)		—			(3,752	)
Income (loss) from continuing operations		112,523			76,061			37,107			32,454			(1,623	)		22,077			(53,553	)
Income from discontinued operations		43,321			—			41,992			1,329			—			—			—
Net income (loss)		155,844			76,061			79,099			33,783			(1,623	)		22,077			(53,553	)
Net (income) loss attributable to noncontrolling interests		(258	)		(2,817	)		—			15			—			—			2,544
Net income (loss) attributable to Vornado Realty L.P.		155,586			73,244			79,099			33,798			(1,623	)		22,077			(51,009	)
Interest and debt expense (2)		212,727			31,945			32,980			23,978			13,315			39,136			71,373
Depreciation and amortization(2)		178,436			41,101			37,116			25,029			13,772			34,357			27,061
Income tax (benefit) expense (2)		(30,479	)		585			47			39			847			(36,122	)		4,125
EBITDA(1)	$	516,270		$	146,875		$	149,242		$	82,844		$	26,311		$	59,448		$	51,550

_______________________

See notes on page 33

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(UNAUDITED)

19. Segment Information – continued

(Amounts in thousands)		For the Three Months Ended September 30, 2008
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys			Other (3)
Property rentals	$	500,549		$	181,758		$	128,382		$	85,664		$	53,167		$	—		$	51,578
Straight-line rents:
Contractual rent increases		14,353			8,077			418			3,754			1,738			—			366
Amortization of free rent		8,070			3,649			2,925			1,539			(2	)		—			(41	)
Amortization of acquired below- market leases, net		24,526			14,807			1,089			7,491			26			—			1,113
Total rentals		547,498			208,291			132,814			98,448			54,929			—			53,016
Tenant expense reimbursements		97,815			40,632			14,601			33,286			5,294			—			4,002
Fee and other income:
Tenant cleaning revenue		13,627			17,751			—			—			—			—			(4,124	)
Management and leasing fees		2,518			1,138			1,875			411			95			—			(1,001	)
Lease termination fees		1,455			21			1,037			362			35			—			—
Other		13,155			3,626			5,701			1,873			2,676			—			(721	)
Total revenues		676,068			271,459			156,028			134,380			63,029			—			51,172
Operating expenses		276,115			120,398			56,653			50,088			31,773			—			17,203
Depreciation and amortization		136,550			48,322			35,929			21,749			12,751			—			17,799
General and administrative		49,494			5,263			6,427			7,397			7,419			—			22,988
Impairment losses on development projects and costs of acquisition not consummated		5,000			—			—			—			—			—			5,000
Total expenses		467,159			173,983			99,009			79,234			51,943			—			62,990
Operating income (loss)		208,909			97,476			57,019			55,146			11,086			—			(11,818	)
(Loss) income applicable to Alexander’s		(6,876	)		189			—			191			—			—			(7,256	)
Loss applicable to Toys		(8,141	)		—			—			—			—			(8,141	)		—
(Loss) income from partially owned entities		(3,099	)		1,798			1,696			25			158			—			(6,776	)
Interest and other investment income, net		9,638			542			507			92			49			—			8,448
Interest and debt expense		(157,646	)		(34,647	)		(31,323	)		(21,445	)		(13,150	)		—			(57,081	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		5,160			—			—			—			—			—			5,160
Income (loss) before income taxes		47,945			65,358			27,899			34,009			(1,857	)		(8,141	)		(69,323	)
Income tax expense		(5,244	)		—			(699	)		(5	)		(814	)		—			(3,726	)
Income (loss) from continuing operations		42,701			65,358			27,200			34,004			(2,671	)		(8,141	)		(73,049	)
Income (loss) from discontinued operations		846			—			(27	)		873			—			—			—
Net income (loss)		43,547			65,358			27,173			34,877			(2,671	)		(8,141	)		(73,049	)
Net loss (income) attributable to noncontrolling interests		466			(1,545	)		—			30			—			—			1,981
Net income (loss) attributable to Vornado Realty L.P.		44,013			63,813			27,173			34,907			(2,671	)		(8,141	)		(71,068	)
Interest and debt expense (2)		202,446			32,979			32,244			26,733			13,360			33,569			63,561
Depreciation and amortization(2)		179,574			46,113			37,222			23,488			12,885			35,155			24,711
Income tax (benefit) expense (2)		(5,063	)		—			701			5			814			(10,944	)		4,361
EBITDA(1)	$	420,970		$	142,905		$	97,340		$	85,133		$	24,388		$	49,639		$	21,565

________________________

See notes on page 33.

30

VORNADO REALTY L.P.

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(UNAUDITED)

19. Segment Information - continued

(Amounts in thousands)		For the Nine Months Ended September 30, 2009
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys		Other (3)
Property rentals	$	1,529,747		$	568,884		$	399,937		$	268,519		$	176,224		$	—	$	116,183
Straight-line rents:
Contractual rent increases		43,469			24,315			9,348			8,442			1,406			—		(42	)
Amortization of free rent		24,871			2,209			9,829			12,380			312			—		141
Amortization of acquired below- market leases, net		56,270			30,518			3,117			18,362			71			—		4,202
Total rentals		1,654,357			625,926			422,231			307,703			178,013			—		120,484
Tenant expense reimbursements		270,934			103,609			47,936			99,337			13,492			—		6,560
Fee and other income:
Tenant cleaning revenue		43,372			58,917			—			—			—			—		(15,545	)
Management and leasing fees		8,255			3,363			5,936			1,248			25			—		(2,317	)
Lease termination fees		4,356			1,524			1,916			100			677			—		139
Other		42,301			9,923			15,129			2,296			6,324			—		8,629
Total revenues		2,023,575			803,262			493,148			410,684			198,531			—		117,950
Operating expenses		814,561			340,552			169,379			155,503			100,134			—		48,993
Depreciation and amortization		398,845			129,884			105,096			75,881			40,800			—		47,184
General and administrative		180,381			18,588			20,548			24,946			25,092			—		91,207
Total expenses		1,393,787			489,024			295,023			256,330			166,026			—		187,384
Operating income (loss)		629,788			314,238			198,125			154,354			32,505			—		(69,434	)
Income applicable to Alexander’s		46,044			577			—			598			—			—		44,869
Income applicable to Toys		118,897			—			—			—			—			118,897		—
(Loss) income from partially owned entities		(49,124	)		3,908			5,504			2,566			186			—		(61,288	)
Interest and other investment (loss) income, net		(63,608	)		712			573			63			83			—		(65,039	)
Interest and debt expense		(475,028	)		(100,118	)		(94,408	)		(67,093	)		(38,888	)		—		(174,521	)
Net gains of early extinguishment of debt		26,996			—			—			769			—			—		26,227
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		4,432			—			—			—			—			—		4,432
Income (loss) before income taxes		238,397			219,317			109,794			91,257			(6,114	)		118,897		(294,754	)
Income tax expense		(15,773	)		(845	)		(1,232	)		(316	)		(1,755	)		—		(11,625	)
Income (loss) from continuing operations		222,624			218,472			108,562			90,941			(7,869	)		118,897		(306,379	)
Income from discontinued operations		49,276			—			46,004			3,272			—			—		—
Net income (loss)		271,900			218,472			154,566			94,213			(7,869	)		118,897		(306,379	)
Net loss (income) attributable to noncontrolling interests		3,442			(6,438	)		—			630			—			—		9,250
Net income (loss) attributable to Vornado Realty L.P.		275,342			212,034			154,566			94,843			(7,869	)		118,897		(297,129	)
Interest and debt expense (2)		612,416			95,058			96,818			71,496			39,563			89,897		219,584
Depreciation and amortization(2)		539,554			125,831			110,263			78,724			41,203			101,368		82,165
Income tax expense (2)		23,804			845			1,242			316			1,820			7,335		12,246
EBITDA(1)	$	1,451,116		$	433,768		$	362,889		$	245,379		$	74,717		$	317,497	$	16,866

_______________________

See notes on page 33.

31

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information – continued

(Amounts in thousands)		For the Nine Months Ended September 30, 2008
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys		Other (3)
Property rentals	$	1,501,146		$	539,254		$	377,867		$	257,500		$	179,606		$	—	$	146,919
Straight-line rents:
Contractual rent increases		45,570			20,860			6,861			12,713			4,531			—		605
Amortization of free rent		17,460			8,106			5,759			319			2,662			—		614
Amortization of acquired below- market leases, net		73,655			45,548			3,305			20,016			84			—		4,702
Total rentals		1,637,831			613,768			393,792			290,548			186,883			—		152,840
Tenant expense reimbursements		269,646			103,230			44,608			97,968			14,715			—		9,125
Fee and other income:
Tenant cleaning revenue		41,431			53,415			—			—			—			—		(11,984	)
Management and leasing fees		10,326			5,035			6,983			974			306			—		(2,972	)
Lease termination fees		4,469			2,050			1,037			1,027			355			—		—
Other		33,830			11,876			14,802			2,014			5,749			—		(611	)
Total revenues		1,997,533			789,374			461,222			392,531			208,008			—		146,398
Operating expenses		793,391			333,845			161,183			144,165			102,747			—		51,451
Depreciation and amortization		397,807			143,549			104,899			63,140			38,324			—		47,895
General and administrative		149,164			14,906			18,824			23,104			21,921			—		70,409
Impairment losses on development projects and costs of acquisition not consummated		8,009			—			—			—			—			—		8,009
Total expenses		1,348,371			492,300			284,906			230,409			162,992			—		177,764
Operating income (loss)		649,162			297,074			176,316			162,122			45,016			—		(31,366	)
Income applicable to Alexander’s		16,404			568			—			529			—			—		15,307
Income applicable to Toys		41,510			—			—			—			—			41,510		—
(Loss) income from partially owned entities		(29,167	)		3,843			4,548			9,889			978			—		(48,425	)
Interest and other investment income, net		47,535			1,965			1,737			422			221			—		43,190
Interest and debt expense		(474,862	)		(104,032	)		(94,085	)		(63,981	)		(39,190	)		—		(173,574	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		8,546			—			—			—			—			—		8,546
Income (loss) before income taxes		259,128			199,418			88,516			108,981			7,025			41,510		(186,322	)
Income tax benefit (expense)		207,170			—			220,916			(7	)		(1,205	)		—		(12,534	)
Income (loss) from continuing operations		466,298			199,418			309,432			108,974			5,820			41,510		(198,856	)
Income from discontinued operations		172,814			—			59,072			1,830			—			—		111,912
Net income (loss)		639,112			199,418			368,504			110,804			5,820			41,510		(86,944	)
Net loss (income) attributable to noncontrolling interests		2,709			(3,366	)		—			104			—			—		5,971
Net income (loss) attributable to Vornado Realty L.P.		641,821			196,052			368,504			110,908			5,820			41,510		(80,973	)
Interest and debt expense (2)		621,367			98,810			96,958			76,492			39,823			108,970		200,314
Depreciation and amortization(2)		531,252			136,738			110,334			67,456			38,711			103,291		74,722
Income tax (benefit) expense (2)		(121,844	)		—			(220,911	)		7			1,205			82,778		15,077
EBITDA(1)	$	1,672,596		$	431,600		$	354,885		$	254,863		$	85,559		$	336,549	$	209,140

________________________

See notes on the following page.

32

VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information – continued

Notes to preceding tabular information

(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental measure for making decisions and assessing the un-levered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered as an alternative to net income or cash flows and may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) Other EBITDA is comprised of:

(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2009			2008			2009			2008
Alexander’s	$	26,769		$	68		$	65,229		$	37,180
555 California Street		10,090			12,296			31,885			35,554
Lexington		(1,863	)		10,803			15,129			29,271
Hotel Pennsylvania		3,599			11,907			7,823			29,772
Industrial warehouses		1,219			1,361			3,902			4,025
Other investments		7,071			8,058			1,904			6,211
		46,885			44,493			125,872			142,013
Investment income and other, net		23,023			15,514			61,214			72,592
Corporate general and administrative expenses		(24,309	)		(19,633	)		(62,757	)		(62,101	)
Write-off of unamortized costs from the voluntary surrender of equity awards on March 31, 2009		—			—			(20,202	)		—
Net loss attributable to noncontrolling interests		2,544			1,981			9,250			5,971
Net gains on early extinguishment of debt		3,407			—			26,227			—
Non-cash asset (write-downs) reversal:
Mezzanine loans receivable		—			—			(122,738	)		10,300
Marketable equity securities		—			(11,808	)		—			(20,881	)
Real estate development projects:
Partially owned entities		—			—			—			(34,200	)
Wholly owned entities (including costs of acquisitions not consummated)		—			(5,000	)		—			(8,009	)
Derivative positions in marketable equity securities		—			(3,982	)		—			(25,812	)
Discontinued operations of Americold (including a $112,690 net gain on sale)		—			—			—			129,267
	$	51,550		$	21,565		$	16,866		$	209,140

33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Partners

Vornado Realty L.P.

