Vornado Realty Trust (VNO) 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 2007

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: 001-11954

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

Maryland	22-1657560
(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 is a large accelerated filer, accelerated filer, or a non-accelerated filer.

See definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

x Large Accelerated Filer         o Accelerated Filer         o Non-Accelerated Filer

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

As of September 30, 2007, 152,264,185 of the registrant’s common shares of beneficial interest are outstanding.

PART I.		Financial Information:
	Item 1.	Financial Statements:	Page Number
		Consolidated Balance Sheets (Unaudited) as of September 30, 2007 and December 31, 2006	3
		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2007 and September 30, 2006	4
		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2007 and September 30, 2006	5
		Notes to Consolidated Financial Statements (Unaudited)	7
		Report of Independent Registered Public Accounting Firm	37
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
	Item 4.	Controls and Procedures	79
PART II.		Other Information:
	Item 1.	Legal Proceedings	80
	Item 1A.	Risk Factors	81
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
	Item 3.	Defaults Upon Senior Securities	81
	Item 4.	Submission of Matters to a Vote of Security Holders	81
	Item 5.	Other Information	81
	Item 6.	Exhibits	81
Signatures			82
Exhibit Index			83

2

Part I. Financial Information

Item 1. Financial Statements

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except share and per share amounts)
ASSETS	September 30, 2007			December 31, 2006
Real estate, at cost:
Land	$	4,632,682		$	2,754,962
Buildings and improvements		12,951,030			9,928,776
Development costs and construction in progress		652,148			377,200
Leasehold improvements and equipment		410,960			372,432
Total		18,646,820			13,433,370
Less accumulated depreciation and amortization		(2,292,589	)		(1,961,974	)
Real estate, net		16,354,231			11,471,396
Cash and cash equivalents		834,274			2,233,317
Escrow deposits and restricted cash		386,792			140,351
Marketable securities		391,738			316,727
Accounts receivable, net of allowance for doubtful accounts of $22,119 and $17,727		273,910			230,908
Investments in and advances to partially owned entities, including Alexander’s of $108,976 and $82,114		1,167,939			1,135,669
Investment in Toys “R” Us		331,129			317,145
Notes and mortgage loans receivable		655,428			561,164
Receivable arising from the straight-lining of rents, net of allowance of $2,056 and $2,334		502,098			441,321
Due from officers		13,185			15,197
Assets related to discontinued operations		145,527			115,643
Other assets		1,197,517			975,443
	$	22,253,768		$	17,954,281
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes and mortgages payable	$	8,933,533		$	6,886,884
Convertible senior debentures		2,357,999			980,083
Senior unsecured notes		698,502			1,196,600
Exchangeable senior debentures		492,450			491,231
Revolving credit facility debt		94,000			—
Accounts payable and accrued expenses		580,479			531,977
Deferred credit		892,498			331,760
Officers’ compensation payable		66,750			60,955
Deferred tax liabilities		266,383			34,529
Liabilities related to discontinued operations		—			10,973
Other liabilities		161,420			150,315
Total liabilities		14,544,014			10,675,307
Minority interest, including unitholders in the Operating Partnership		1,503,395			1,128,204
Commitments and contingencies
Shareholders’ equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 33,983,962 and 34,051,635 shares		825,275			828,660
Common shares of beneficial interest: $.04 par value per share; authorized 250,000,000 shares; issued and outstanding 152,264,185 and 151,093,373 shares		6,130			6,083
Additional capital		5,344,272			5,287,923
Earnings less than distributions		(35,650	)		(69,188	)
Accumulated other comprehensive income		62,668			92,963
Deferred compensation shares earned but not yet delivered		3,664			4,329
Total shareholders’ equity		6,206,359			6,150,770
	$	22,253,768		$	17,954,281

See notes to consolidated financial statements.

3

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
(Amounts in thousands, except per share amounts)	2007			2006			2007			2006
REVENUES:
Property rentals	$	522,814		$	389,018		$	1,441,653		$	1,142,897
Temperature Controlled Logistics		212,715			190,280			619,282			573,177
Tenant expense reimbursements		89,482			68,634			239,310			191,181
Fee and other income		28,025			27,999			81,920			71,233
Total revenues		853,036			675,931			2,382,165			1,978,488
EXPENSES:
Operating		431,339			346,565			1,193,857			996,350
Depreciation and amortization		140,377			101,799			380,876			289,831
General and administrative		58,366			52,096			170,790			148,530
Costs of acquisitions not consummated		—			—			8,807			—
Total expenses		630,082			500,460			1,754,330			1,434,711
Operating income		222,954			175,471			627,835			543,777
Income (loss) applicable to Alexander’s		12,111			(3,586	)		35,114			7,569
(Loss) income applicable to Toys “R” Us		(20,289	)		(40,699	)		18,343			4,177
Income from partially owned entities		13,901			23,010			31,599			43,696
Interest and other investment income		56,906			98,092			231,890			137,186
Interest and debt expense (including amortization of deferred financing costs of $3,706 and $4,257 in each three month period, respectively, and $11,702 and $11,391 in each nine month period, respectively)		(165,889	)		(115,280	)		(469,659	)		(339,118	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		1,012			8,032			17,699			65,527
Minority interest of partially owned entities		3,587			2,534			11,819			5,378
Income before income taxes		124,293			147,574			504,640			468,192
Provision for income taxes		(3,048	)		(382	)		(6,815	)		(2,362	)
Income from continuing operations		121,245			147,192			497,825			465,830
Income from discontinued operations, net of minority interest		24,655			577			24,592			37,865
Income before allocation to minority limited partners		145,900			147,769			522,417			503,695
Minority limited partners’ interest in the Operating Partnership		(10,241	)		(13,103	)		(44,270	)		(46,301	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		(6,683	)		(14,455	)		(17,030	)
Net income		130,841			127,983			463,692			440,364
Preferred share dividends		(14,295	)		(14,351	)		(42,886	)		(43,162	)
NET INCOME applicable to common shares	$	116,546		$	113,632		$	420,806		$	397,202
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net of minority interest	$	0.61		$	0.80		$	2.61		$	2.54
Income from discontinued operations, net of minority interest		0.16			—			0.16			0.27
Net income per common share	$	0.77		$	0.80		$	2.77		$	2.81
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net of minority interest	$	0.58		$	0.76		$	2.50		$	2.41
Income from discontinued operations, net of minority interest		0.16			—			0.15			0.25
Net income per common share	$	0.74		$	0.76		$	2.65		$	2.66
DIVIDENDS PER COMMON SHARE	$	0.85		$	0.80		$	2.55		$	2.40

See notes to consolidated financial statements.

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VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Nine Months Ended September 30,
(Amounts in thousands)	2007			2006
Cash Flows from Operating Activities:
Net income	$	463,692		$	440,364
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of debt issuance costs)		392,578			302,869
Net gains from derivative positions		(100,060	)		(65,589	)
Equity in income of partially owned entities, including Alexander’s and Toys		(85,056	)		(55,442	)
Straight-lining of rental income		(58,492	)		(47,688	)
Amortization of below market leases, net		(58,810	)		(15,558	)
Minority limited partners’ interest in the Operating Partnership		47,010			46,302
Net gains on dispositions of wholly owned and partially owned assets other than depreciable real estate		(17,699	)		(65,527	)
Distributions of income from partially owned entities, including Alexander’s and Toys		18,047			27,518
Perpetual preferred unit distributions of the Operating Partnership		14,455			15,905
Costs of acquisitions not consummated		8,807			—
Minority interest of partially owned entities		(11,819	)		(5,378	)
Loss on early extinguishment of debt and write-off of unamortized financing costs		7,670			15,596
Other non-cash adjustments		14,311			3,977
Net gains on sale of real estate		(27,745	)		(33,769	)
Write-off of issuance costs of preferred units redeemed		—			1,125
Changes in operating assets and liabilities:
Accounts receivable, net		(17,899	)		33,047
Accounts payable and accrued expenses		(20,242	)		(48,222	)
Other assets		(75,330	)		(88,536	)
Other liabilities		(6,325	)		25,844
Net cash provided by operating activities		487,093			486,838
Cash Flows from Investing Activities:
Acquisitions of real estate and other		(2,775,982	)		(577,399	)
Investments in partially owned entities		(201,432	)		(112,729	)
Investments in notes and mortgage loans receivable		(211,942	)		(361,841	)
Purchases of marketable securities		(152,683	)		(83,698	)
Development costs and construction in progress		(231,575	)		(156,051	)
Proceeds received from repayment of notes and mortgage loans receivable		126,629			169,746
Additions to real estate		(108,935	)		(139,751	)
Proceeds from sales of, and return of investment in, marketable securities		57,341			157,363
Deposits in connection with real estate acquisitions, including pre-acquisition costs		(21,231	)		(21,676	)
(Increase) decrease in restricted cash balances, primarily mortgage escrows		(13,245	)		2,527
Distributions of capital from partially owned entities, including Alexander’s and Toys		13,315			108,779
Proceeds received from Officer loan repayment		2,000			—
Proceeds from sales of real estate		217,941			110,388
Proceeds received on settlement of derivatives (primarily McDonalds and Sears Holdings)		234,242			135,028
Net cash used in investing activities		(3,065,557	)		(769,314	)

See notes to consolidated financial statements.