New York, New York

We have reviewed the accompanying consolidated balance sheet of Vornado Realty L.P. (the "Company") as of September 30, 2009, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2009 and 2008, and of changes in partners’ capital and cash flows for the nine-month periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vornado Realty L.P. as of December 31, 2008, and the related consolidated statements of income, partners’ capital, and cash flows for the year then ended (not presented herein); and in our report dated March 10, 2009 (October 16, 2009, as to the effects of the retrospective application of new accounting guidance on the accounting for convertible debt instruments, noncontrolling interests, and earnings per share as disclosed in Note 2), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2008 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

November 6, 2009

34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements and our future results of operations and financial condition, see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2008. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three and nine months ended September 30, 2009. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Critical Accounting Policies

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2008 in Management’s Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2009.

35

Overview

Business Objective and Operating Strategy

Our business objective is to maximize Vornado’s shareholder value, which we measure by our total return provided to Vornado’s shareholders. Below is a table comparing Vornado’s performance to that of the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ending September 30, 2009:

	Total Return (1)
	Vornado	RMS	SNL
One-year	(25.8%)	(26.5%)	(26.0%)
Three-years	(34.2%)	(33.6%)	(31.3%)
Five-years	21.7%	5.0%	8.0%
Ten-years	226.2%	146.8%	156.2%

_________________________

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

We intend to achieve our business objective by continuing to pursue our investment philosophy and executing our operating strategies through:

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

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

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

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

• Investing in fully-integrated operating companies that have a significant real estate component; and

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

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

On May 14, 2009, Vornado’s Board of Trustees executed its long-planned management succession strategy and elected Michael D. Fascitelli, as Vornado’s Chief Executive Officer, succeeding Steven Roth, who continues to serve as Chairman of the Board.

We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC and Northern Virginia areas. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends. See “Risk Factors” in Item 1A of our Annual Report on form 10-K for the year ended December 31, 2008, for additional information regarding these factors.

36

Overview – continued

In the second half of 2007 the residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages, declining home values and increasing inventory nationwide. In 2008, the “credit crisis” spread to the broader commercial credit and financial markets resulting in illiquidity and volatility in the bond and equity markets. These trends and the related economic recession have continued in 2009. This economic recession has negatively affected substantially all businesses, including ours. Real estate transactions have diminished significantly and capitalization rates have risen. The commercial real estate industry may continue to be affected by declining demand for office and retail space due to bankruptcies, layoffs, downsizing, cost cutting as well as general economic conditions, which would result in lower occupancy rates and effective rents and a corresponding decrease in net income and cash flow. In addition, the value of investments in joint ventures, marketable securities, and mezzanine loans may continue to decline, and may result in impairment charges and/or valuation allowances and a corresponding decrease in net income. Impairment charges and valuation allowances are based on our judgment and represent our estimate of losses we may incur based on the difference between the carrying amounts of our investments and our estimate of the amounts we may ultimately receive upon disposition of the investments. The estimation process is inherently uncertain, and is based upon, among other factors, our expectations of future events, and accordingly, actual amounts received on these investments could differ materially from our estimates.

The trends discussed above have had an impact on our financial results during 2009. During the second quarter of 2009, we recorded a $122,738,000 mezzanine loans receivable valuation allowance. It is not possible for us to quantify the impact of the above trends, which may persist for the remainder of 2009 and beyond, on our future financial results.

37

Overview – continued

Quarter Ended September 30, 2009 Financial Results Summary

Net income attributable to Class A unitholders for the quarter ended September 30, 2009 was $136,364,000, or $0.69 per diluted Class A unit, versus $24,931,000, or $0.13 per diluted Class A unit, for the quarter ended September 30, 2008. Net income for the quarters ended September 30, 2009 and 2008 includes $43,329,000 and $1,313,000, respectively, of net gains on sale of real estate. In addition, net income for the quarters ended September 30, 2009 and 2008 includes certain items that affect comparability which are listed in the table below. The aggregate of the net gains on sale of real estate and the items in the table below, increased net income attributable to Class A unitholders for the quarter ended September 30, 2009 by $57,235,000, or $0.29 per diluted Class A unit and decreased net income attributable to Class A unitholders for the quarter ended September 30, 2008 by $35,488,000, or $0.20 per diluted Class A unit.

(Amounts in thousands)	For the Three Months Ended September 30,
	2009			2008
Items that affect comparability (income) expense:
Our share of partially owned entities’ adjustments:
Lexington Realty Trust – impairment losses related to its investment in Concord Debt Holdings LLC	$	14,541		$	7,175
Toys “R” Us – litigation settlement income		(10,200	)		—
Alexander’s:
Income tax benefit		(13,668	)		—
Stock appreciation rights		—			14,557
Net gains on early extinguishment of debt		(3,407	)		—
Marketable equity securities – impairment losses		—			11,808
Derivative positions in marketable equity securities		—			3,982
Other, net		(1,172	)		(721	)
Items that affect comparability	$	(13,906	)	$	36,801

On January 1, 2009, we adopted the guidance in Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options. The guidance contained in ASC 470-20 was required to be applied retrospectively. Accordingly, net income for the three and nine months ended September 30, 2008 has been adjusted to include $9,600,000 and $28,300,000, respectively, of additional interest expense. In addition, in accordance with ASC 260, Earnings Per Share, we have included 6,230,000 additional Class A units in the computation of income per Class A unit retroactively to the three and nine months ended September 30, 2008, as a result of the unit portion of our Class A unit distributions during 2009.

The percentage increase (decrease) in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the quarter ended September 30, 2009 over the quarter ended September 30, 2008 and the trailing quarter ended June 30, 2009 are summarized below.

	New York Office	Washington, DC Office	Retail	Merchandise Mart
Quarter Ended:
September 30, 2009 vs. September 30, 2008:
GAAP basis	1.5%	10.0%	2.0%	(5.7%)
Cash basis	6.4%	8.7%	5.2%	(0.8%)
September 30, 2009 vs. June 30, 2009:
GAAP basis	(1.4%)	1.1%	4.2%	(13.0%)
Cash basis	(2.1%)	2.8%	3.9%	(11.1%)

38

Overview – continued

Nine Months Ended September 30, 2009 Financial Results Summary

Net income attributable to Class A unitholders for the nine months ended September 30, 2009 was $217,695,000, or $1.15 per diluted Class A unit, versus $584,428,000, or $3.24 per diluted Class A unit, for the nine months ended September 30, 2008. Net income for the nine months ended September 30, 2009 and 2008 includes $44,002,000, and $65,918,000, respectively, of net gains on sale of real estate. In addition, net income for the nine months ended September 30, 2009 and 2008 includes certain items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate and the items in the table below, decreased net income attributable to Class A unitholders for the nine months ended September 30, 2009 by $60,389,000, or $0.32 per diluted Class A unit and increased net income attributable to Class A unitholders for the nine months ended September 30, 2008 by $302,774,000, or $1.68 per diluted Class A unit.

(Amounts in thousands)	For the Nine Months Ended September 30,
	2009			2008
Items that affect comparability (income) expense:
Mezzanine loans receivable loss accrual (reversal)	$	122,738		$	(10,300	)
Write-off of unamortized costs from the voluntary surrender of equity awards		32,588			—
Net gains on early extinguishment of debt		(26,996	)		—
Our share of partially owned entities’ adjustments:
Lexington Realty Trust – impairment losses related to its investment in Concord Debt Holdings LLC		19,121			7,175
Toys “R” Us:
Non-cash purchase price accounting adjustments		(13,946	)		14,900
Litigation settlement income		(10,200	)		—
Alexander’s:
Stock appreciation rights		(11,105	)		7,605
Income tax benefit		(13,668	)		—
Filene’s, Boston – lease termination payment		7,650			—
Development joint ventures – non-cash asset write-downs		—			34,200
Reversal of deferred income taxes initially recorded in connection with H Street acquisition		—			(222,174	)
Net gain on sale of our 47.6% interest in Americold Realty Trust		—			(112,690	)
Derivative positions in marketable equity securities		—			25,812
Marketable equity securities – impairment losses		—			20,881
Other, net		(1,791	)		(3,341	)
		104,391			(237,932	)
47.6% share of Americold’s net loss – sold on March 31, 2008		—			1,076
Items that affect comparability	$	104,391		$	(236,856	)

The percentage increase (decrease) in GAAP basis and cash basis same store “EBITDA” of our operating segments for the nine months ended September 30, 2009 over the nine months ended September 30, 2008 is summarized below.

	New York Office	Washington, DC Office	Retail	Merchandise Mart
Nine Months Ended:
September 30, 2009 vs. September 30, 2008:
GAAP basis	1.7%	6.8%	3.6%	(11.5%)
Cash basis	5.7%	5.2%	1.8%	(6.4%)

Calculations of same store EBITDA, reconciliations of our net income to EBITDA and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.

39

Overview – continued

2009 Dispositions:

On September 1, 2009, we sold 1999 K Street, a newly developed 250,000 square foot office building, in Washington’s Central Business District, for $207,800,000 in cash, which resulted in a net gain of approximately $41,211,000.

During the nine months ended September 30, 2009, we sold 13 retail properties, in separate transactions (primarily our California supermarkets), for an aggregate of $48,000,000 in cash, which resulted in net gains of approximately $1,444,000 in the aggregate.

2009 Financing Activities:

In the first quarter of 2009, we purchased $47,000,000 of debt secured by our cross-collateralized mortgages on 42 shopping centers for $46,231,000 in cash.

During the first quarter of 2009, we purchased $81,534,000 (aggregate face amount) of our senior unsecured notes for $75,977,000 in cash. In the second quarter of 2009, pursuant to our April 30, 2009 tender offer, we purchased an additional $173,321,000 (aggregate face amount) of our senior unsecured notes for $169,832,000 in cash. In addition, upon maturity in August 2009, we repaid the remaining $97,900,000 of our 4.5% senior unsecured notes.

On April 7, 2009, we completed a $75,000,000 financing of 4 Union Square South, Manhattan, a 203,000 square foot, fully-leased retail property. This interest-only loan has a rate of LIBOR plus 3.25% (3.50% at September 30, 2009) and matures in April 2012, with two one-year extension options. The property was previously unencumbered.

On April 22, 2009, Vornado sold 17,250,000 common shares, including underwriters’ over-allotment, in an underwritten public offering pursuant to an effective registration statement at an initial public offering price of $43.00 per share. Vornado received net proceeds of approximately $710,226,000, after the underwriters’ discount and offering expenses and contributed the net proceeds to us in exchange for 17,250,000 Class A units.

On June 1, 2009, we repaid the $50,223,000 outstanding balance of the Commerce Executive loan, which was scheduled to mature on July 31, 2009.

In June 2009, we purchased $58,399,000 (aggregate carrying amount) of the debt secured by 555 California Street Complex for $55,814,000 in cash.

On June 24, 2009, Toys “R” Us, Inc. (“Toys”) in which we own a 32.7% interest, extended its $2.0 billion credit facility which was to expire in July 2010, to May 2012. The borrowing capacity under the amended facility will remain at $2.0 billion through the original maturity date in July 2010 and will continue at $1.5 billion thereafter. The interest rate will be LIBOR plus 3.20%, which may vary based on availability, through July 2010 and LIBOR plus 4.00%, subject to usage, thereafter. In addition, on July 9, 2009, Toys issued $950 million aggregate principal amount of senior unsecured notes due in 2017 at 97.399%. The proceeds from the issuance, along with existing cash, were used to repay the outstanding balance under its $1.3 billion senior credit facility, which was subsequently terminated.

During 2009, we purchased $279,922,000 (aggregate face amount) of our convertible senior debentures due to Vornado for $247,728,000 in cash. In October 2009, we purchased an additional $79,671,000 (aggregate face amount) of our convertible senior debentures due to Vornado for $76,651,000 in cash.

On July 7, 2009, we refinanced the loan on Beverly Connection, which was scheduled to mature on July 9, 2009. The new loan has a two-year term and an interest rate of LIBOR plus 3.50%, with a LIBOR floor of 1.50% (5.00% at September 30, 2009) and provides for a one-year extension through July 2012, at LIBOR plus 5.00%.

40

Overview – continued

2009 Financing Activities – continued:

On July 30, 2009, we completed an $82,500,000 refinancing of 2011 Crystal Drive, a 442,000 square foot office building located in Crystal City – Arlington, Virginia. The loan has a fixed interest rate of 7.30% and matures in August 2017, with two one-year extension options. We retained net proceeds of approximately $44,500,000 after repaying the existing loan and closing costs.

On August 11, 2009, we completed a $52,000,000 financing of 435 Seventh Avenue, Manhattan, a 43,000 square foot fully-leased retail property. This loan has a rate of LIBOR plus 3.00%, with a LIBOR floor of 2.00% (5.00% at September 30, 2009) and matures in August 2012, with two one-year extension option. The property was previously unencumbered.

On September 14, 2009, we completed a $50,000,000 additional financing of the Universal Buildings. The additional financing has a fixed interest rate of 8.0% and matures on the same date as the existing loans in April 2014.