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VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

(Amounts in thousands)	For The Nine Months Ended September 30,
	2007			2006
Cash Flows from Financing Activities:
Proceeds from borrowings		2,517,105			1,807,091
Repayments of borrowings		(727,730	)		(802,785	)
Dividends paid on common shares		(387,268	)		(339,844	)
Purchase of marketable securities in connection with the legal defeasance of mortgage notes payable		(109,092	)		(174,254	)
Distributions to minority partners		(62,169	)		(65,303	)
Dividends paid on preferred shares		(42,940	)		(43,257	)
Debt issuance costs		(13,229	)		(15,166	)
Proceeds from exercise of share options and other		4,744			9,510
Proceeds from issuance of preferred shares and units		—			43,862
Redemption of perpetual preferred shares and units		—			(45,000	)
Net cash provided by financing activities		1,179,421			374,854
Net (decrease) increase in cash and cash equivalents		(1,399,043	)		92,378
Cash and cash equivalents at beginning of period		2,233,317			294,504
Cash and cash equivalents at end of period	$	834,274		$	386,882
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (including capitalized interest of $38,013 and $16,014)	$	457,669		$	321,676
Cash payments for income taxes	$	25,969		$	3,822
Non-Cash Transactions:
Financing assumed in acquisitions	$	1,326,514		$	283,695
Marketable securities transferred in connection with the legal defeasance of mortgage notes payable		109,092			174,254
Mortgage notes payable legally defeased		104,571			163,620
Conversion of Class A Operating Partnership units to common shares		41,390			22,458
Unrealized net (loss) gain on securities available for sale		(32,889	)		22,089
Operating partnership units issued in connection with acquisitions		22,382			—
Increases in assets and liabilities resulting from the consolidation of our 50% investment in H Street partially owned entities upon acquisition of the remaining 50% interest on April 30, 2007:
Real estate, net		342,764			—
Restricted cash		369			—
Other assets		11,648			—
Notes and mortgages payable		55,272			—
Accounts payable and accrued expenses		3,101			—
Deferred credit		2,407			—
Deferred tax liabilities		112,797			—
Other liabilities		71			—

See notes to consolidated financial statements.

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VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization

Vornado Realty Trust is a fully-integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). All references to “our,” “we,” “us,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries. We are the sole general partner of, and owned approximately 90.0% of the common limited partnership interest in, the Operating Partnership at September 30, 2007.

Substantially all of Vornado Realty Trust’s assets are held through subsidiaries of the Operating Partnership. Accordingly, Vornado Realty Trust’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors.

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 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 and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2007, are not necessarily indicative of the operating results for the full year.

The accompanying consolidated financial statements include the accounts of Vornado and 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 under Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities (“FIN 46R”), or (ii) when we are a general partner that meets the criteria under Emerging Issues Task Force (“EITF”) Issue No. 04-5. We consolidate our 47.6% investment in AmeriCold Realty Trust because we have the contractual right to appoint three out of five members of its Board of Trustees, and therefore determined that we have a controlling interest. All significant inter-company amounts have been eliminated. Equity interests in partially owned entities are accounted for under the equity method of accounting when they do not meet the criteria for consolidation and our ownership interest is greater than 20%. 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.

Certain prior year balances related to discontinued operations and provision for income taxes have been reclassified in order to conform to current year presentation.

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VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. Recently Issued Accounting Literature

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 establishes new evaluation and measurement processes for all income tax positions taken. FIN 48 also requires expanded disclosures of income tax matters. The adoption of this standard on January 1, 2007 did not have a material effect on our consolidated financial statements.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”).SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. We believe that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.

In September 2006, the FASB issued Statement No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of SFAS No. 87, 88, 106 and 132R (“SFAS No. 158”). SFAS No. 158 requires an employer to (i) recognize in its statement of financial position an asset for a plan’s over-funded status or a liability for a plan’s under-funded status; (ii) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (iii) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income. The adoption of the requirement to recognize the funded status of a benefit plan and the disclosure requirements as of December 31, 2006 did not have a material effect on our consolidated financial statements. The requirement to measure plan assets and benefit obligations to determine the funded status as of the end of the fiscal year and to recognize changes in the funded status in the year in which the changes occur is effective for fiscal years ending after December 15, 2008. The adoption of the measurement date provisions of this standard is not expected to have a material effect on our consolidated financial statements.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.  This Statement is effective for fiscal years beginning after November 15, 2007.  We have not decided if we will choose to measure any eligible financial assets and liabilities at fair value upon the adoption of this standard on January 1, 2008.

On August 31, 2007, the FASB issued a proposed FASB Staff Position (the “proposed FSP”) that affects the accounting for our convertible and exchangeable senior debentures and Series D-13 convertible preferred units. The proposed FSP requires the initial proceeds from the sale of our convertible and exchangeable senior debentures and Series D-13 convertible preferred units to be allocated between a liability component and an equity component. The resulting discount must be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The proposed FSP, if adopted, would be effective for fiscal years beginning after December 15, 2007 and would require retroactive application. The adoption of the proposed FSP on January 1, 2008 would result in the recognition of an aggregate unamortized debt discount of $190,697,000 (as of September 30, 2007) on our consolidated balance sheet and additional interest expense on our consolidated statements of income. Our current estimate of the incremental interest expense, net of minority interest, for each reporting period is as follows:

(Amounts in thousands)
For the year ended December 31:
2005	$	3,405
2006	$	6,065
2007	$	28,590
2008	$	35,721
2009	$	37,856
2010	$	40,114
2011	$	41,112
2012	$	8,192
For the three months ended:
March 31, 2007	$	3,127
June 30, 2007	$	8,344
September 30, 2007	$	8,487

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VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4. Acquisitions and Dispositions

Acquisitions:

100 West 33^rd Street, New York City (the “Manhattan Mall”)

On January 10, 2007, we acquired the Manhattan Mall for approximately $689,000,000 in cash. This mixed-use property is located on the entire Sixth Avenue block-front between 32^nd and 33^rd Streets in Manhattan and contains approximately 1,000,000 square feet, including 812,000 square feet of office space and 164,000 square feet of retail space. Included as part of the acquisition were 250,000 square feet of additional air rights. The property is adjacent to our Hotel Pennsylvania. At closing, we completed a $232,000,000 financing secured by the property, which bears interest at LIBOR plus 0.55% (5.67% at September 30, 2007) and matures in two years with three one-year extension options. The operations of the office component of the property are included in the New York Office segment and the operations of the retail component are included in the Retail segment. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

Bruckner Plaza, Bronx, New York

On January 11, 2007, we acquired the Bruckner Plaza shopping center, containing 386,000 square feet, for approximately $165,000,000 in cash. Also included as part of the acquisition was an adjacent parcel which is ground leased to a third party. The property is located on Bruckner Boulevard in the Bronx, New York. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

1290 Avenue of the Americas and 555 California Street

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas, a 2,000,000 square foot Manhattan office building, located on the block-front between 51^st and 52^nd Street on Avenue of the Americas, and the 3- building 555 California Street complex (“555 California Street”) containing 1,800,000 square feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district. The purchase price for our 70% interest in the real estate was approximately $1.8 billion, consisting of $1.0 billion of cash and $797,000,000 of existing debt. Our share of the debt is comprised of $308,000,000 secured by 1290 Avenue of the Americas and $489,000,000 secured by 555 California Street. 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. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

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 various of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records.  In a decision dated October 1, 2007, the Court determined that Mr. Trump already received access to the books and records to which he was entitled, with the exception of certain documents which the general partners have requested from third parties but have not yet been received. Mr. Trump has sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  

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 would not be material to our consolidated financial statements.

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VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4. Acquisitions and Dispositions - continued

1290 Avenue of the Americas and 555 California Street - continued

The following summarizes our allocation of the purchase price to the assets and liabilities acquired.