On September 30, 2009, we completed a public offering of $460,000,000 principal amount of 7.875% callable senior unsecured 30-year notes due October 1, 2039. Interest on the notes is payable quarterly in arrears on each January 1, April 1, July 1 and October 1, commencing January 1, 2010. The notes were sold to the public at par and may be redeemed at our option in whole or in part beginning October 1, 2014, at a price equal to the principal amount plus accrued and unpaid interest.  These notes are subject to substantively the same financial covenants as our previously issued senior unsecured notes. We retained net proceeds of approximately $446,000,000 from the offering, which will be used for general corporate purposes.

In October 2009, we repaid $400,000,000 of the amounts outstanding under our unsecured revolving credit facilities.

On November 2, 2009, we commenced a cash tender offer for any and all of our convertible senior debentures due to Vornado. Upon the terms and subject to the conditions of the tender offer, we are offering to purchase the convertible senior debentures due to Vornado at par, plus accrued and unpaid interest. The tender offer expires on December 1, 2009.

41

Overview - continued

The following table sets forth certain information for the properties we own directly or indirectly, including leasing activity. The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue recognition in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Tenant improvements and leasing commissions are presented below based on square feet leased during the period, on a per square foot and per square foot per annum basis based on weighted average lease terms and as a percentage of initial rent per square foot.

(Square feet in thousands)
	New York		Washington, DC				Merchandise Mart
As of September 30, 2009:	Office		Office		Retail		Office		Showroom
Square feet (in service)		16,167		18,156		22,096		2,447		6,319
Number of properties		28		81		164		8		8
Occupancy rate		96.0%		94.8%		91.6%		87.1%		88.9%
Leasing Activity:
Quarter Ended September 30, 2009:
Square feet		356		313		294		15		334
Initial rent per square foot (1)	$	50.93	$	39.30	$	27.81	$	45.66	$	24.77
Weighted average lease terms (years)		7.8		5.0		11.4		3.4		4.0
Rent per square foot – relet space:
Square feet		324		257		93		15		334
Initial Rent – cash basis (1)	$	50.59	$	38.59	$	11.02	$	45.66	$	24.77
Prior escalated rent – cash basis	$	50.15	$	33.93	$	9.93	$	38.80	$	26.73
Percentage increase (decrease):
Cash basis		0.9%		13.7%		11.0%		17.7%		(7.3%	)
GAAP basis		8.3%		14.9%		17.7%		27.3%		(0.8%	)
Rent per square foot – vacant space:
Square feet		33		56		201		—		—
Initial rent (1)	$	54.31	$	42.55	$	35.62	$	—	$	—
Tenant improvements and leasing commissions:
Per square foot	$	42.10	$	7.88	$	6.81	$	54.93	$	2.02
Per square foot per annum	$	5.37	$	1.58	$	0.60	$	16.16	$	0.51
Percentage of initial rent		10.5%		4.0%		2.2%		35.4%		2.0%
Nine Months Ended September 30, 2009:
Square feet		924		1,382		888		15		778
Initial rent per square foot (1)	$	52.29	$	39.64	$	20.73	$	45.66	$	25.58
Weighted average lease terms (years)		7.9		4.8		10.4		3.4		4.0
Rent per square foot – relet space:
Square feet		799		1,110		375		15		778
Initial Rent – cash basis (1)	$	52.52	$	39.11	$	14.87	$	45.66	$	25.58
Prior escalated rent – cash basis	$	50.03	$	36.44	$	13.96	$	38.80	$	26.88
Percentage increase (decrease):
Cash basis		5.0%		7.3%		6.5%		17.7%		(4.8%	)
GAAP basis		10.0%		11.4%		11.6%		27.3%		2.8%
Rent per square foot – vacant space:
Square feet		125		272		513		—		—
Initial rent (1)	$	50.82	$	41.80	$	25.02	$	—	$	—
Tenant improvements and leasing commissions:
Per square foot	$	43.02	$	14.11	$	3.33	$	54.93	$	2.81
Per square foot per annum	$	5.46	$	2.94	$	0.32	$	16.16	$	0.70
Percentage of initial rent		10.4%		7.4%		1.5%		35.4%		2.7%

__________________________

See notes on the following page

42

Overview - continued

(Square feet in thousands)
	New York		Washington, DC				Merchandise Mart
	Office		Office		Retail		Office			Showroom
As of June 30, 2009:
Square feet (in service)		16,154		18,073		21,925		2,430	6,336
Number of properties		28		81		164		8	8
Occupancy rate		96.1%		95.3%		91.3%		95.4%	90.2%
As of December 31, 2008:
Square feet (in service)		16,108		17,666		21,475		2,424	6,332
Number of properties		28		81		163		8	8
Occupancy rate		96.7%		95.0%		92.0%		96.5%	92.2%
As of September30, 2008:
Square feet (in service)		16,093		17,553		21,451		2,408	6,349
Number of properties		28		81		163		8	8
Occupancy rate		97.1%		95.7%		94.0%		96.5%	92.3%

_______________________________

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

43

Overview - continued

Recently Issued Accounting Literature

In December 2007, the FASB issued an update to ASC 805, Business Combinations. The amended guidance contained in ASC 805 applies to all transactions and other events in which one entity obtains control over one or more other businesses. It also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. The amended guidance also expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. The amended guidance became effective for all transactions entered into on or after January 1, 2009. The adoption of this guidance on January 1, 2009 did not have any effect on our consolidated financial statements because there have been no acquisitions during 2009.

In December 2007, the FASB issued an update to ASC 810, Consolidation. The amended guidance contained in ASC 810 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. The amended guidance became effective on January 1, 2009 and resulted in (i) the reclassification of minority interests in consolidated subsidiaries to noncontrolling interests in consolidated subsidiaries, a component of permanent equity on our consolidated balance sheets, (ii) the reclassification of minority interest expense to net income attributable to noncontrolling interests, on our consolidated statements of income, and (iii) additional disclosures, including a consolidated statement of changes in partners’ capital in quarterly reporting periods.

In March 2008, the FASB issued an update to ASC 815, Derivatives and Hedging. The amended guidance contained in ASC 815 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows. It also provided a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock. The amended guidance became effective on January 1, 2009. The adoption of this guidance on January 1, 2009 did not have a material effect on our consolidated financial statements.

In June 2008, the FASB issued an update to ASC 260, Earnings Per Share. The amended guidance contained in ASC 260 requires companies to treat unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” and include such securities in the computation of earnings per share pursuant to the two-class method as described in ASC 260. The amended guidance became effective on January 1, 2009 and required all prior period earnings per Class A unit data presented, to be adjusted retroactively. The adoption of this guidance on January 1, 2009 did not have a material effect on our computation of income per Class A unit.

44

Overview - continued

Recently Issued Accounting Literature - continued

On January 1, 2009, we adopted the provisions of ASC 470-20, which was required to be applied retrospectively. The adoption affected the accounting for our convertible senior debentures due to Vornado and exchangeable senior debentures by requiring the initial proceeds from their sale to be allocated between a debt component and an equity component in a manner that results in interest expense on the debt component at our nonconvertible debt borrowing rate on the date of issue. The initial debt components of our $1.4 billion Convertible Senior Debentures due to Vornado, $1 billion Convertible Senior Debentures due to Vornado and $500 million Exchangeable Senior Debentures were $1,241,286,000, $926,361,000 and $457,699,000, respectively, based on the fair value of similar nonconvertible instruments issued at that time. The aggregate initial debt discount of $216,655,000 after original issuance costs allocated to the equity component was recorded in “General Partners’ Class A units” as a cumulative effect of change in accounting principle in our consolidated statement of changes in partners’ capital. We are amortizing the discount using the effective interest method over the period the debt is expected to remain outstanding (i.e., the earliest date the holders may require us to repurchase the debentures), as additional interest expense. Accordingly, interest expense for the three and nine months ended September 30, 2008 has been adjusted to include $9,600,000 and $28,300,000 of amortization. Amortization for periods prior to December 31, 2007 (not presented herein) aggregating $35,552,000 has been reflected as a cumulative effect of change in accounting principle in “earnings less than distributions” on our consolidated statement of changes in partners’ capital. Below is a summary of the financial statement effects of implementing the provisions of ASC 470-20 and related disclosures.

		Due to Vornado
		$1.4 Billion Convertible Senior Debentures				$1 Billion Convertible Senior Debentures				$500 Million Exchangeable Senior Debentures
(Amounts in thousands, except per unit amounts) Balance Sheet:		September 30, 2009		December 31, 2008		September 30, 2009		December 31, 2008		September 30, 2009		December 31, 2008
Principal amount of debt component	$	1,204,359	$	1,382,700	$	888,219	$	989,800	$	499,982	$	499,982
Unamortized discount		(72,664	)	(106,415	)	(29,959	)	(44,342	)	(17,107	)	(21,726	)
Carrying amount of debt component	$	1,131,695	$	1,276,285	$	858,260	$	945,458	$	482,875	$	478,256
Carrying amount of equity component	$	130,714	$	130,714	$	53,640	$	53,640	$	32,301	$	32,301
Effective interest rate		5.45	%	5.45	%	5.32	%	5.32	%	5.32	%	5.32	%
Maturity date (period through which discount is being amortized)		4/1/12				11/15/11				4/15/12
Conversion price per Class A unit, as adjusted	$	157.18			$	148.46			$	87.17
Number of Class A units on which the aggregate consideration to be delivered upon conversion is determined		—	(1)			—	(1)			5,736

__________________

(1) Pursuant to the provisions of ASC 470-20, we are required to disclose the conversion price and the number of Class A units on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value). Our convertible senior debentures due to Vornado require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or Class A units. Based on the September 30, 2009 closing share price of Vornado’s common shares and the conversion prices in the table above, there was no excess value; accordingly, no Class A units would be issued if these securities were settled on this date. The number of Class A units on which the aggregate consideration to be delivered upon conversion is 7,662 and 5,983 Class A units, respectively.

45

Overview - continued

Recently Issued Accounting Literature - continued

(Amounts in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
Income Statement:		2009		2008		2009		2008
$1.4 Billion Convertible Senior Debentures Due to Vornado:
Coupon interest	$	8,693	$	9,975	$	28,204	$	29,925
Discount amortization – original issue		1,203		1,307		3,836		3,869
Discount amortization – ASC 470-20 implementation		5,631		6,121		17,958		18,116
	$	15,527	$	17,403	$	49,998	$	51,910
$1 Billion Convertible Senior Debentures Due to Vornado:
Coupon interest	$	8,102	$	9,063	$	25,929	$	27,188
Discount amortization – original issue		908		962		2,846		2,848
Discount amortization – ASC 470-20 implementation		2,430		2,574		7,616		7,621
	$	11,440	$	12,599	$	36,391	$	37,657
$500 Million Exchangeable Senior Debentures:
Coupon interest	$	4,844	$	4,844	$	14,585	$	14,531
Discount amortization – original issue		369		350		1,091		1,035
Discount amortization – ASC 470-20 implementation		1,193		1,131		3,532		3,350
	$	6,406	$	6,325	$	19,208	$	18,916

On May 28, 2009, the FASB issued ASC 855, Subsequent Events. Although ASC 855 does not significantly change current practice surrounding the disclosure of subsequent events, it provides guidance on management’s assessment of subsequent events and the requirement to disclose the date through which subsequent events have been evaluated. ASC 855 became effective on June 30, 2009. We have evaluated subsequent events through November 5, 2009, the date our consolidated financial statements were available to be issued for this Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

On June 12, 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. SFAS 167 becomes effective for all new and existing VIEs on January 1, 2010. We are currently evaluating the impact SFAS 167 will have on our consolidated financial statements.

46

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2009 and 2008

Below is a summary of net income and a reconciliation of our net income to EBITDA⁽¹⁾ by segment for the three months ended September 30, 2009 and 2008.