(Amounts in thousands)
Land	$	652,144
Building		1,219,968
Acquired above-market leases		33,205
Other assets		223,083
Acquired in-place leases		173,922
Assets acquired		2,302,322
Mortgage debt		812,380
Acquired below-market leases		223,764
Other liabilities		40,784
Liabilities acquired		1,076,928
Net assets acquired ($1.0 billion excluding net working capital acquired and closing costs)	$	1,225,394

Our initial valuation of the assets and liabilities acquired (70% interest) is preliminary and subject to change within the one-year period from the date of closing as additional valuation information becomes available.

The following table presents our pro forma condensed consolidated statements of income for the three and nine months ended September 30, 2006 and the nine months ended September 30, 2007, as if the above transaction occurred on January 1, 2006. The unaudited pro forma information is not necessarily indicative of what our actual results would have been had the transaction been consummated on January 1, 2006, nor does it represent the results of operations for any future periods. In our opinion all adjustments necessary to reflect this transaction have been made.

	Actual			Pro forma
Condensed Consolidated Statements of Income	For the Three Months Ended			For the Three Months Ended			For the Nine Months Ended September 30,
(Amounts in thousands, except per share amounts)	September 30, 2007			September 30, 2006			2007			2006
Revenues	$	853,036		$	741,511		$	2,480,783		$	2,174,124
Income before allocation to limited partners	$	145,900		$	136,838		$	478,788		$	468,708
Minority limited partners’ interest in the Operating Partnership		(10,241	)		(12,046	)		(39,802	)		(42,697	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		(6,683	)		(14,455	)		(17,030	)
Net income		130,841			118,109			424,531			408,981
Preferred share dividends		(14,295	)		(14,351	)		(42,886	)		(43,162	)
Net income applicable to common shares	$	116,546		$	103,758		$	381,645		$	365,819
Net income per common share – basic	$	0.77		$	0.73		$	2.52		$	2.59
Net income per common share - diluted	$	0.74		$	0.69		$	2.41		$	2.45

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4. Acquisitions and Dispositions - continued

H Street Building Corporation (“H Street”)

In July 2005, we acquired H Street, which owns a 50% interest in real estate assets located in Pentagon City, Virginia and Washington, DC. On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets for approximately $383,000,000, consisting of $333,000,000 in cash and $50,000,000 of existing mortgages. These assets include twin office buildings located in Washington, DC, containing 577,000 square feet, and assets located in Pentagon City, Virginia comprised of 34 acres of land leased to three residential and retail operators, a 1,670 unit high-rise apartment complex and 10 acres of vacant land. In conjunction with this acquisition all existing litigation has been dismissed. Beginning on April 30, 2007, we consolidate the accounts of these entities into our consolidated financial statements and no longer account for them on the equity method.

Further, we agreed to sell approximately 19.6 of the 34 acres of land to one of the existing ground lessees in two closings over a two-year period for approximately $220,000,000. On May 11, 2007, we closed on the sale of 11 of the 19.6 acres for $104,000,000 and received $5,000,000 in cash and a $99,000,000 note due December 31, 2007. On September 28, 2007, the buyer pre-paid the note in cash and we recognized the net gain on sale of $4,803,000. The balance of the net gain of $11,028,000, representing deferred taxes will be reversed and recognized as income in the first quarter of 2008 when H Street and its affiliates elect to be taxed as REITs. In April 2007, we received letters from the two remaining ground lessees claiming a right of first offer on the sale of the land, one of which has since retracted its letter and reserved its rights under the lease.

Our total purchase price for 100% of the assets we will own, after the anticipated proceeds from the land sales, is $409,000,000, consisting of $286,000,000 in cash and $123,000,000 of existing mortgages.

Toys “R” Us Stores

On May 31, 2007, we acquired four properties from Toys “R” Us (“Toys”) for $12,242,000 in cash, which completed our September 2006 agreement to acquire 43 stores that were closed as part of Toys’ January 2006 store closing program. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition. Our $1,045,000 share of Toys net gain on this transaction was recorded as an adjustment to the basis of our investment in Toys and was not recorded as income.

India Property Fund LP

In 2005 and 2006, we invested $94,200,000 in two joint ventures established to acquire, manage and develop real estate in India. On June 14, 2007, we committed to contribute $95,000,000 to a third venture, the India Property Fund, LP (the “Fund”), also established to acquire, manage and develop real estate in India. We satisfied $77,000,000 of our commitment by contributing our interest in one of the above mentioned joint ventures to the Fund. The Fund will seek to raise additional equity. As of September 30, 2007, we own 95% of the Fund and therefore consolidate the accounts of the Fund into our consolidated financial statements, pursuant to the requirements of FIN 46 R.  

Shopping Center Portfolio Acquisition

On June 26, 2007, we entered into an agreement to acquire a 15 shopping center portfolio aggregating approximately 1.9 million square feet. The properties are located primarily in Northern New Jersey and Long Island, New York. The purchase price is approximately $351,000,000, consisting of approximately $120,000,000 of cash, $89,000,000 of newly issued Vornado Realty L.P. redeemable preferred and common units and $142,000,000 of existing debt. On June 28, 2007, we completed the acquisition of five of the shopping centers for $116,561,000, consisting of $94,179,000 in cash, $15,993,000 in Vornado Realty L.P. preferred units and $6,389,000 of Vornado Realty L.P. common units. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition. The closing of the remaining shopping centers is expected to occur in two additional tranches and be completed by the end of 2007, subject to customary closing conditions.

Dispositions:

Vineland, New Jersey Shopping Center Property

On July 16, 2007, we sold our Vineland, New Jersey shopping center property for $2,774,000 in cash, which resulted in a net gain of $1,708,000.

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(UNAUDITED)

4. Acquisitions and Dispositions - continued

BNA Complex

On August 9, 2007, we completed our previously announced sale of Crystal Mall Two, a 277,000 square foot office building located at 1801 South Bell Street in Crystal City, to The Bureau of National Affairs, Inc. (“BNA”), and simultaneously completed the acquisition of a three building complex from BNA. The three buildings acquired contain approximately 300,000 square feet and are located in Washington’s West End between Georgetown and the Central Business District. Vornado received sales proceeds of approximately $103,600,000 from BNA and recognized a net gain of $19,893,000. All of the proceeds from the sale were reinvested in a tax-free “like-kind” exchange in accordance with Section 1031 of the Internal Revenue Code (“Section 1031”). Vornado paid BNA $111,000,000 for the three buildings acquired. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

Arlington Plaza

On October 17, 2007, we sold Arlington Plaza, a 188,000 square foot office building located in Arlington, Virginia for $71,500,000, resulting in a gain of $33,900,000 which will be recognized in the fourth quarter of 2007.

5. Derivative Instruments and Related Marketable Securities

Investment in McDonald’s Corporation (“McDonalds”) (NYSE: MCD)

As of September 30, 2007, we owned 858,000 common shares of McDonalds. These shares are recorded as marketable equity securities on our consolidated balance sheets and are classified as “available for sale.” Appreciation or depreciation in the fair market value of these shares is recorded as an increase or decrease in “accumulated other comprehensive income” in the shareholders’ equity section of our consolidated balance sheets and not recognized in income. At September 30, 2007, based on McDonalds’ September 28, 2007 closing stock price of $54.47 per share, $21,388,000 of appreciation in the value of these shares was included in “accumulated other comprehensive income” on our consolidated balance sheet. During October 2007, we sold all of the McDonalds common shares at a weighted average price of $56.45 per share, resulting in a net gain of $23,090,000 which will be recognized in the fourth quarter of 2007.

In addition to the above, at July 1, 2007, we owned 13,695,500 McDonalds common shares (“option shares”) through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on McDonalds’ common shares. The option shares had a weighted-average strike price of $32.70 per share, or an aggregate of $447,822,000, expired on various dates between July 30, 2007 and September 10, 2007 and provided for net cash settlement. During the three months ended September 30, 2007, we settled 10,118,800 option shares and received $234,242,000 in cash. At September 30, 2007, there were 3,576,700 option shares remaining in the derivative position at a price of $54.47 per share. During the three months ended September 30, 2007, we recognized a net gain of $28,190,000 as a result of the above transactions. The aggregate net gain recognized for the nine months ended September 30, 2007 was $102,803,000. During the three and nine months ended September 30, 2006, we recognized net gains of $68,796,000 and $60,581,000, respectively.

In October 2007, we settled all of the remaining option shares at a weighted average price of $56.24 per share, resulting in a net gain of $6,018,000 which will be recognized in the fourth quarter of 2007.

The aggregate net gain realized from inception of our investments in McDonalds in 2005 through final settlement in October 2007 was $289,414,000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of September 30, 2007, we own 32.8% of Toys. Below is a summary of Toys’ latest available financial information.

(Amounts in thousands)
Balance Sheet:	As of August 4, 2007		As of July 29, 2006
Total Assets	$	11,255,700	$	12,515,000
Total Liabilities	$	10,212,800	$	11,390,000
Total Equity	$	1,042,900	$	1,125,000

	For the Three Months Ended						For the Nine Months Ended
Income Statement:	August 4, 2007			July 29, 2006			August 4, 2007		July 29, 2006
Total Revenues	$	2,605,000		$	2,413,000		$	10,865,000	$	9,688,000
Net (Loss) Income	$	(70,700	)	$	(127,000	)	$	40,400	$	(11,000	)

The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. Because Toys’ fiscal year ends on the Saturday nearest January 31, we record our 32.8% share of Toys’ net income or loss on a one-quarter lag basis.

Alexander’s (NYSE: ALX)

As of September 30, 2007, we own 32.8% 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, 2007, Alexander’s owed us $39,368,000 for fees under these agreements.

As of September 30, 2007, the market value of our investment in Alexander’s was $637,643,000, based on Alexander’s September 28, 2007 closing share price of $385.50.

The Lexington Master Limited Partnership (“Lexington MLP”)

On December 31, 2006, Newkirk Realty Trust (NYSE: NKT) was acquired in a merger by Lexington Corporate Properties Trust (“Lexington”) (NYSE: LXP), a real estate investment trust. We owned 10,186,991 limited partnership units (representing a 15.8% investment ownership interest) of Newkirk MLP, which was also acquired by Lexington as a subsidiary, and was renamed Lexington MLP. The units in Newkirk MLP, which we accounted for on the equity method, were converted on a 0.80 for 1 basis into limited partnership units of Lexington MLP, which we also account for on the equity method. The Lexington MLP units are exchangeable on a one-for-one basis into common shares of Lexington.

As of September 30, 2007, we own 8,149,593 limited partnership units of Lexington MLP, or a 7.3% ownership interest. We record our pro rata share of Lexington MLP’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. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of Lexington MLP’s net income for its three months ended June 30, 2007.

As of September 30, 2007, the market value of our investment in Lexington MLP based on Lexington’s September 28, 2007 closing share price of $20.01, was $163,073,000, or $17,238,000 below the carrying amount on our consolidated balance sheet. We have concluded that as of September 30, 2007, the decline in the value of our investment is not “other-than-temporary.”

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(UNAUDITED)

6. Investments in Partially Owned Entities - continued

GMH Communities L.P. (“GMH”)

As of September 30, 2007, we own 7,337,857 limited partnership units (which are exchangeable on a one-for-one basis into common shares of GMH Communities Trust (“GCT”) (NYSE: GCT), a real estate investment trust that conducts its business through GMH and of which it is the sole general partner) and 2,517,247 common shares of GCT, or 13.5% of the limited partnership interest of GMH. We account for our investment in GMH on the equity method and record our pro rata share of GMH’s net income or loss on a one-quarter lag basis as we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that GCT files its financial statements. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of GMH’s net income for its three months ended June 30, 2007.

As of September 30, 2007, the market value of our investment in GMH and GCT based on GCT’s September 28, 2007 closing share price of $7.75, was $76,377,000, or $27,473,000 below the carrying amount on our consolidated balance sheet. We have concluded that as of September 30, 2007, the decline in the value of our investment is not “other-than-temporary.”

Downtown Crossing Joint Venture

On January 26, 2007, a joint venture in which we have a 50% interest acquired the Filene’s property located in the Downtown Crossing district of Boston, Massachusetts for approximately $100,000,000 in cash, of which our share was $50,000,000. The venture plans to redevelop the property to include over 1,200,000 square feet, consisting of office, retail, condominium apartments and a hotel. The project is subject to governmental approvals. Our investment in the joint venture is accounted for under the equity method.

14

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6. 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: (Amounts in thousands)	As of September 30, 2007		As of December 31, 2006
Toys	$	331,129	$	317,145
H Street non-consolidated subsidiaries (see page 11)	$	—	$	189,516
Lexington MLP, formerly Newkirk MLP		180,311		184,961
Partially Owned Office Buildings (1)		162,106		150,954
Alexander’s		108,976		82,114
GMH		103,850		103,302
India Real Estate Ventures		99,361		93,716
Beverly Connection Joint Venture		90,305		82,101
Other Equity Method Investments		423,030		249,005
	$	1,167,939	$	1,135,669

Our Share of Net Income (Loss): (Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Toys:	2007			2006			2007			2006
32.8% in 2007 and 32.9% in 2006 share of equity in net (loss) income	$	(21,997	)	$	(41,720	)	$	13,493		$	(3,614	)
Interest and other income		1,708			1,021			4,850			7,791
	$	(20,289	)	$	(40,699	)	$	18,343		$	4,177
Alexander’s:
32.8% in 2007 and 33.0% in 2006 share of:
Equity in net income before net gain on sale of condominiums and stock appreciation rights compensation expense	$	5,508		$	4,580		$	16,277		$	13,176
Stock appreciation rights compensation income (expense)		3,075			(10,797	)		8,991			(18,356	)
Net gain on sale of condominiums		—			—			—			4,580
Equity in net income		8,583			(6,217	)		25,268			(600	)
Management and leasing fees		2,255			2,471			6,777			7,604
Development and guarantee fees		1,273			160			3,069			565
	$	12,111		$	(3,586	)	$	35,114		$	7,569
H Street Non-Consolidated Subsidiaries:
50% share of equity in net income	$	—		$	4,065	(3)	$	5,923	(2)	$	8,376	(3)
Beverly Connection:
50% share of equity in net loss		(1,287	)		(1,844	)		(3,676	)		(7,867	)
Interest and fee income		3,885			2,862			8,492			9,199
		2,598			1,018			4,816			1,332
GMH:
13.5% share of equity in net income		5,709			15			5,428			15
Lexington MLP, formerly Newkirk MLP:
7.3% in 2007 and 15.8% in 2006 share of equity in net income		1,726			13,604	(4)		1,484			22,177	(4)
Other		3,868			4,308			13,948			11,796
	$	13,901		$	23,010		$	31,599		$	43,696

_________________________

See notes on following page.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6. Investments in Partially Owned Entities - continued

Notes to preceding tabular information:

(1) Includes interests in 330 Madison Avenue (25%), 825 Seventh Avenue (50%), Fairfax Square (20%), Kaempfer equity interests in three office buildings (2.5% to 5.0%), Rosslyn Plaza (46%) and West 57^th Street properties (50%).

(2) Represents our 50% share of equity in net income from January 1, 2007 through April 29, 2007. On April 30, 2007, we acquired the remaining 50% interest of these entities and began to consolidate the accounts into our consolidated financial statements and no longer account for this investment under the equity method on a one-quarter lag basis. For further details see footnote 4. Acquisitions and Dispositions.

(3) Prior to the quarter ended June 30, 2006, two 50% owned entities that were contesting our acquisition of H Street impeded access to their financial information and accordingly, we were unable to record our pro rata share of their earnings. During the three and nine months ended September 30, 2006, we recognized equity in net income of $4,065 and $8,376, respectively, from these entities of which $1,083 and $3,890, respectively, was for the periods from July 20, 2005 (date of acquisition) to December 31, 2005.

(4) Includes $10,842 for our share of net gains on sale of real estate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6. Investments in Partially Owned Entities - continued

Below is a summary of the debt of partially owned entities as of September 30, 2007 and December 31, 2006, none of which is guaranteed by us.