(Amounts in thousands)		For the Three Months Ended September 30, 2009
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys			Other (3)
Property rentals	$	509,968		$	189,896		$	137,139		$	91,286		$	52,269		$	—		$	39,378
Straight-line rents:
Contractual rent increases		16,676			10,126			3,573			2,827			135			—			15
Amortization of free rent		4,682			(98	)		2,760			1,963			19			—			38
Amortization of acquired below- market leases, net		18,728			10,710			1,069			4,826			30			—			2,093
Total rentals		550,054			210,634			144,541			100,902			52,453			—			41,524
Tenant expense reimbursements		89,530			36,360			14,892			32,121			3,661			—			2,496
Fee and other income:
Tenant cleaning revenue		14,514			20,661			—			—			—			—			(6,147	)
Management and leasing fees		2,837			1,269			1,984			557			11			—			(984	)
Lease termination fees		1,608			1,226			234			—			9			—			139
Other		12,676			3,182			4,979			648			3,461			—			406
Total revenues		671,219			273,332			166,630			134,228			59,595			—			37,434
Operating expenses		265,952			117,362			57,889			49,304			26,469			—			14,928
Depreciation and amortization		130,503			42,621			35,187			24,091			13,654			—			14,950
General and administrative		51,684			4,895			6,079			6,802			7,198			—			26,710
Total expenses		448,139			164,878			99,155			80,197			47,321			—			56,588
Operating income (loss)		223,080			108,454			67,475			54,031			12,274			—			(19,154	)
Income applicable to Alexander’s		21,297			192			—			187			—			—			20,918
Income applicable to Toys		22,077			—			—			—			—			22,077			—
(Loss) income from partially owned entities		(18,784	)		1,454			1,876			580			26			—			(22,720	)
Interest and other investment income, net		20,486			190			254			10			12			—			20,020
Interest and debt expense		(158,205	)		(33,644	)		(32,454	)		(22,315	)		(13,088	)		—			(56,704	)
Net gains of early extinguishment of debt		3,407			—			—			—			—			—			3,407
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		4,432			—			—			—			—			—			4,432
Income (loss) before income taxes		117,790			76,646			37,151			32,493			(776	)		22,077			(49,801	)
Income tax expense		(5,267	)		(585	)		(44	)		(39	)		(847	)		—			(3,752	)
Income (loss) from continuing operations		112,523			76,061			37,107			32,454			(1,623	)		22,077			(53,553	)
Income from discontinued operations		43,321			—			41,992			1,329			—			—			—
Net income (loss)		155,844			76,061			79,099			33,783			(1,623	)		22,077			(53,553	)
Net (income) loss attributable to noncontrolling interests		(258	)		(2,817	)		—			15			—			—			2,544
Net income (loss) attributable to Vornado Realty L.P.		155,586			73,244			79,099			33,798			(1,623	)		22,077			(51,009	)
Interest and debt expense (2)		212,727			31,945			32,980			23,978			13,315			39,136			71,373
Depreciation and amortization(2)		178,436			41,101			37,116			25,029			13,772			34,357			27,061
Income tax (benefit) expense (2)		(30,479	)		585			47			39			847			(36,122	)		4,125
EBITDA(1)	$	516,270		$	146,875		$	149,242		$	82,844		$	26,311		$	59,448		$	51,550

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

___________________

See notes on page 49.

47

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2009 and 2008 - continued

(Amounts in thousands)		For the Three Months Ended September 30, 2008
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys			Other (3)
Property rentals	$	500,549		$	181,758		$	128,382		$	85,664		$	53,167		$	—		$	51,578
Straight-line rents:
Contractual rent increases		14,353			8,077			418			3,754			1,738			—			366
Amortization of free rent		8,070			3,649			2,925			1,539			(2	)		—			(41	)
Amortization of acquired below- market leases, net		24,526			14,807			1,089			7,491			26			—			1,113
Total rentals		547,498			208,291			132,814			98,448			54,929			—			53,016
Tenant expense reimbursements		97,815			40,632			14,601			33,286			5,294			—		��	4,002
Fee and other income:
Tenant cleaning revenue		13,627			17,751			—			—			—			—			(4,124	)
Management and leasing fees		2,518			1,138			1,875			411			95			—			(1,001	)
Lease termination fees		1,455			21			1,037			362			35			—			—
Other		13,155			3,626			5,701			1,873			2,676			—			(721	)
Total revenues		676,068			271,459			156,028			134,380			63,029			—			51,172
Operating expenses		276,115			120,398			56,653			50,088			31,773			—			17,203
Depreciation and amortization		136,550			48,322			35,929			21,749			12,751			—			17,799
General and administrative		49,494			5,263			6,427			7,397			7,419			—			22,988
Impairment losses on development projects and costs of acquisition not consummated		5,000			—			—			—			—			—			5,000
Total expenses		467,159			173,983			99,009			79,234			51,943			—			62,990
Operating income (loss)		208,909			97,476			57,019			55,146			11,086			—			(11,818	)
(Loss) income applicable to Alexander’s		(6,876	)		189			—			191			—			—			(7,256	)
Loss applicable to Toys		(8,141	)		—			—			—			—			(8,141	)		—
(Loss) income from partially owned entities		(3,099	)		1,798			1,696			25			158			—			(6,776	)
Interest and other investment income, net		9,638			542			507			92			49			—			8,448
Interest and debt expense		(157,646	)		(34,647	)		(31,323	)		(21,445	)		(13,150	)		—			(57,081	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		5,160			—			—			—			—			—			5,160
Income (loss) before income taxes		47,945			65,358			27,899			34,009			(1,857	)		(8,141	)		(69,323	)
Income tax expense		(5,244	)		—			(699	)		(5	)		(814	)		—			(3,726	)
Income (loss) from continuing operations		42,701			65,358			27,200			34,004			(2,671	)		(8,141	)		(73,049	)
Income (loss) from discontinued operations		846			—			(27	)		873			—			—			—
Net income (loss)		43,547			65,358			27,173			34,877			(2,671	)		(8,141	)		(73,049	)
Net loss (income) attributable to noncontrolling interests		466			(1,545	)		—			30			—			—			1,981
Net income (loss) attributable to Vornado Realty L.P.		44,013			63,813			27,173			34,907			(2,671	)		(8,141	)		(71,068	)
Interest and debt expense (2)		202,446			32,979			32,244			26,733			13,360			33,569			63,561
Depreciation and amortization(2)		179,574			46,113			37,222			23,488			12,885			35,155			24,711
Income tax (benefit) expense (2)		(5,063	)		—			701			5			814			(10,944	)		4,361
EBITDA(1)	$	420,970		$	142,905		$	97,340		$	85,133		$	24,388		$	49,639		$	21,565

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

______________________________

See notes on the following page.

48

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2009 and 2008 - continued

Notes to preceding tabular information:

(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental measure for making decisions and assessing the un-levered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered as an alternative to net income or cash flows and may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) Other EBITDA is comprised of:

(Amounts in thousands)	For the Three Months Ended September 30,
	2009			2008
Alexander’s	$	26,769		$	68
555 California Street		10,090			12,296
Lexington		(1,863	)		10,803
Hotel Pennsylvania		3,599			11,907
Industrial warehouses		1,219			1,361
Other investments		7,071			8,058
		46,885			44,493
Investment income and other, net		23,023			15,514
Corporate general and administrative expenses		(24,309	)		(19,633	)
Net loss attributable to noncontrolling interests		2,544			1,981
Net gains on early extinguishment of debt		3,407			—
Non-cash asset write-downs:
Marketable equity securities		—			(11,808	)
Land held for development		—			(5,000	)
Derivative positions in marketable equity securities		—			(3,982	)
	$	51,550		$	21,565

49

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $671,219,000 for the quarter ended September 30, 2009, compared to $676,068,000 in the prior year’s quarter, a decrease of $4,849,000. Below are the details of the (decrease) increase by segment:

(Amounts in thousands)
Increase (decrease) due to:	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Property rentals:
Acquisitions (including the transfer of an asset from other to the retail segment)	$	5,067		$	—		$	—		$	2,449		$	3,519		$	(901	)
Development/redevelopment		(944	)		—			356			(1,300	)		—			—
Amortization of acquired below-market leases, net		(5,798	)		(4,097	) (1)		(20	)		(2,665	)		4			980
Operations:
Hotel Pennsylvania		(10,340	)		—			—			—			—			(10,340	) (2)
Trade shows		(2,093	)		—			—			—			(2,093	) (3)		—
Leasing activity (see page 42)		16,664			6,440			11,391			3,970			(3,906	)		(1,231	)
Increase (decrease) in property rentals		2,556			2,343			11,727			2,454			(2,476	)		(11,492	)
Tenant expense reimbursements:
Acquisitions/development		(2,065	)		—			(103	)		(1,625	)		—			(337	)
Operations		(6,220	)		(4,272	) (4)		394			460			(1,633	) (4)		(1,169	)
(Decrease) increase in tenant expense reimbursements		(8,285	)		(4,272	)		291			(1,165	)		(1,633	)		(1,506	)
Fee and other income:
Lease cancellation fee income		153			1,205			(803	)		(362	)		(26	)		139
Management and leasing fees		319			131			109			146			(84	)		17
BMS cleaning revenue		887			2,910			—			—			—			(2,023	)
Other		(479	)		(444	)		(722	)		(1,225	)		785			1,127
Increase (decrease) in fee and other income		880			3,802			(1,416	)		(1,441	)		675			(740	)
Total (decrease) increase in revenues	$	(4,849	)	$	1,873		$	10,602		$	(152	)	$	(3,434	)	$	(13,738	)

______________________________

(1) Primarily due to a lease modification that reduced the term of a portion of AXA’s space at 1290 Avenue of the Americas, which resulted in additional amortization of approximately $3,000 in the prior year’s quarter.

(2) Primarily due to lower REVPAR.

(3) Primarily due to lower trade show revenues.

(4) Primarily due to a decrease in utility reimbursements as a result of lower utility costs.

50

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008 (continued)

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $448,139,000 for the quarter ended September 30, 2009, compared to $467,159,000 in the prior year’s quarter, a decrease of $19,020,000. Below are the details of the (decrease) increase by segment:

(Amounts in thousands)
(Decrease) increase due to:	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Operating:
Acquisitions and other (including the transfer of an asset from other to the retail segment)	$	3,896		$	—		$	—		$	1,600		$	2,506		$	(210	)
Development/redevelopment		(415	)		—			991			(1,406	)		—			—
Hotel activity		(1,902	)		—			—			—			—			(1,902	)
Trade shows activity		(1,081	)		—			—			—			(1,081	)		—
Operations		(10,661	)		(3,036	) (1)		245			(978	)		(6,729	) (2)		(163	)
(Decrease) increase in operating expenses		(10,163	)		(3,036	)		1,236			(784	)		(5,304	)		(2,275	)
Depreciation and amortization:
Acquisitions/development		(1,270	)		—			(1,499	)		755			—			(526	)
Operations (due to additions to buildings and improvements)		(4,777	)		(5,701	) (3)		757			1,587			903			(2,323	)
(Decrease) increase in depreciation and amortization		(6,047	)		(5,701	)		(742	)		2,342			903			(2,849	)
General and administrative:
Deferred compensation plan liability – mark-to-market of plan assets		8,197			—			—			—			—			8,197
Operations		(6,007	)		(368	)		(348	)		(595	)		(221	)		(4,475	) (4)
Increase (decrease) in general and administrative		2,190			(368	)		(348	)		(595	)		(221	)		3,722
Costs of acquisitions not consummated		(5,000	)		—			—			—			—			(5,000	)
Total (decrease) increase in expenses	$	(19,020	)	$	(9,105	)	$	146		$	963		$	(4,622	)	$	(6,402	)

______________________________

(1) Primarily due to lower utility costs.

(2) Primarily due to lower bad debt reserves and utility and marketing costs.

(3) Primarily due to a lease modification that reduced the term of a portion of AXA’s space at 1290 Avenue of the Americas, which resulted in additional depreciation of approximately $4,000 in the prior year’s quarter.

(4) Primarily due to lower payroll and stock-based compensation expense.

51

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008 (continued)

Income (Loss) Applicable to Alexander’s

Our 32.4% share of Alexander’s net income (comprised of our share of Alexander’s net income and management, leasing, and development fees) was $21,297,000 for the three months ended September 30, 2009, compared to a net loss of $6,876,000 for the prior year’s quarter, an increase of $28,173,000. This increase was primarily due to income of $13,668,000 for our share of an income tax benefit in the current year’s quarter, compared to $14,557,000 of expense for our share of stock appreciation rights compensation expense in the prior year’s quarter.

Income (Loss) Applicable to Toys

During the quarter ended September 30, 2009, we recognized $22,077,000 of income from our investment in Toys, comprised of (i) $20,137,000 for our 32.7% share of Toys’ net income (a net loss of $15,985,000 before our share of Toys’ income tax benefit, for its quarter ended August 1, 2009) and (ii) $1,940,000 of interest and other income.

During the quarter ended September 30, 2008, we recognized a net loss of $8,141,000 from our investment in Toys, comprised of (i) $10,107,000 for our 32.7% share of Toys’ net loss ($21,051,000 before our share of Toys’ income tax benefit, for its quarter ended August 2, 2008), partially offset by (ii) $1,966,000 of interest and other income.

Loss from Partially Owned Entities

Summarized below are the components of (loss) income from partially owned entities for the three months ended September 30, 2009 and 2008.

	For The Three Months Ended September 30,
(Amounts in thousands)	2009			2008
Lexington – 16.1% share in 2009 and 7.7% share in 2008 of equity in net loss (1)	$	(15,054	)	$	(6,040	)
India real estate ventures – 4% to 36.5% share of equity in net loss		(465	)		(835	)
Other, net (2)		(3,265	)		3,776
	$	(18,784	)	$	(3,099	)

________________________

(1) The three months ended September 30, 2009 includes $14,541 for our share of non-cash impairment losses recorded by Lexington related to its investment in Concord Debt Holdings LLC. The three months ended September 30, 2008 includes a $7,175 non-cash impairment loss on our investment in Lexington.