	100% of Partially Owned Entities Debt
(Amounts in thousands)	September 30, 2007		December 31, 2006
Toys (32.8% interest):
$1.3 billion senior credit facility, due 2008, LIBOR plus 3.00% (8.67% at September 30, 2007)	$	1,300,000	$	1,300,000
$2.0 billion credit facility, due 2010, LIBOR plus 1.00% - 3.75%		65,000		836,000
$804 million secured term loan facility, due 2012, LIBOR plus 4.25% (9.67% at September 30, 2007)		801,000		800,000
Mortgage loan, due 2010, LIBOR plus 1.30% (7.06% at September 30, 2007)		800,000		800,000
Senior U.K. real estate facility, due 2013, with interest at 5.02%		724,000		676,000
7.625% bonds, due 2011 (Face value – $500,000)		480,000		477,000
7.875% senior notes, due 2013 (Face value – $400,000)		372,000		369,000
7.375% senior notes, due 2018 (Face value – $400,000)		330,000		328,000
$181 million unsecured loan facility, due 2012, LIBOR + 5.00% (10.80% at September 30, 2007)		180,000		—
Toys “R” Us - Japan short-term borrowings, due 2007, tiered rates (weighted average rate of 0.91% at September 30, 2007)		235,000		285,000
8.750% debentures, due 2021 (Face value – $22,000)		21,000		193,000
4.51% Spanish real estate facility, due 2012		183,000		171,000
Toys “R” Us - Japan bank loans, due 2007-2020, 1.20% - 2.80%		161,000		156,000
6.84% Junior U.K. real estate facility, due 2013		129,000		118,000
4.51% French real estate facility, due 2012		88,000		83,000
Note at an effective cost of 2.23% due in semi-annual installments through 2008		32,000		50,000
$200 million asset sale facility, due 2008, LIBOR plus 3.00% - 4.00% (9.14% at September 30, 2007)		35,000		44,000
Multi-currency revolving credit facility, due 2010, LIBOR plus 1.50% - 2.00%		38,000		190,000
Other		39,000		39,000
		6,013,000		6,915,000
Alexander’s (32.8% interest):
731 Lexington Avenue mortgage note payable collateralized by the office space, due in February 2014, with interest at 5.33% (prepayable without penalty)		386,123		393,233
731 Lexington Avenue mortgage note payable, collateralized by the retail space, due in July 2015, with interest at 4.93% (prepayable without penalty)		320,000		320,000
Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at 7.46% (prepayable with yield maintenance)		204,411		207,130
Rego Park mortgage note payable, due in June 2009, with interest at 7.25% (prepayable without penalty after March 2009)		79,507		80,135
Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable without penalty)		68,000		68,000
		1,058,041		1,068,498
Lexington MLP (formerly Newkirk MLP) (7.3% interest in 2007 and 15.8% interest in 2006): Portion of first mortgages collateralized by the partnership’s real estate, due from 2007 to 2024, with a weighted average interest rate of 5.91% (various prepayment terms)		3,251,206		2,101,104
GMH (13.5% interest): Mortgage notes payable, collateralized by 64 properties, due from 2008 to 2027, with a weighted average interest rate of 5.50% (various prepayment terms)		1,050,327		957,788
H Street non-consolidated entities (9.78% interest): Mortgage notes payable, collateralized by 3 properties, due from 2007 to 2029, with a weighted average interest rate of 7.29% (various prepayment terms)		236,573		351,584

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6. Investments in Partially Owned Entities - continued

(Amounts in thousands)	100% of Partially Owned Entities Debt
Partially owned office buildings:	September 30, 2007		December 31, 2006
Kaempfer Properties (2.5% to 5.0% interests in two partnerships) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2011 to 2031, with a weighted average interest rate of 6.84% at September 30, 2007 (various prepayment terms)	$	144,640		$	145,640
Fairfax Square (20% interest) mortgage note payable, due in August 2009, with interest at 7.50%		64,330			65,178
330 Madison Avenue (25% interest) mortgage note payable, due in April 2008, with interest at 6.52% (prepayable with yield maintenance)		60,000			60,000
825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014, with interest at 8.07% (prepayable with yield maintenance)		21,898			22,159
Rosslyn Plaza (46% interest) mortgage note payable, due in November 2007, with interest at 7.27% (prepayable without penalty)		56,858			57,396
West 57th Street (50% interest) mortgage note payable, due in October 2009, with interest at 4.94% (prepayable without penalty after July 2009)		29,000			29,000
Verde Realty Master Limited Partnership (8.51% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2007 to 2025, with a weighted average interest rate of 6.14% at September 30, 2007 (various prepayment terms)		304,044			311,133
Monmouth Mall (50% interest) mortgage note payable, due in September 2015, with interest at 5.44% (prepayable with yield maintenance)		165,000			165,000
Green Courte Real Estate Partners, LLC (8.3% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2007 to 2015, with a weighted average interest rate of 5.73% (various prepayment terms)		255,705			201,556
San Jose, California Ground-up Development (45% interest) construction loan, due in March 2009, with a one-year extension option and interest at LIBOR plus 1.75% (7.32% at September 30, 2007)		70,212			50,659
Beverly Connection (50% interest) mortgage and mezzanine loans payable, due in March 2008 and July 2008, with a weighted average interest rate of 10.09%, $70,000 of which is due to Vornado (prepayable with yield maintenance)		170,000			170,000
TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity’s real estate, due from 2007 to 2022, with a weighted average interest rate of 12.47% at September 30, 2007 (various prepayment terms)		127,042			45,601
478-486 Broadway (50% interest in 2006) mortgage note payable – 100% owned and consolidated as of September 25, 2007		—			20,000
Wells/Kinzie Garage (50% interest) mortgage note payable, due in June 2009, with interest at 7.03%		14,507			14,756
Orleans Hubbard Garage (50% interest) mortgage note payable, due in April 2009, with interest at 7.03%		9,099			9,257
Other		38,079			23,656

Based on our ownership interest in the partially-owned entities above, our pro rata share of the debt of these partially-owned entities was $3,104,451,000 and $3,323,007,000 as of September 30, 2007 and December 31, 2006, respectively.

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(UNAUDITED)

7. Notes and Mortgage Loans Receivable

Blackstone/Equity Office Properties Loan

On March 29, 2007, we acquired a 9.4% interest in a $772,600,000 mezzanine loan for $72,400,000 in cash. During April and May of 2007, we were repaid the $72,400,000 outstanding balance of the loan.

Fortress Loan

In 2006, we acquired bonds for $99,500,000 in cash, representing a 7% interest in two margin loans aggregating $1.430 billion. On March 30, 2007, we were repaid $35,348,000. On July 10, 2007 and October 2, 2007, we were repaid an additional $13,221,000 and $13,290,000, respectively. The remaining balance of $37,641,000, is due in December 2007.

MPH Mezzanine Loans

On June 5, 2007, we acquired a 42% interest in two mezzanine loans totaling $158,700,000, for $66,403,000 in cash. The loans bear interest at LIBOR plus 5.32% (10.44% at September 30, 2007) and mature in February 2008. The loans are subordinate to $2.9 billion of other debt and are secured by the equity interests in four New York City properties: Worldwide Plaza, 1540 Broadway office condominium, 527 Madison Avenue and Tower 56.

Manhattan House Loan

On October 12, 2007, we were repaid the $42,000,000 outstanding balance of the Manhattan House mezzanine loan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8. Identified Intangible Assets, Intangible Liabilities and Goodwill

The following summarizes our identified intangible assets (acquired above-market leases and in-place leases), intangible liabilities (acquired below market leases) and goodwill as of September 30, 2007 and December 31, 2006.

(Amounts in thousands)	September 30, 2007			December 31, 2006
Identified intangible assets (included in other assets):
Gross amount	$	780,082		$	393,524
Accumulated amortization		(148,521	)		(89,915	)
Net	$	631,561		$	303,609
Goodwill (included in other assets):
Gross amount	$	7,281		$	7,281
Identified intangible liabilities (included in deferred credit):
Gross amount	$	983,275		$	359,407
Accumulated amortization		(138,064	)		(62,571	)
Net	$	845,211		$	296,836

Amortization of acquired below market leases, net of acquired above market leases (a component of rental income) was $24,488,000 and $58,810,000 for the three and nine months ended September 30, 2007, respectively, and $7,087,000 and $15,164,000 for the three and nine months ended September 30, 2006, respectively. The estimated annual amortization of acquired below market leases, net of acquired above market leases for each of the five succeeding years is as follows:

(Amounts in thousands)
2008	$	89,187
2009		76,569
2010		69,421
2011		66,085
2012		50,279

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

(Amounts in thousands)
2008	$	63,336
2009		61,972
2010		59,871
2011		57,760
2012		52,537

We are a tenant under ground leases for certain properties acquired during 2006 and 2007. Amortization of these acquired below market leases net of acquired above market leases resulted in an increase to rent expense of $394,000 and $1,183,000 for the three and nine months ended September 30, 2007, respectively. The estimated annual amortization of these below market leases for each of the five succeeding years is as follows:

(Amounts in thousands)
2008	$	1,577
2009		1,577
2010		1,577
2011		1,577
2012		1,577