(2) Includes our equity in net earnings of partially owned entities including, partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Realty MLP, 85 10^th Avenue and others.

52

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008 (continued)

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of interest income on mezzanine loans receivable, other interest income and dividend income) was $20,486,000 for the three months ended September 30, 2009, compared to $9,638,000 in the prior year’s quarter, an increase of $10,848,000. This increase resulted from:

(Amounts in thousands)
Marketable equity securities – impairment losses in prior year’s quarter	$	11,808
Increase in the mark-to-market of investments in our deferred compensation plan (for which there is a corresponding increase in general and administrative expense)		8,197
Lower average yield on investments (0.3% in this quarter compared to 2.3% in the prior year’s quarter)		(6,479	)
Lower average mezzanine loan investments - $268,000 in this quarter, compared to $468,000 in the prior year’s quarter		(4,122	)
Derivative positions in marketable equity securities – loss in prior year’s quarter		3,982
Other, net (primarily a reduction in dividend income)		(2,538	)
	$	10,848

Interest and Debt Expense

Interest and debt expense was $158,205,000 in the three months ended September 30, 2009, compared to $157,646,000 in the prior year’s quarter, an increase of $559,000. This increase resulted primarily from (i) lower capitalized interest of $12,332,000, (ii) $2,568,000 of interest on new borrowings and refinancings and (iii) $1,220,000 of interest on additional borrowings under our revolving credit facilities, partially offset by (iv) $7,855,000 as a result of the purchase of a portion of our corporate senior unsecured debt and (v) $7,747,000 due to a decrease in weight average interest rates.

Net Gains on Early Extinguishment of Debt

Net gains on early extinguishment of debt of $3,407,000 for the three months ended September 30, 2009 resulted from purchases of certain of our convertible senior debentures.

Net Gains on Disposition of Wholly Owned and Partially Owned Assets Other than Depreciable Real Estate

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $4,432,000 in the three months ended September 30, 2009, compared to $5,160,000 in the prior year’s quarter and was primarily comprised of net gains on sale of marketable securities.

Income Tax Expense

Income tax expense for the three months ended September 30, 2009 was $5,267,000, compared to $5,244,000 in the prior year’s quarter.

53

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008 (continued)

Income from Discontinued Operations

Income from discontinued operations for the three months ended September 30, 2009 was $43,321,000, compared to $846,000 for the prior year’s quarter. The three months ended September 30, 2009 includes a $41,211,000 net gain on the sale of 1999 K Street, which was sold on September 1, 2009.

Preferred Unit Distributions

Preferred unit distributions were $19,222,000 for the three months ended September 30, 2009, compared to $19,082,000 for the prior year’s quarter.

54

Results of Operations – Three Months Ended September 30, 2009 Compared to September 30, 2008 (continued)

Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods. Same store EBITDA excludes segment-level overhead expenses that are not considered property-level expenses, as well as other non-operating items. We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.

Below are the same store EBITDA results on a GAAP basis and cash basis for each of our segments for the three months ended September 30, 2009, compared to the three months ended September 30, 2008.

(Amounts in thousands)	New York Office			Washington, DC Office			Retail			Merchandise Mart
EBITDA for the three months ended September 30, 2009	$	146,875		$	149,242		$	82,844		$	26,311
Add-back: non-property level overhead expenses included above		4,895			6,079			6,802			7,198
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(2,107	)		(42,323	)		(5,765	)		(3,529	)
GAAP basis same store EBITDA for the three months ended September 30, 2009		149,663			112,998			83,881			29,980
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(16,488	)		(5,545	)		(8,202	)		(184	)
Cash basis same store EBITDA for the three months ended September 30, 2009	$	133,175		$	107,453		$	75,679		$	29,796
EBITDA for the three months ended September 30, 2008	$	142,905		$	97,340		$	85,133		$	24,388
Add-back: non-property level overhead expenses included above		5,263			6,427			7,397			7,419
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(738	)		(1,003	)		(10,259	)		—
GAAP basis same store EBITDA for the three months ended September 30, 2008		147,430			102,764			82,271			31,807
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(22,292	)		(3,942	)		(10,312	)		(1,762	)
Cash basis same store EBITDA for the three months ended September 30, 2008	$	125,138		$	98,822		$	71,959		$	30,045
Increase (decrease) in GAAP basis same store EBITDA for the three months ended September 30, 2009 over the three months ended September 30, 2008	$	2,233		$	10,234		$	1,610		$	(1,827	)
Increase (decrease) in Cash basis same store EBITDA for the three months ended September 30, 2009 over the three months ended September 30, 2008	$	8,037		$	8,631		$	3,720		$	(249	)
% increase (decrease) in GAAP basis same store EBITDA		1.5%			10.0%			2.0%			(5.7%	)
% increase (decrease) in Cash basis same store EBITDA		6.4%			8.7%			5.2%			(0.8%	)

55

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2009 and 2008

Below is a summary of net income and a reconciliation of our net income to EBITDA⁽¹⁾ by segment for the nine months ended September 30, 2009 and 2008.

(Amounts in thousands)		For the Nine Months Ended September 30, 2009
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys		Other (3)
Property rentals	$	1,529,747		$	568,884		$	399,937		$	268,519		$	176,224		$	—	$	116,183
Straight-line rents:
Contractual rent increases		43,469			24,315			9,348			8,442			1,406			—		(42	)
Amortization of free rent		24,871			2,209			9,829			12,380			312			—		141
Amortization of acquired below- market leases, net		56,270			30,518			3,117			18,362			71			—		4,202
Total rentals		1,654,357			625,926			422,231			307,703			178,013			—		120,484
Tenant expense reimbursements		270,934			103,609			47,936			99,337			13,492			—		6,560
Fee and other income:
Tenant cleaning revenue		43,372			58,917			—			—			—			—		(15,545	)
Management and leasing fees		8,255			3,363			5,936			1,248			25			—		(2,317	)
Lease termination fees		4,356			1,524			1,916			100			677			—		139
Other		42,301			9,923			15,129			2,296			6,324			—		8,629
Total revenues		2,023,575			803,262			493,148			410,684			198,531			—		117,950
Operating expenses		814,561			340,552			169,379			155,503			100,134			—		48,993
Depreciation and amortization		398,845			129,884			105,096			75,881			40,800			—		47,184
General and administrative		180,381			18,588			20,548			24,946			25,092			—		91,207
Total expenses		1,393,787			489,024			295,023			256,330			166,026			—		187,384
Operating income (loss)		629,788			314,238			198,125			154,354			32,505			—		(69,434	)
Income applicable to Alexander’s		46,044			577			—			598			—			—		44,869
Income applicable to Toys		118,897			—			—			—			—			118,897		—
(Loss) income from partially owned entities		(49,124	)		3,908			5,504			2,566			186			—		(61,288	)
Interest and other investment (loss) income, net		(63,608	)		712			573			63			83			—		(65,039	)
Interest and debt expense		(475,028	)		(100,118	)		(94,408	)		(67,093	)		(38,888	)		—		(174,521	)
Net gains of early extinguishment of debt		26,996			—			—			769			—			—		26,227
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		4,432			—			—			—			—			—		4,432
Income (loss) before income taxes		238,397			219,317			109,794			91,257			(6,114	)		118,897		(294,754	)
Income tax expense		(15,773	)		(845	)		(1,232	)		(316	)		(1,755	)		—		(11,625	)
Income (loss) from continuing operations		222,624			218,472			108,562			90,941			(7,869	)		118,897		(306,379	)
Income from discontinued operations		49,276			—			46,004			3,272			—			—		—
Net income (loss)		271,900			218,472			154,566			94,213			(7,869	)		118,897		(306,379	)
Net loss (income) attributable to noncontrolling interests		3,442			(6,438	)		—			630			—			—		9,250
Net income (loss) attributable to Vornado Realty L.P.		275,342			212,034			154,566			94,843			(7,869	)		118,897		(297,129	)
Interest and debt expense (2)		612,416			95,058			96,818			71,496			39,563			89,897		219,584
Depreciation and amortization(2)		539,554			125,831			110,263			78,724			41,203			101,368		82,165
Income tax expense (2)		23,804			845			1,242			316			1,820			7,335		12,246
EBITDA(1)	$	1,451,116		$	433,768		$	362,889		$	245,379		$	74,717		$	317,497	$	16,866

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

___________________

See notes on page 58.

56

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2009 and 2008 - continued

(Amounts in thousands)		For the Nine Months Ended September 30, 2008
	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Toys		Other (3)
Property rentals	$	1,501,146		$	539,254		$	377,867		$	257,500		$	179,606		$	—	$	146,919
Straight-line rents:
Contractual rent increases		45,570			20,860			6,861			12,713			4,531			—		605
Amortization of free rent		17,460			8,106			5,759			319			2,662			—		614
Amortization of acquired below- market leases, net		73,655			45,548			3,305			20,016			84			—		4,702
Total rentals		1,637,831			613,768			393,792			290,548			186,883			—		152,840
Tenant expense reimbursements		269,646			103,230			44,608			97,968			14,715			—		9,125
Fee and other income:
Tenant cleaning revenue		41,431			53,415			—			—			—			—		(11,984	)
Management and leasing fees		10,326			5,035			6,983			974			306			—		(2,972	)
Lease termination fees		4,469			2,050			1,037			1,027			355			—		—
Other		33,830			11,876			14,802			2,014			5,749			—		(611	)
Total revenues		1,997,533			789,374			461,222			392,531			208,008			—		146,398
Operating expenses		793,391			333,845			161,183			144,165			102,747			—		51,451
Depreciation and amortization		397,807			143,549			104,899			63,140			38,324			—		47,895
General and administrative		149,164			14,906			18,824			23,104			21,921			—		70,409
Impairment losses on development projects and costs of acquisition not consummated		8,009			—			—			—			—			—		8,009
Total expenses		1,348,371			492,300			284,906			230,409			162,992			—		177,764
Operating income (loss)		649,162			297,074			176,316			162,122			45,016			—		(31,366	)
Income applicable to Alexander’s		16,404			568			—			529			—			—		15,307
Income applicable to Toys		41,510			—			—			—			—			41,510		—
(Loss) income from partially owned entities		(29,167	)		3,843			4,548			9,889			978			—		(48,425	)
Interest and other investment income, net		47,535			1,965			1,737			422			221			—		43,190
Interest and debt expense		(474,862	)		(104,032	)		(94,085	)		(63,981	)		(39,190	)		—		(173,574	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		8,546			—			—			—			—			—		8,546
Income (loss) before income taxes		259,128			199,418			88,516			108,981			7,025			41,510		(186,322	)
Income tax benefit (expense)		207,170			—			220,916			(7	)		(1,205	)		—		(12,534	)
Income (loss) from continuing operations		466,298			199,418			309,432			108,974			5,820			41,510		(198,856	)
Income from discontinued operations		172,814			—			59,072			1,830			—			—		111,912
Net income (loss)		639,112			199,418			368,504			110,804			5,820			41,510		(86,944	)
Net loss (income) attributable to noncontrolling interests		2,709			(3,366	)		—			104			—			—		5,971
Net income (loss) attributable to Vornado Realty L.P.		641,821			196,052			368,504			110,908			5,820			41,510		(80,973	)
Interest and debt expense (2)		621,367			98,810			96,958			76,492			39,823			108,970		200,314
Depreciation and amortization(2)		531,252			136,738			110,334			67,456			38,711			103,291		74,722
Income tax (benefit) expense (2)		(121,844	)		—			(220,911	)		7			1,205			82,778		15,077
EBITDA(1)	$	1,672,596		$	431,600		$	354,885		$	254,863		$	85,559		$	336,549	$	209,140

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

______________________________

See notes on the following page.

57

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2009 and 2008 - continued

Notes to preceding tabular information:

(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental measure for making decisions and assessing the un-levered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to those of our peers. EBITDA should not be considered as an alternative to net income or cash flows and may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) Other EBITDA is comprised of:

(Amounts in thousands)	For the Nine Months Ended September 30,
	2009			2008
Alexander’s	$	65,229		$	37,180
555 California Street		31,885			35,554
Lexington		15,129			29,271
Hotel Pennsylvania		7,823			29,772
Industrial warehouses		3,902			4,025
Other investments		1,904	(1)		6,211
		125,872			142,013
Corporate general and administrative expenses		(62,757	)		(62,101	)
Investment income and other, net		61,214			72,592
Write-off of unamortized costs from the voluntary surrender of equity awards on March 31, 2009		(20,202	)		—
Net gains on early extinguishment of debt		26,227			—
Net loss attributable to noncontrolling interests		9,250			5,971
Non-cash asset (write-downs) reversal:
Mezzanine loans receivable		(122,738	)		10,300
Marketable equity securities		—			(20,881	)
Real estate development projects:
Partially owned entities		—			(34,200	)
Wholly owned entities (including costs of acquisitions not consummated)		—			(8,009	)
Derivative positions in marketable equity securities		—			(25,812	)
Discontinued operations of Americold (including a $112,690 net gain on sale)		—			129,267
	$	16,866		$	209,140

________________________

(1) Includes $7,650 of expense for our share of the Filene’s, Boston lease termination payment.