20

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt

(Amounts in thousands)		Interest Rate as of	Balance as of
Notes and Mortgages Payable:	Maturity	September 30, 2007	September 30, 2007		December 31, 2006
Fixed Interest:
New York Office:
1290 Avenue of the Americas	09/12	5.97%	$	456,511	$	—
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%		293,138		296,428
909 Third Avenue	04/15	5.64%		218,053		220,314
Eleven Penn Plaza	12/14	5.20%		211,159		213,651
866 UN Plaza (1)	N/A	N/A		—		45,467
Washington DC Office:
Skyline Place (2)	02/17	5.74%		678,000		155,358
Warner Building	05/16	6.26%		292,700		292,700
Crystal Gateway 1-4 and Crystal Square 5	10/10-08/13	6.75%-7.09%		204,867		207,389
Crystal Park 1-4 (3)	09/08-08/13	6.66%-7.08%		151,250		201,012
Crystal Square 2, 3 and 4	10/10-11/14	6.82%-7.08%		134,390		136,317
Bowen Building	06/16	6.14%		115,022		115,022
H Street (4)	06/29	4.88%		110,003		—
Reston Executive I, II and III	01/13	5.57%		93,000		93,000
1101 17th , 1140 Connecticut, 1730 M and 1150 17th	08/10	6.74%		90,043		91,232
Courthouse Plaza 1 and 2	01/08	7.05%		73,305		74,413
Crystal Gateway N. and Arlington Plaza (5)	11/07	6.77%		51,689		52,605
1750 Pennsylvania Avenue	06/12	7.26%		47,360		47,803
Crystal Malls 1, 3 and 4	12/11	6.91%		37,395		42,675
Retail:
Cross collateralized mortgages payable on 42 shopping centers	03/10	7.93%		457,765		463,135
Springfield Mall (including present value of purchase option of $70,767)	04/13	5.45%		259,579		262,391
Green Acres Mall	02/08	6.75%		138,122		140,391
Montehiedra Town Center	06/16	6.04%		120,000		120,000
Broadway Mall	06/13	5.30%		97,587		99,154
828-850 Madison Avenue Condominium	06/18	5.29%		80,000		80,000
Las Catalinas Mall	11/13	6.97%		62,457		63,403
Other retail properties	05/09-10/18	4.00%-7.40%		86,812		50,450
Merchandise Mart:
Merchandise Mart	12/16	5.57%		550,000		550,000
High Point Complex	08/16	6.34%		221,293		220,000
Boston Design Center	09/15	5.02%		72,000		72,000
Washington Design Center	11/11	6.95%		45,848		46,328
Temperature Controlled Logistics:
Cross collateralized mortgages payable on 50 properties	02/11-12/16	5.48%		1,055,746		1,055,712
Other:
555 California Street	05/10-08/11	5.97%		719,312		—
Industrial Warehouses (6)	10/11	6.95%		25,751		47,179
Total Fixed Interest Notes and Mortgages Payable		5.94%		8,351,711		6,657,083

_______________________

See notes on page 23.

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(UNAUDITED)

9. Debt - continued

(Amounts in thousands)			Interest Rate as of	Balance as of
Notes and Mortgages Payable:	Maturity	Spread over LIBOR	September 30, 2007	September 30, 2007		December 31, 2006
Variable Interest:
New York Office:
100 West 33rd Street	02/09	L+55	6.30%	$	232,000	$	—
866 UN Plaza (1)	05/09	L+40	5.78%		44,978		—
Washington, DC Office:
Commerce Executive III, IV and V	07/08	L+55	6.22%		50,223		50,523
1999 K Street (7)	N/A	N/A	N/A		—		19,422
Other:
220 Central Park South	11/08	L+235-L+245	7.87%		122,990		122,990
India Property Fund $82.5 million secured revolving credit facility	03/08	L+80	6.16%		82,500		—
Other	07/08-04/10	Various	7.55%		49,131		36,866
Total Variable Interest Notes and Mortgages Payable			6.67%		581,822		229,801
Total Notes and Mortgages Payable			5.99%	$	8,933,533	$	6,886,884
Convertible Senior Debentures:
Due 2027 (8)	04/12 (10)		2.85%	$	1,374,878	$	—
Due 2026	11/11 (10)		3.63%		983,121		980,083
Total Convertible Senior Debentures			3.17%	$	2,357,999	$	980,083
Senior Unsecured Notes:
Senior unsecured notes due 2009	08/09		4.50%	$	249,270	$	248,984
Senior unsecured notes due 2010	12/10		4.75%		199,388		199,246
Senior unsecured notes due 2011	02/11		5.60%		249,844		249,808
Senior unsecured notes due 2007 (9)	N/A	N/A	N/A		—		498,562
Total senior unsecured notes			4.96%	$	698,502	$	1,196,600
Exchangeable Senior Debentures due 2025	04/12 (10)		3.88%	$	492,450	$	491,231
Unsecured Revolving Credit Facilities:
$1.595 billion unsecured revolving credit facility (11)	09/10	L+55	N/A	$	—	$	—
$1.000 billion unsecured revolving credit facility ($47,939 reserved for outstanding letters of credit) (12)	06/10	L+51	6.07%		94,000		—
Total Unsecured Revolving Credit Facilities			6.07%	$	94,000	$	—
AmeriCold $30 million secured revolving credit facility ($19,156 reserved for outstanding letters of credit)	10/08	L+175	N/A	$	—	$	—

_______________________

See notes on following page.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt - continued

Notes to preceding tabular information:

($ in thousands, except per share amounts)

(1) On May 14, 2007, we completed a $44,978 financing of our 866 UN Plaza property. This interest only loan bears interest at LIBOR plus 0.40% and matures in May 2009. The net proceeds were used to repay the existing loan and closing costs.

(2) On January 26, 2007, we completed a $678,000 financing of our Skyline Complex in Fairfax Virginia, consisting of eight office buildings containing 2,560,000 square feet. The loan bears interest only at 5.74% and matures in February 2017. We retained net proceeds of approximately $515,000 after repaying existing loans and closing costs, including $5,771 for prepayment penalties and defeasance costs which is included in “interest and debt expense” in the nine months ended September 30, 2007.

(3) On March 30, 2007, we repaid the $47,011 balance of the Crystal Park 2 mortgage loan.

(4) See Note 4. Acquisitions and Dispositions.

(5) On October 11, 2007, we repaid the $51,678 balance of the Crystal Gateway N. and Arlington Plaza mortgage loan.

(6) On July 3, 2007, we repaid $21,030 of the $46,837 outstanding balance of the mortgage loan which was secured by the Garfield, Edison and East Brunswick industrial warehouses. We incurred $1,701 for prepayment penalties and defeasance costs which is included in “interest and debt expense” in the quarter ended September 30, 2007.

(7) On March 1, 2007, we repaid the $19,394 balance of the 1999 K Street mortgage loan.

(8) On March 21, 2007, Vornado Realty Trust sold $1.4 billion aggregate principal amount of 2.85% convertible senior debentures due 2027, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $1.37 billion. The debentures are redeemable at our option beginning in 2012 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2012, 2017, and 2022 and in certain other limited circumstances. The debentures are convertible, under certain circumstances, for cash and Vornado common shares at an initial conversion rate of 6.1553 common shares per one-thousand dollars of principal amount of debentures. The initial conversion price is $162.46, which represents a premium of 30% over the March 21, 2007 closing price of $124.97 for our common shares. The principal amount of debentures will be settled for cash and the amount in excess of the principal defined as the conversion value will be settled in cash or, at our election, Vornado common shares.

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the interest method) over the period from the date of issuance to the date of earliest redemption of April 1, 2012. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate. The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership guaranteed the payment of the debentures.

(9)

On May 11, 2007, we redeemed our $500,000 5.625% senior unsecured notes at the face amount plus accrued interest.

(10) Represents the earliest date the holders can require us to repurchase the debentures.