58

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above market-leases, and fee income, were $2,023,575,000 for the nine months ended September 30, 2009, compared to $1,997,533,000 in the prior year’s nine months, an increase of $26,042,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)
Increase (decrease) due to:	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Property rentals:
Acquisitions (including the transfer of an asset from other to the retail segment)	$	9,973		$	—		$	—		$	7,821		$	4,732		$	(2,580	)
Development/redevelopment		(987	)		—			356			(1,343	)		—			—
Amortization of acquired below-market leases, net		(17,385	)		(15,030	) (1)		(188	)		(1,654	)		(13	)		(500	)
Operations:
Hotel Pennsylvania		(26,400	)		—			—			—			—			(26,400	) (2)
Trade shows		(9,012	)		—			—			—			(9,012	) (3)		—
Leasing activity (see page 42)		60,337			27,188			28,271			12,331			(4,577	)		(2,876	)
Increase (decrease) in property rentals		16,526			12,158			28,439			17,155			(8,870	)		(32,356	)
Tenant expense reimbursements:
Acquisitions/development		(1,508	)		—			(103	)		(660	)		—			(745	)
Operations		2,796			379	(4)		3,431			2,029			(1,223	)		(1,820	)
Increase (decrease) in tenant expense reimbursements		1,288			379			3,328			1,369			(1,223	)		(2,565	)
Fee and other income:
Lease cancellation fee income		(113	)		(526	)		879			(927	)		322			139
Management and leasing fees		(2,071	)		(1,672	)		(1,047	)		274			(281	)		655
BMS cleaning revenue		1,941			5,502			—			—			—			(3,561	)
Other		8,471			(1,953	)		327			282			575			9,240	(5)
Increase (decrease) in fee and other income		8,228			1,351			159			(371	)		616			6,473
Total increase (decrease) in revenues	$	26,042		$	13,888		$	31,926		$	18,153		$	(9,477	)	$	(28,448	)

______________________________

(1) Primarily due to a lease modification that reduced the term of a portion of AXA’s space at 1290 Avenue of the Americas, which resulted in additional amortization of approximately $9,000 in the prior year’s nine months.

(2) Primarily due to lower REVPAR.

(3) Primarily due to lower trade show revenues.

(4) Primarily due to a decrease in real estate tax reimbursements as a result of new tenant base years.

(5) Includes $5,402 of income previously deferred resulting from the termination of a lease with a partially owned entity.

59

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $1,393,787,000 for the nine months ended September 30, 2009, compared to $1,348,371,000 in the prior year’s nine months, an increase of $45,416,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)
Increase (decrease) due to:	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Operating:
Acquisitions and other (including the transfer of an asset from other to the retail segment)	$	11,015		$	—		$	—		$	5,197		$	5,034		$	784
Development/redevelopment		2,781			—			1,001			1,780			—			—
Hotel activity		(4,496	)		—			—			—			—			(4,496	)
Trade shows activity		(4,214	)		—			—			—			(4,214	)		—
Operations		16,084			6,707			7,195			4,361			(3,433	)		1,254
Increase (decrease) in operating expenses		21,170			6,707			8,196			11,338			(2,613	)		(2,458	)
Depreciation and amortization:
Acquisitions/development		(876	)		—			(6,305	)		7,064			—			(1,635	)
Operations (due to additions to buildings and improvements)		1,914			(13,665	) (1)		6,502			5,677			2,476			924
Increase (decrease) in depreciation and amortization		1,038			(13,665	)		197			12,741			2,476			(711	)
General and administrative:
Write-off of unamortized costs from the voluntary surrender of equity awards (2)		32,588			3,451			3,131			4,793			1,011			20,202
Deferred compensation plan liability - mark-to-market of plan assets		9,209			—			—			—			—			9,209
Operations		(10,580	)		231			(1,407	)		(2,951	)		2,160	(3)		(8,613	) (4)
Increase in general and administrative		31,217			3,682			1,724			1,842			3,171			20,798
Costs of acquisitions not consummated		(8,009	)		—			—			—						(8,009	)
Total increase (decrease) in expenses	$	45,416		$	(3,276	)	$	10,117		$	25,921		$	3,034		$	9,620

______________________________

(1) Primarily due to a lease modification that reduced the term of a portion of AXA’s space at 1290 Avenue of the Americas, which resulted in additional depreciation of approximately $12,000 in the prior year’s nine months.

(2) On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-performance plan awards. Accordingly, we recognized $32,588 of expense in the first quarter of 2009, representing the unamortized portion of these awards.

(3) Primarily due to pension termination costs of $2,800.

(4) Primarily due to lower payroll and stock-based compensation expense.

60

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Income Applicable to Alexander’s

Our 32.4% share of Alexander’s net income (comprised of our share of Alexander’s net income and management, leasing, and development fees) was $46,044,000 for the nine months ended September 30, 2009, compared to $16,404,000 for the prior year’s nine months, an increase of $29,640,000. This increase was primarily due to income of $13,668,000 for our share of an income tax benefit and $11,105,000 for our share of the reversal of accrued stock appreciation rights compensation expense in the current period, compared to $7,605,000 for our share of stock appreciation rights compensation expense in the prior year’s period.

Income Applicable to Toys

During the nine months ended September 30, 2009, we recognized $118,897,000 of income from our investment in Toys, comprised of (i) $99,210,000 for our 32.7% share of Toys’ net income ($106,545,000 before our share of Toys’ income tax expense), (ii) $13,946,000 for our share of income from the reversal of previously recognized deferred financing cost amortization expense, which we initially recorded as a reduction of the basis of our investment in Toys, and (iii) $5,741,000 of interest and other income.

During the nine months ended September 30, 2008, we recognized $41,510,000 of income from our investment in Toys, comprised of (i) $50,450,000 for our 32.7% share of Toys’ net income ($133,228,000 before our share of Toys’ income tax expense) and (ii) $5,960,000 of interest and other income, partially offset by (iii) $14,900,000 for our share of a non-cash charge adjusting Toys purchase accounting basis income tax expense resulting from the audit of Toys fiscal 2006 and 2007 purchase accounting financial statements.

Loss from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the nine months ended September 30, 2009 and 2008.

(Amounts in thousands)	For The Nine Months Ended September 30,
	2009			2008
Lexington – 16.1% share in 2009 and 7.7% share in 2008 of equity in net loss (1)	$	(24,969	)	$	(4,153	)
India real estate ventures – 4% to 36.5% share of equity in net loss		(1,386	)		(1,863	)
Other, net (2)		(22,769	)(3)		(23,151	)(4)
	$	(49,124	)	$	(29,167	)

________________________

(1) The nine months ended September 30, 2009 includes $19,121 for our share of impairment losses recorded by Lexington related to its investment in Concord Debt Holdings LLC. The nine months ended September 30, 2008 includes a $7,175 non-cash impairment loss on our investment in Lexington.

(2) Includes our equity in net earnings of partially owned entities including, partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Realty MLP, 85 10^th Avenue and others.

(3) Includes $7,650 of expense for our share of the Filene’s, Boston lease termination payment.

(4) Includes $34,200 of non-cash charges for the write-off of our share of certain partially owned entities’pre-development costs.

 

61

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Interest and Other Investment (Loss) Income, net

Interest and other investment (loss) income, net (comprised of interest income on mezzanine loans receivable, loss reserves on mezzanine loans receivable, other interest income and dividend income) was a loss of $63,608,000 in the nine months ended September 30, 2009, compared to income of $47,535,000 in the prior year’s nine months, a decrease of $111,143,000. This decrease resulted from:

(Amounts in thousands)
Mezzanine loans – $122,738 loss accrual in the current year’s nine months, compared to $10,300 of income from the reversal of a loan loss accrual in the prior year’s nine months	$	(133,038	)
Derivative positions in marketable equity securities – loss in prior year’s nine months		25,812
Lower average yield on investments (0.4% in the current year’s nine months, compared to 2.6% in the prior year’s nine months)		(17,080	)
Marketable equity securities – impairment losses in the prior year’s nine months		20,881
Increase in the mark-to-market of investments in our deferred compensation plan (for which there is a corresponding increase in general and administrative expenses)		9,209
Lower average mezzanine loan investments - $403,000 in the current year’s nine months, compared to $482,000 in the prior year’s nine months		(7,291	)
Other, net (primarily a reduction in dividend income)		(9,636	)
	$	(111,143	)

Interest and Debt Expense

Interest and debt expense was $475,028,000 in the nine months ended September 30, 2009, compared to $474,862,000 in the prior year’s nine months, an increase of $166,000. This increase resulted primarily from lower capitalized interest of $31,878,000 and $2,833,000 of interest on refinancings, partially offset by $21,797,000 due to a decrease in weighted average interest rates and $12,809,000 as a result of the purchase of a portion of our corporate senior unsecured debt.

Net Gains on Early Extinguishment of Debt

Net gains on early extinguishment of debt was $26,996,000 for the nine months ended September 30, 2009 and resulted primarily from purchases of certain of our convertible senior debentures and senior unsecured notes.

Net Gains on Disposition of Wholly Owned and Partially Owned Assets Other than Depreciable Real Estate

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $4,432,000 in the nine months ended September 30, 2009, compared to $8,546,000 in the prior year’s nine months and was primarily comprised of net gains on sale of marketable securities.

Income Tax (Expense) Benefit

In the nine months ended September 30, 2009, we had an income tax expense of $15,773,000, compared to an income tax benefit of $207,170,000 for the prior year’s nine months, an increase in expense of $222,943,000. This increase resulted primarily from a $222,174,000 reversal of deferred tax liabilities in the first quarter of 2008. These deferred taxes were initially recorded in connection with our acquisition of H Street and were reversed as a result of completing all of the actions necessary to enable the entities to which these deferred taxes related to, elect REIT status effective for the tax year beginning on January 1, 2008.

62

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Income from Discontinued Operations

Income from discontinued operations for the nine months ended September 30, 2009 was $49,276,000, compared to $172,814,000 for the nine months ended September 30, 2008. The nine months ended September 30, 2009 includes a $41,211,000 net gain on the sale of 1999 K Street, which was sold on September 1, 2009. The nine months ended September 30, 2008 includes net gains on sale of Americold Realty Trust, which was sold on March 31, 2008 for a $112,690,000 net gain and Tysons Dulles Plaza, which was sold on September 10, 2008 for a $56,831,000 net gain.

Preferred Unit Distributions

Preferred unit distributions were $57,647,000 for the nine months ended September 30, 2009, compared to $57,393,000 for the prior year’s nine months.

63

Results of Operations – Nine Months Ended September 30, 2009 Compared to September 30, 2008 - continued

Same Store EBITDA

Below are the same store EBITDA results on a GAAP basis and cash basis for each of our segments for the nine months ended September 30, 2009, compared to the nine months ended September 30, 2008.

(Amounts in thousands)	New York Office			Washington, DC Office			Retail			Merchandise Mart
EBITDA for the nine months ended September 30, 2009	$	433,768		$	362,889		$	245,379		$	74,717
Add-back: non-property level overhead expenses included above (1)		18,588			20,548			24,946			25,092
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(2,714	)		(50,254	)		(12,320	)		(3,826	)
GAAP basis same store EBITDA for the nine months ended September 30, 2009		449,642			333,183			258,005			95,983
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(48,863	)		(20,688	)		(32,048	)		(1,907	)
Cash basis same store EBITDA for the nine months ended September 30, 2009	$	400,779		$	312,495		$	225,957		$	94,076
EBITDA for the nine months ended September 30, 2008	$	431,600		$	354,885		$	254,863		$	85,559
Add-back: non-property level overhead expenses included above		14,906			18,824			23,104			21,921
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(4,387	)		(61,760	)		(28,859	)		945
GAAP basis same store EBITDA for the nine months ended September 30, 2008		442,119			311,949			249,108			108,425
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(63,086	)		(14,766	)		(27,253	)		(7,867	)
Cash basis same store EBITDA for the nine months ended September 30, 2008	$	379,033		$	297,183		$	221,855		$	100,558
Increase (decrease) in GAAP basis same store EBITDA for the nine months ended September 30, 2009 over the nine months ended September 30, 2008	$	7,523		$	21,234		$	8,897		$	(12,442	)
Increase (decrease) in Cash basis same store EBITDA for the nine months ended September 30, 2009 over the nine months ended September 30, 2008	$	21,746		$	15,312		$	4,102		$	(6,482	)
% increase (decrease) in GAAP basis same store EBITDA		1.7%			6.8%			3.6%			(11.5%	)
% increase (decrease) in Cash basis same store EBITDA		5.7%			5.2%			1.8%			(6.4%	)

________________________

(1) Includes the write-off of unamortized costs from the voluntary surrender of equity awards on March 31, 2009, of $3,451, $3,131, $4,793 and $1,011, respectively.

64

SUPPLEMENTAL INFORMATION

Three Months Ended September 30, 2009 vs. Three Months Ended June 30, 2009

Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings and cash flows, and therefore comparisons of the current quarter to the previous quarter. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for more than 80% of Toys’ fiscal year net income. The Office and Merchandise Mart segments have historically experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart segment also has experienced higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail segment revenue in the fourth quarter is typically higher due to the recognition of percentage rental income.

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended September 30, 2009, compared to the three months ended June 30, 2009.

(Amounts in thousands)	New York Office			Washington, DC Office			Retail			Merchandise Mart
EBITDA for the three months ended September 30, 2009	$	146,875		$	149,242		$	82,844		$	26,311
Add-back: non-property level overhead expenses included above		4,895			6,079			6,802			7,198
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(1,994	)		(42,323	)		(5,207	)		(3,529	)
GAAP basis same store EBITDA for the three months ended September 30, 2009		149,776			112,998			84,439			29,980
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(16,601	)		(5,545	)		(8,760	)		(184	)
Cash basis same store EBITDA for the three months ended September 30, 2009	$	133,175		$	107,453		$	75,679		$	29,796
EBITDA for the three months ended June 30, 2009 (1)	$	147,774		$	110,269		$	80,883		$	26,969
Add-back: non-property level overhead expenses included above		4,531			5,560			6,393			6,930
Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses		(360	)		(4,091	)		(6,216	)		549
GAAP basis same store EBITDA for the three months ended June 30, 2009		151,945			111,738			81,060			34,448
Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments		(15,908	)		(7,224	)		(8,231	)		(935	)
Cash basis same store EBITDA for the three months ended June 30, 2009	$	136,037		$	104,514		$	72,829		$	33,513
(Decrease) increase in GAAP basis same store EBITDA for the three months    ended September 30, 2009 over the three months ended June 30, 2009	$	(2,169	)	$	1,260		$	3,379		$	(4,468	)
(Decrease) increase in Cash basis same store EBITDA for the three months ended September 30, 2009 over the three months ended June 30, 2009	$	(2,862	)	$	2,939		$	2,580		$	(3,717	)
% (decrease) increase in GAAP basis same store EBITDA		(1.4%	)		1.1%			4.2%			(13.0%	)
% (decrease) increase in Cash basis same store EBITDA		(2.1%	)		2.8%			3.9%			(11.1%	)

________________________

(1) Below is a reconciliation of our net income (loss) to EBITDA for the three months ended June 30, 2009.

(Amounts in thousands)	New York Office		Washington, DC Office		Retail		Merchandise Mart
Net income (loss) attributable to Vornado Realty L.P. for the three months ended June 30, 2009	$	73,870	$	41,367	$	26,688	$	(769	)
Interest and debt expense		31,675		32,237		24,459		13,190
Depreciation and amortization		41,969		35,904		29,625		13,883
Income tax expense		260		761		111		665
EBITDA for the three months ended June 30, 2009	$	147,774	$	110,269	$	80,883	$	26,969

65

LIQUIDITY AND CAPITAL RESOURCES

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders, debt amortization and recurring capital expenditures. Capital requirements for significant acquisitions and development expenditures may require funding from borrowings and/or equity offerings. We may from time to time purchase or retire outstanding debt securities though cash purchases and/or exchanges for our equity securities, in open market purchases, privately negotiated transactions or otherwise. Such purchases and/or exchanges, if any, will depend on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements.

We may determine to raise capital for future real estate acquisitions through an institutional investment fund. We would serve as the general partner of the fund for a fee and would also expect to be a limited partner of the fund and have the potential to earn certain incentives based on the fund’s performance.  The fund may serve as our exclusive investment vehicle for a limited period of time for all investments that fit within the fund’s investment parameters.  If we determine to raise capital through a fund, the partnership interests offered would not be registered under the Securities Act of 1933 and could not be offered or sold in the United States absent registration under that act or an applicable exemption from those registration requirements.

We are exploring issuing commercial mortgage backed securities that would be eligible to participate in the U.S Federal Reserve’s Term Asset-Backed Loan Facility (TALF) program. There can be no assurance that we will actually participate in this program or that our securities would be eligible for participation. Any such securities offering would not be registered under the Securities Act of 1933 and the securities could not be offered or sold in the United States absent a registration under that act or an applicable exemption from those registration requirements.

Our consolidated outstanding debt was $12,728,012,000 at September 30, 2009, a $290,089,000 increase from the balance at December 31, 2008. This increase resulted primarily from the issuance of $460,000,000 of 7.875% senior unsecured notes on September 30, 2009 which are due October 2039. As of September 30, 2009 and December 31, 2008, $648,250,000 and $358,468,000, respectively, was outstanding under our revolving credit facilities. During the remainder of 2009 and 2010, $84,810,000 and $899,067,000 of our outstanding debt matures, respectively. We may refinance such debt or choose to repay all or a portion, using existing cash balances or our revolving credit facilities.

Our share of debt of unconsolidated subsidiaries was $3,012,310,000 at September 30, 2009, a $184,275,000 decrease from the balance at December 31, 2008. This resulted primarily from a decrease in our share of Toys “R” Us outstanding debt.

Cash Flows for the Nine Months Ended September 30, 2009

Our cash and cash equivalents were $2,560,011,000 at September 30, 2009, a $1,033,158,000 increase over the balance at December 31, 2008. This increase resulted from $489,487,000 of net cash provided by operating activities and $621,471,000 of net cash provided by financing activities, partially offset by $77,800,000 of net cash used in investing activities. Property rental income represents our primary source of net cash provided by operating activities. Our property rental income is primarily dependent upon the occupancy and rental rates of our properties. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans and corporate level unsecured borrowings; our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales. Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, distributions to our unitholders, as well as acquisition and development costs.

Cash flows provided by operating activities of $489,487,000 was primarily comprised of (i) net income of $271,900,000, adjusted for $276,376,000 of non-cash adjustments, including depreciation and amortization expense, mezzanine loan loss accruals, the effect of straight-lining of rental income, equity in net income of partially owned entities and amortization of below market leases, net of above market leases, (ii) distributions of income from partially owned entities of $21,484,000 partially offset by (iii) the net change in operating assets and liabilities of $80,273,000.

Net cash used in investing activities of $77,800,000 was primarily comprised of (i) development and redevelopment expenditures of $384,655,000, (ii) investments in partially owned entities of $28,738,000, (iii) additions to real estate of $145,981,000, partially offset by, (iv) proceeds from the sale of real estate of $291,652,000, (v) $81,195,000 of restricted cash (vi) proceeds from the sale of marketable securities of $59,873,000 and (vii) $46,339,000 received from mezzanine loan receivables repayments.

Net cash provided by financing activities of $621,471,000 was primarily comprised of (i) $710,226,000 of proceeds from the issuance of Class A units in April 2009, (ii) proceeds from borrowings of $1,208,204,000, partially offset by, (iii) repayments of borrowings of $996,218,000, (iv) distributions to Vornado of $194,087,000, (v) distributions to preferred unitholders of $42,809,000 (vi) distributions to redeemable security-holders of $30,291,000 and (vi) the purchase of outstanding Series G Preferred Units of $24,330,000.

66

LIQUIDITY AND CAPITAL RESOURCES - continued

Capital Expenditures

Our capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions. Recurring capital improvements include expenditures to maintain a property’s competitive position within the market and tenant improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital improvements include expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition as well as tenant improvements and leasing commissions for space that was vacant at the time of acquisition of a property. Our development and redevelopment expenditures include all hard and soft costs associated with the development or redevelopment of a property, including tenant improvements, leasing commissions and capitalized interest and operating costs until the property is substantially complete and ready for its intended use.

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the nine months ended September 30, 2009.

(Amounts in thousands)	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Capital Expenditures (Accrual basis):
Expenditures to maintain the assets:
Recurring	$	29,744		$	11,804		$	12,013		$	1,953		$	3,974		$	—
Non-recurring		13,433			5,181			644			—			—			7,608
Total		43,177			16,985			12,657			1,953			3,974			7,608
Tenant improvements:
Recurring		43,976			25,571			14,518			946			2,941			—
Non-recurring		6,227			4,503			—			—			—			1,724
Total		50,203			30,074			14,518			946			2,941			1,724
Leasing commissions:
Recurring		14,435			8,289			5,339			732			75			—
Non-recurring		2,045			1,659			—			34			—			352
Total		16,480			9,948			5,339			766			75			352
Tenant improvements and leasing commissions:
Per square foot	$	16.36		$	43.02		$	14.11		$	3.33		$	3.80		$	—
Per square foot per annum	$	2.48		$	5.46		$	2.94		$	0.32		$	0.95		$	—
Percentage of initial rent		6.9%			10.4%			7.4%			1.5%			3.7%			—
Total capital expenditures and leasing commissions (accrual basis)	$	109,860		$	57,007		$	32,514		$	3,665		$	6,990		$	9,684
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods		97,888			53,067			33,515			4,134			4,693			2,479
Expenditures to be made in future periods for the current period		(51,661	)		(32,103	)		(15,515	)		(1,164	)		(1,280	)		(1,599	)
Total capital expenditures and leasing commissions (cash basis)	$	156,087		$	77,971		$	50,514		$	6,635		$	10,403		$	10,564
Development and Redevelopment Expenditures:
West End 25	$	50,975		$	—		$	50,975		$	—		$	—		$	—
Bergen Town Center		49,323			—			—			49,323			—			—
Wasserman Venture		38,238			—			—			—			—			38,238
220 20th Street		36,468			—			36,468			—			—			—
1999 K Street (sold in September 2009)		31,874			—			31,874			—			—			—
Manhattan Mall		20,144			—			—			20,144			—			—
North Bergen, New Jersey		19,495			—			—			19,495			—			—
Poughkeepsie, New York		17,446			—			—			17,446			—			—
Garfield, New Jersey		15,404			—			—			15,404			—			—
2101 L Street		12,865			—			12,865			—			—			—
Other		92,423			11,814			20,490			39,569			5,636			14,914
	$	384,655		$	11,814		$	152,672		$	161,381		$	5,636		$	53,152

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LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

Cash Flows for the Nine Months Ended September 30, 2008

Cash and cash equivalents were $1,529,012,000 at September 30, 2008, a $374,417,000 increase over the balance at December 31, 2007. This increase resulted from $647,609,000 of net cash provided by operating activities, partially offset by $138,563,000 of net cash used in investing activities and $134,629,000 of net cash used in financing activities. Property rental income represents our primary source of net cash provided by operating activities.

Cash flows provided by operating activities of $647,609,000 was comprised of (i) net income of $639,112,000, (ii) distributions of income from partially owned entities of $12,021,000, and (iii) the net change in operating assets and liabilities of $17,129,000, partially offset by, $20,653,000 of non-cash adjustments, including depreciation and amortization expense, the effect of straight-lining of rental income and equity in net income of partially owned entities,

Net cash used in investing activities of $138,563,000 was primarily comprised of (i) development and redevelopment expenditures of $413,947,000, (ii) investments in partially owned entities of $115,250,000, (iii) additions to real estate of $158,434,000, (iv) acquisitions of real estate and related investments of $36,566,000, (v) restricted cash (primarily mortgage escrows) of $22,674,000, (vi) purchases of marketable equity securities of $8,035,000 and (vii) investments in mezzanine loans receivable of $7,397,000, partially offset by, (viii) proceeds from the sale of real estate (primarily Americold and Tysons Dulles Plaza) of $352,511,000, (ix) distributions of capital from partially owned entities of $182,090,000, (x) proceeds received from repayments on mezzanine loans receivable of $52,032,000 and (xi) proceeds from the sale marketable securities of $47,723,000.

Net cash used in financing activities of $134,629,000 was primarily comprised of (i) repayments of borrowings of $1,043,734,000, (ii) distributions to Vornado of $415,169,000, (iii) distributions to redeemable security-holders of $65,925,000 and (iv) distributions to preferred unitholders of $42,841,000, partially offset by, (v) proceeds from borrowings of $1,424,458,000 and (vi) proceeds received from exercise of unit options of $21,981,000.

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LIQUIDITY AND CAPITAL RESOURCES - continued

Capital Expenditures

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the nine months ended September 30, 2008.