23

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. Debt - continued

Notes to preceding tabular information - continued:

($ in thousands, except per share amounts)

(11)	On September 28, 2007, the Operating Partnership entered into a new $1.510 billion unsecured revolving credit facility, which was increased by $85,000 on October 12, 2007 and can be increased up to $2.0 billion during the initial term. The new facility has a three-year term with two one-year extension options, bears interest at LIBOR plus 55 basis points (5.67% at September 30, 2007), based on our current credit ratings and requires the payment of an annual facility fee of 15 basis points. Together with the existing $1.0 billion credit facility, we have an aggregate of $2.595 billion of unsecured revolving credit. Vornado is the guarantor of the Operating Partnership’s obligations under both revolving credit agreements.
	The existing $1.0 billion credit facility’s financial covenants have been modified to conform to the financial covenants under the new agreement. Significant modifications include (i) changing the definition of Capitalization Value to exclude corporate unallocated general and administrative expenses and to reduce the capitalization rate to 6.5% from 7.5%, and (ii) changing the definition of Total Outstanding Indebtedness to exclude indebtedness of unconsolidated joint ventures. Under the new agreement, “Equity Value” may not be less than Three Billion Dollars; “Total Outstanding Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value;” the ratio of “Combined EBITDA” to “Fixed Charges,” each measured as of the most recently ended calendar quarter, may not be less than 1.40 to 1.00; the ratio of “Unencumbered Combined EBITDA” to “Unsecured Interest Expense,” each measured as of the most recently ended calendar quarter, may not be less than 1.50 to 1.00; at any time, “Unsecured Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value of Unencumbered Assets;” and the ratio of “Secured Indebtedness” to “Capitalization Value,” each measured as of the most recently ended calendar quarter, may not exceed fifty percent (50%). The new agreement also contains standard representations and warranties and other covenants. The terms in quotations in this paragraph are all defined in the new agreement, which was filed as an exhibit to our Current Report on Form 8-K dated September 28, 2007, filed on October 4, 2007.
(12)	Requires the payment of an annual facility fee of 15 basis points.

10. 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,
	2007		2006		2007		2006
Tenant cleaning fees	$	13,028	$	8,818	$	33,398	$	24,471
Management and leasing fees		2,891		2,651		12,894		7,833
Lease termination fees		1,575		7,522		6,310		17,911
Other income		10,531		9,008		29,318		21,018
	$	28,025	$	27,999	$	81,920	$	71,233

Fee and other income above include management fee income from Interstate Properties, a related party, of $183,000 and $223,000 in the three months ended September 30, 2007 and 2006, respectively and $593,000 and $605,000 in the nine months ended September 30, 2007 and 2006, respectively. The above table excludes fee income from partially owned entities, which is included in income from partially owned entities (see Note 6 – Investments in Partially-Owned Entities).

24

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

11. Discontinued Operations

During the three months ended September 30, 2007, we classified our Crystal Mall Two and Arlington Plaza Washington D.C. office properties as discontinued operations. See Note 4. Acquisitions and Dispositions for details. The following table sets forth the assets and liabilities related to discontinued operations at September 30, 2007 and December 31, 2006. Assets related to discontinued operations consist primarily of the net book value of real estate. Liabilities related to discontinued operations consist primarily of below market lease intangibles and deferred tax liabilities established at acquisition.

(Amounts in thousands)	Assets related to Discontinued Operations as of				Liabilities related to Discontinued Operations as of
	September 30, 2007		December 31, 2006		September 30, 2007		December 31, 2006
H Street – land subject to ground leases	$	108,497	$	23,696	$	—	$	10,973
Arlington Plaza (sold on October 17, 2007)		37,030		35,459		—		—
Crystal Mall Two (sold on August 9, 2007)		—		55,580		—		—
Vineland, New Jersey (sold on July 16, 2007)		—		908		—		—
Total	$	145,527	$	115,643	$	—	$	10,973

The following table sets forth the combined results of operations related to discontinued operations for the three and nine months ended September 30, 2007 and 2006.

(Amounts in thousands)	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2007			2006		2007			2006
Revenues	$	334		$	2,608	$	1,746		$	12,820
Expenses		3,424			2,031		4,899			8,724
Net (loss) income		(3,090	)		577		(3,153	)		4,096
Net gain on sale of Crystal Mall Two		19,893			—		19,893			—
Net gain on sale of H Street land		4,803			—		4,803			—
Net gain on sale of Vineland, NJ		1,708			—		1,708			—
Net gain on sale of 1919 South Eads Street		—			—		—			17,609
Net gain on sale of 424 Sixth Avenue		—			—		—			9,218
Net gain on sale of 33 North Dearborn Street		—			—		—			4,835
Net gain on disposition of other real estate		1,341			—		1,341			2,107
Income from discontinued operations, net of minority interest	$	24,655		$	577	$	24,592		$	37,865

25

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

12. Income Per Share

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

(Amounts in thousands, except per share amounts)	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2007			2006			2007			2006
Numerator:
Income from continuing operations, net of minority interest in the Operating Partnership	$	106,186		$	127,406		$	439,100		$	402,499
Income from discontinued operations, net of minority interest		24,655			577			24,592			37,865
Net income		130,841			127,983			463,692			440,364
Preferred share dividends		(14,295	)		(14,351	)		(42,886	)		(43,162	)
Numerator for basic income per share – net income applicable to common shares		116,546			113,632			420,806			397,202
Impact of assumed conversions:
Convertible preferred share dividends		68			139			588			508
Numerator for diluted income per share – net income applicable to common shares	$	116,614		$	113,771		$	421,394		$	397,710
Denominator:
Denominator for basic income per share – weighted average shares		151,990			141,684			151,739			141,413
Effect of dilutive securities (1):
Employee stock options and restricted share awards		6,407			8,174			6,742			7,935
Convertible preferred shares		116			238			264			289
Denominator for diluted income per share – adjusted weighted average shares and assumed conversions		158,513			150,096			158,745			149,637
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net of minority interest	$	0.61		$	0.80		$	2.61		$	2.54
Income from discontinued operations, net of minority interest		0.16			—			0.16			0.27
Net income per common share	$	0.77		$	0.80		$	2.77		$	2.81
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net of minority interest	$	0.58		$	0.76		$	2.50		$	2.41
Income from discontinued operations, net of minority interest		0.16			—			0.15			0.25
Net income per common share	$	0.74		$	0.76		$	2.65		$	2.66

__________________

(1) The effect of dilutive securities above excludes anti-dilutive weighted average common share equivalents. In the three and nine months ended September 30, 2007, there were 22,145 and 22,014 anti-dilutive weighted average common share equivalents, respectively. In the three and nine months ended September 30, 2006, there were 21,904 and 21,934 anti-dilutive weighted average common share equivalents, respectively.

26

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

13. Comprehensive Income

(Amounts in thousands)	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2007			2006		2007			2006
Net income	$	130,841		$	127,983	$	463,692		$	440,364
Other comprehensive (loss) income		(5,337	)		19,533		(30,295	)		(18,727	)
Comprehensive income	$	125,504		$	147,516	$	433,397		$	421,637

Substantially all of other comprehensive (loss) income in the three and nine months ended September 30, 2007 and 2006 relates to the mark-to-market of marketable equity securities classified as available-for-sale.

14. Stock-based Compensation

Our 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 stock-based compensation in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure and as revised by SFAS No. 123R, Share-Based Payment (“SFAS No. 123R”). We adopted SFAS No. 123R, using the modified prospective application, on January 1, 2006. Stock based compensation expense for the three and nine months ended September 30, 2007 and 2006 consists of stock option awards, restricted common share and Operating Partnership unit awards and our 2006 Out-Performance Plan awards.

During the three months ended September 30, 2007 and 2006, we recognized $6,177,000 and $3,245,000 of stock-based compensation expense, respectively and in the nine months ended September 30, 2007 and 2006 we recognized $18,797,000 and $7,018,000 of stock-based compensation expense, respectively.

27

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

15. Commitments and Contingencies

At September 30, 2007, our $1.0 billion revolving credit facility had $47,939,000 reserved for outstanding letters of credit. Our revolving credit facilities contain financial covenants, which require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provides for higher interest rates in the event of a decline in our ratings below Baa3/BBB. At September 30, 2007, AmeriCold’s $30,000,000 revolving credit facility had $19,156,000 reserved for outstanding letters of credit. This facility requires AmeriCold to maintain, on a trailing four-quarter basis, a minimum of $30,000,000 of free cash flow, as defined. Our revolving credit facilities 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 such items as failure to pay interest or principal.

We have made acquisitions and investments in partially owned entities for which we are committed to fund additional capital aggregating $152,995,000. Of this amount, $95,000,000 relates to our equity commitment to the India Property Fund, LP, and $22,800,000 relates to capital expenditures to be funded over the next four years at the Springfield Mall, in which we have a 97.5% interest.

On November 10, 2005, we committed to fund the junior portion of up to $30,530,000 of a $173,000,000 construction loan to an entity developing a mixed-use building complex in Boston, Massachusetts, at the north end of the Boston Harbor. We earn current-pay interest at 30-day LIBOR plus 11%. The loan matures in November 2008, with a one-year extension option. As of September 30, 2007, we have funded $13,787,000 of this commitment.