(Amounts in thousands)	Total			New York Office			Washington, DC Office			Retail			Merchandise Mart			Other
Capital Expenditures (Accrual basis):
Expenditures to maintain the assets:
Recurring	$	33,988		$	15,114		$	6,993		$	1,517		$	8,702		$	1,662
Non-recurring		9,950			3,034			2,069			—			—			4,847
Total		43,938			18,148			9,062			1,517			8,702			6,509
Tenant improvements:
Recurring		54,958			20,035			22,896			4,417			7,610			—
Non-recurring		14,084			6,822			—			285			6,846			131
Total		69,042			26,857			22,896			4,702			14,456			131
Leasing Commissions:
Recurring		21,688			15,015			5,130			1,003			540			—
Non-recurring		8,423			5,909			—			112			2,221			181
Total		30,111			20,924			5,130			1,115			2,761			181
Tenant improvements and leasing commissions:
Per square foot	$	22.60		$	46.81		$	16.27		$	9.95		$	19.57		$	—
Per square foot per annum	$	2.92		$	5.09		$	2.14		$	1.31		$	3.03		$	—
Percentage of initial rent		6.8%			7.1%			5.6%			4.1%			11.0%			—
Total Capital Expenditures and Leasing Commissions (accrual basis)	$	143,091		$	65,929		$	37,088		$	7,334		$	25,919		$	6,821
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods		98,319			53,997			14,430			6,440			20,306			3,146
Expenditures to be made in future periods for the current period		(60,484	)		(29,135	)		(20,127	)		(5,817	)		(5,274	)		(131	)
Total Capital Expenditures and Leasing Commissions (Cash basis)	$	180,926		$	90,791		$	31,391		$	7,957		$	40,951		$	9,836
Development and Redevelopment Expenditures:
Bergen Town Center	$	93,685		$	—		$	—		$	93,685		$	—		$	—
Wasserman Venture		51,405			—			—			—			—			51,405
1999 K Street (Sold in September 2009)		32,837			—			32,837			—			—			—
40 East 66th Street		28,634			—			—			—			—			28,634
220 Central Park South		26,538			—			—			—			—			26,538
220 20th Street		25,627			—			25,627			—			—			—
Manhattan Mall		22,493			—			—			22,493			—			—
West End 25		16,852			—			16,852			—			—			—
2101 L Street		11,987			—			11,987			—			—			—
Springfield Mall		9,749			—			—			9,749			—			—
North Bergen, New Jersey		7,267			—			—			7,267			—			—
Green Acres Mall		3,632			—			—			3,632			—			—
Other		83,241			19,045			15,861			33,365			5,023			9,947
	$	413,947		$	19,045		$	103,164		$	170,191		$	5,023		$	116,524

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LIQUIDITY AND CAPITAL RESOURCES - continued

Insurance

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”), which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage in effect through February 15, 2011. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Our coverage for NBCR losses is up to $2 billion, per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

Our debt instruments, consisting of mortgage loans secured by our properties (which are generally non-recourse to us), senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

Other Contractual Obligations

At September 30, 2009, there were $39,282,000 of outstanding letters of credit under our $965,000,000 revolving credit facility. Our credit facilities and our senior unsecured notes contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities and our senior unsecured notes also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including items such as the failure to pay interest or principal.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $201,550,000. Of this amount, $80,923,000 is committed to the India Property Fund and is pledged as collateral to its lender.

From time to time, we have disposed of substantial amounts of real estate to third parties for which, as to certain properties, we remain contingently liable for rent payments or mortgage indebtedness that we cannot quantify.

70

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates on our consolidated and non-consolidated debt (all of which arises out of non-trading activity) is as follows:

(Amounts in thousands, except per unit amounts)	As at September 30, 2009					As at December 31, 2008
Consolidated debt:	Balance		Weighted Average Interest Rate	Effect of 1% Change In Base Rates		Balance		Weighted Average Interest Rate
Variable rate	$	2,486,814	1.64%	$	24,868	$	2,002,381	2.71%
Fixed rate		10,241,198	5.89%		—		10,435,542	5.76%
	$	12,728,012	5.06%	$	24,868	$	12,437,923	5.27%
Pro rata share of debt of non- consolidated entities (non-recourse):
Variable rate – excluding Toys	$	326,053	2.57%	$	3,260	$	282,752	3.63%
Variable rate – Toys		712,947	3.31%		7,129		819,512	3.68%
Fixed rate (including $1,072,461, and $1,012,560 of Toys’ debt in 2009 and 2008)		1,973,310	7.17%		—		2,094,321	6.51%
	$	3,012,310	5.76%	$	10,389	$	3,196,585	5.53%
Total change in annual net income				$	35,257
Per Class A unit-diluted				$	0.19

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of September 30, 2009, variable rate debt with an aggregate principal amount of $514,000,000 and a weighted average interest rate of 2.50% was subject to LIBOR caps. These caps are based on a notional amount of $514,000,000 and cap LIBOR at a weighted average rate of 5.39%. As of September 30, 2009, we have investments in mezzanine loans with an aggregate carrying amount of $269,976,000 that are based on variable interest rates that partially mitigate our exposure to a change in interest rates on our variable rate debt.

Fair Value of Debt

As of September 30, 2009, the carrying amount of our debt exceeds its aggregate fair value by approximately $476,826,000, based on discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt.

71

Item 4. Controls and Procedures

Disclosure Controls and Procedures: Management of Vornado, with the participation of Vornado’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, Vornado’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2009, such disclosure controls and procedures were effective.

Internal Control Over Financial Reporting: There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time involved in various other legal actions in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters individually or in the aggregate, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. Discovery is now complete and we anticipate that a trial date will be set for some time in 2010. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above.   Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records; that claim was dismissed by virtue of a decision dated October 1, 2007 and an Order dated January 28, 2009. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with the 2006 decision.  In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump filed an additional appeal of the 2006, 2007 and 2009 decisions. Mr. Trump’s appeals were denied on all grounds on June 30, 2009. Thereafter, Mr. Trump moved to reargue the appellate decisions but later withdrew the motion. On July 24, 2009 Mr. Trump moved for leave to appeal the June 30, 2009 decision to the New York Court of Appeals, which was denied on October 27, 2009. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

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Item 1A. Risk Factors

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index.

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SIGNATURES

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

		VORNADO REALTY L.P.
		(Registrant)
Date: November 6, 2009	By:	/s/ Joseph Macnow
		Joseph Macnow, Executive Vice President - Finance and Administration and Chief Financial Officer of Vornado Realty Trust, sole general partner of Vornado Realty L.P. (duly authorized officer and principal financial and accounting officer)

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EXHIBIT INDEX

Exhibit No.
3.1		-	Articles of Restatement of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated by reference to Exhibit 3.75 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007	*
3.2		-	Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 - Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
3.3		-	Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.4		-	Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.5		-	Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998	*
3.6		-	Third Amendment to the Partnership Agreement, dated as of November 12, 1998 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 30, 1998	*
3.7		-	Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on February 9, 1999	*
3.8		-	Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on March 17, 1999	*
3.9		-	Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*
3.10		-	Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*
3.11		-	Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*
3.12		-	Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999	*
3.13		-	Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999	*
	*		_______________________ Incorporated by reference.

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3.14		-	Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 23, 1999	*
3.15		-	Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on May 19, 2000	*
3.16		-	Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 16, 2000	*
3.17		-	Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 28, 2000	*
3.18		-	Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 - Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001	*
3.19		-	Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.20		-	Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.21		-	Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 001-11954), filed on March 18, 2002	*
3.22		-	Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*
3.23		-	Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by reference to Exhibit 3.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.24		-	Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003	*
3.25		-	Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 – Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004	*
3.26		-	Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004	*
3.27		-	Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 – Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*
	*		_______________________ Incorporated by reference.

77

3.28		-	Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 – Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*
3.29		-	Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*
3.30		-	Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*
3.31		-	Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on January 4, 2005	*
3.32		-	Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 21, 2005	*
3.33		-	Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on September 1, 2005	*
3.34		-	Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on September 14, 2005	*
3.35		-	Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 000-22685), filed on May 8, 2006	*
3.36		-	Thirty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006	*
3.37		-	Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on May 3, 2006	*
3.38		-	Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006	*
3.39		-	Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007	*
3.40		-	Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*
	*		_______________________ Incorporated by reference.

78

3.41		-	Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*
3.42		-	Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*
3.43		-	Fortieth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*
3.44		-	Forty-First Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (file No. 001-11954), filed on May 6, 2008	*
4.1		-	Indenture and Servicing Agreement, dated as of March 1, 2000, among Vornado Finance LLC, LaSalle Bank National Association, ABN Amro Bank N.V. and Midland Loan Services, Inc. - Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
4.2		-	Indenture, dated as of June 24, 2002, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 24, 2002	*
4.3		-	Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-11954), filed on April 28, 2005	*
4.4		-	Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 27, 2006	*
			Certain instruments defining the rights of holders of long-term debt securities of Vornado Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange Commission, upon request, copies of any such instruments.
10.1	**	-	Vornado Realty Trust’s 1993 Omnibus Share Plan - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 331-09159), filed on July 30, 1996	*
10.2	**	-	Vornado Realty Trust’s 1993 Omnibus Share Plan, as amended - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-29011), filed on June 12, 1997	*
10.3		-	Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference to Vornado, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992	*
10.4		-	Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29, 1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

79

10.5		-	Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.6		-	Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.7	**	-	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 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997	*
10.8		-	Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 1, 2000, between Entities named therein (as Mortgagors) and Vornado (as Mortgagee) - Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
10.9	**	-	Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2005 – Incorporated by reference to Exhibit 10.15 to Vornado Realty Trust Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006	*
10.10	**	-	Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust - Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*
10.11		-	Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E. Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod, individually, and Charles E. Smith Management, Inc. - Incorporated by reference to Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on January 16, 2002	*
10.12		-	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002	*
10.13		-	Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002	*
10.14	**	-	Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 001-11954), filed on May 1, 2002	*
10.15	**	-	First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

80

10.16		-	Registration Rights Agreement, dated as of July 21, 1999, by and between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002	*
10.17		-	Form of Registration Rights Agreement between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002	*
10.18		-	Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.19		-	59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.20		-	Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.21		-	59th Street Management and Development Agreement, dated as of July 3, 2002, by and between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(2) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*
10.22		-	Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5 of Interstate Properties’ Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed on May 30, 2002	*
10.23	**	-	Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216) filed December 26, 2002	*
10.24		-	Registration Rights Agreement by and between Vornado Realty Trust and Bel Holdings LLC dated as of November 17, 2003 – Incorporated by reference to Exhibit 10.68 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004	*
10.25		-	Registration Rights Agreement, dated as of May 27, 2004, by and between Vornado Realty Trust and 2004 Realty Corp. – Incorporated by reference to Exhibit 10.75 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.26		-	Registration Rights Agreement, dated as of December 17, 2004, by and between Vornado Realty Trust and Montebello Realty Corp. 2002 – Incorporated by reference to Exhibit 10.76 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

81

10.27	**	-	Form of Stock Option Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.28	**	-	Form of Restricted Stock Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
10.29	**	-	Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated February 22, 2005 and effective as of January 1, 2005 – Incorporated by reference to Exhibit 10.76 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 001-11954), filed on April 28, 2005	*
10.30		-	Contribution Agreement, dated May 12, 2005, by and among Robert Kogod, Vornado Realty L.P. and certain Vornado Realty Trust’s affiliates – Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006	*
10.31	**	-	Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on May 2, 2006	*
10.32	**	-	Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006	*
10.33	**	-	Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on May 1, 2006	*
10.34		-	Revolving Credit Agreement, dated as of June 28, 2006, among the Operating Partnership, the banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citicorp North America, Inc., as Syndication Agents, Deutsche Bank Trust Company Americas, Lasalle Bank National Association, and UBS Loan Finance LLC, as Documentation Agents and Vornado Realty Trust – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on June 28, 2006	*
10.35	**	-	Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006	*
10.36	**	-	Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006	*
10.37		-	Guaranty, made as of June 28, 2006, by Vornado Realty Trust, for the benefit of JP Morgan Chase Bank – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006	*
10.38	**	-	Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

82

10.39	**	-	Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007	*
10.40	**	-	Amendment to 59th Street Real Estate Retention Agreement, dated January 1, 2007, by and among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007	*
10.41		-	Stock Purchase Agreement between the Sellers identified and Vornado America LLC, as the Buyer, dated as of March 5, 2007 – Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954), filed on May 1, 2007	*
10.42	**	-	Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19, 2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954), filed on May 1, 2007	*
10.43		-	Revolving Credit Agreement, dated as of September 28, 2007, among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks signatory thereto, each as a Bank, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A. as Syndication Agent, Citicorp North America, Inc., Deutsche Bank Trust Company Americas, and UBS Loan Finance LLC as Documentation Agents, and J.P. Morgan Securities Inc. and Bank of America Securities LLC as Lead Arrangers and Bookrunners. - Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007	*
10.44		-	Second Amendment to Revolving Credit Agreement, dated as of September 28, 2007, by and among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages thereof, and J.P. Morgan Chase Bank N.A., as Administrative Agent for the Banks - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007	*
10.45	**	-	Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-11954) filed on February 26, 2008	*
10.46	**	-	Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008	*
10.47	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 29, 2008. Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
10.48	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow, dated December 29, 2008. Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

83

10.49	**	-	Amendment to Employment Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
10.50	**	-	Amendment to Indemnification Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
10.51	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N. Schear, dated December 29, 2008. Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
10.52	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated December 29, 2008. Incorporated by reference to Exhibit 10.52 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
10.53	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated December 29, 2008. Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
15.1		-	Letter regarding Unaudited Interim Financial Information
31.1		-	Rule 13a-14 (a) Certification of the Chief Executive Officer
31.2		-	Rule 13a-14 (a) Certification of the Chief Financial Officer
32.1		-	Section 1350 Certification of the Chief Executive Officer
32.2		-	Section 1350 Certification of the Chief Financial Officer
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

84