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 under 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, or if the Terrorism Risk Insurance Extension Act of 2005 is not extended past 2007, it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

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 enter into agreements for the purchase and resale of U.S. government obligations for periods of up to one week. The obligations purchased under these agreements are held in safekeeping in our name by various money center banks. We have the right to demand additional collateral or return of these invested funds at any time the collateral value is less than 102% of the invested funds plus any accrued earnings thereon. We had $60,080,000 and $219,990,000 of cash invested in these agreements at September 30, 2007 and December 31, 2006, respectively.

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 cannot be quantified.

28

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

15. Commitments and Contingencies - continued

Insurance

We carry commercial liability and all-risk property insurance (fire, flood, rental loss, extended coverage, and “acts of terrorism” as defined in the Terrorism Risk Insurance Extension Act (“TRIA”) which expires in December 2007) with respect to our assets. We also carry earthquake insurance with respect to our California properties.

In June 2007, we formed Penn Plaza Insurance Company, LLC (“PPIC”), a wholly owned consolidated subsidiary of the Operating Partnership, to act as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for (i) “certified” acts of terrorism by TRIA, (ii) “non-certified” acts of terrorism, and (iii) nuclear, biological, chemical and radiological (“NBCR”) “certified acts of terrorism” under TRIA. Coverage under (i) and (ii) are fully reinsured by third party insurance companies with no exposure to PPIC. Prior to the formation of PPIC, we were uninsured for losses under NBCR coverage. Subsequently, we are uninsured for the first $100,000,000 of NBCR coverage under TRIA, for which PPIC would be responsible, and ultimately we would bear such loss.

Effective as of September 15, 2007, we increased our property insurance per occurrence limits to $1.5 billion from $1.4 billion, including “certified” acts of terrorism. Coverage for “non-certified” acts of terrorism is $500,000,000 per occurrence with a $500,000,000 annual aggregate limit. Earthquake insurance coverage is $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, with a $150,000,000 annual aggregate limit. The first $10,000,000 above the deductible is provided by PPIC on a reinsurance basis.

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.

29

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

15. Commitments and Contingencies - continued

Litigation

Stop & Shop

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey claiming we had no right to reallocate and therefore continue to collect $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty. 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. On April 16, 2007, the Court directed that discovery should be completed by December 2007, with a trial date to be determined thereafter. We intend to vigorously pursue our claims against Stop & Shop.

1290 Avenue of the Americas and 555 California Street

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and 555 California Street. 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 various of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump already received access to the books and records to which he was entitled, with the exception of certain documents which the general partners have requested from third parties but have not yet been received. Mr. Trump has sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  

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 would not be material to our consolidated financial statements.

There are various other legal actions against us in the ordinary course of business. 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 flow.

30

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

16. Retirement Plans

The following table sets forth the components of net periodic benefit costs:

(Amounts in thousands)	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2007			2006			2007			2006
Service cost	$	347		$	122		$	463		$	365
Interest cost		3,004			1,230			4,494			3,690
Expected return on plan assets		(4,183	)		(1,474	)		(6,077	)		(4,422	)
Amortization of net loss		79			125			207			306
Net periodic benefit cost	$	(753	)	$	3		$	(913	)	$	(61	)

Employer Contributions

We made contributions of $1,847,000 and $6,388,000 to the plans during the nine months ended September 30, 2007 and 2006, respectively. We anticipate additional contributions of $444,000 to the plans during the remainder of 2007.

17. Costs of Acquisition Not Consummated

In the first quarter of 2007, we wrote-off $8,807,000 of costs associated with the Equity Office Properties Trust acquisition not consummated.

18. Related Party Transactions

Transactions with Affiliates and Officers and Trustees of the Company

On March 13, 2007, Michael Fascitelli, our President and President of Alexander’s, exercised 350,000 of his Alexander’s stock appreciation rights (“SARS”), which were scheduled to expire on March 14, 2007 and received $144.18 for each SAR exercised, representing the difference between Alexander’s stock price of $388.01 (the average of the high and low market price) on the date of exercise and the exercise price of $243.83.

On March 26, 2007, Joseph Macnow, Executive Vice President – Finance and Administration and Chief Financial Officer, repaid to the Company his $2,000,000 outstanding loan which was scheduled to mature in June 2007.

Effective as of April 19, 2007, we entered into a new employment agreement with Mitchell Schear, the President of our Washington, DC Office Division. This agreement, which replaced his prior agreement, was approved by the Compensation Committee of our Board of Trustees and provides for a term of five years and is automatically renewable for one-year terms thereafter. The agreement also provides for a minimum salary of $1,000,000 per year and bonuses and other customary benefits. Pursuant to the terms of the agreement, on April 19, 2007, the Compensation Committee granted options to Mr. Schear to acquire 200,000 of our common shares at an exercise price of $119.94 per share. These options vest ratably over three years beginning in 2010 and accelerate on a change of control or if we terminate his employment without cause or by him for breach by us. The agreement also provides that if we terminate Mr. Schear’s employment without cause or by him for breach by us, he will receive a lump-sum payment equal to one time salary and bonus, up to a maximum of $2,000,000.

31

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information

Below is a summary of net income and a reconciliation of net income to EBITDA⁽¹⁾ by segment for the three months ended September 30, 2007 and 2006.

(Amounts in thousands)	For the Three Months Ended September 30, 2007
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	481,964		$	173,180		$	120,299		$	83,184		$	57,176		$	—		$	—		$	48,125
Straight-line rents:
Contractual rent increases		10,565			3,124			3,376			2,986			1,023			—			—			56
Amortization of free rent		5,797			1,562			3,353			44			91			—			—			747
Amortization of acquired below- market leases, net		24,488			15,216			1,055			6,272			10			—			—			1,935
Total rentals		522,814			193,082			128,083			92,486			58,300			—			—			50,863
Temperature Controlled Logistics		212,715			—			—			—			—			212,715			—			—
Tenant expense reimbursements		89,482			35,701			11,843			30,338			7,043			—			—			4,557
Fee and other income:
Tenant cleaning fees		13,028			15,672			—			—			—			—			—			(2,644	)
Management and leasing fees		2,891			1,494			2,178			310			8			—			—			(1,099	)
Lease termination fees		1,575			1,326			—			51			198			—			—			—
Other		10,531			4,058			4,079			515			2,026			—			—			(147	)
Total revenues		853,036			251,333			146,183			123,700			67,575			212,715			—			51,530
Operating expenses		431,339			106,616			50,501			43,656			35,240			171,214			—			24,112
Depreciation and amortization		140,377			41,346			30,804			19,634			12,715			20,495			—			15,383
General and administrative		58,366			5,330			6,193			6,739			7,497			10,474			—			22,133
Total expenses		630,082			153,292			87,498			70,029			55,452			202,183			—			61,628
Operating income (loss)		222,954			98,041			58,685			53,671			12,123			10,532			—			(10,098	)
Income applicable to Alexander’s		12,111			189			—			187			—			—			—			11,735
Loss applicable to Toys “R” Us		(20,289	)		—			—			—			—			—			(20,289	)		—
Income from partially owned entities		13,901			1,290			743			3,972			(50	)		340			—			7,606
Interest and other investment income		56,906			668			3,558			195			104			325			—			52,056
Interest and debt expense		(165,889	)		(36,186	)		(31,289	)		(19,423	)		(13,174	)		(16,167	)		—			(49,650	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		1,012			—			—			—			—			—			—			1,012
Minority interest of partially owned entities		3,587			(1,613	)		—			54			—			3,869			—			1,277
Income (loss) before income taxes		124,293			62,389			31,697			38,656			(997	)		(1,101	)		(20,289	)		13,938
Provision for income taxes		(3,048	)		—			(2,330	)		(3	)		(172	)		(242	)		—			(301	)
Income (loss) from continuing operations		121,245			62,389			29,367			38,653			(1,169	)		(1,343	)		(20,289	)		13,637
Income (loss) from discontinued operations, net		24,655			—			29,324			3,078			—			—			—			(2,747	)
Income (loss) before allocation to minority limited partners		145,900			62,389			53,691			41,731			(1,169	)		(1,343	)		(20,289	)		10,890
Minority limited partners’ interest in the Operating Partnership		(10,241	)		—			—			—			—			—			—			(10,241	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		—			—			—			—			—			—			(4,818	)
Net income (loss)		130,841			62,389			53,691			41,731			(1,169	)		(1,343	)		(20,289	)		(4,169	)
Interest and debt expense (1)		207,934			34,853			31,999			21,947			13,388			7,693			40,875			57,179
Depreciation and amortization (1)		171,106			39,543			32,869			20,617			12,865			9,780			34,495			20,937
Income tax (benefit) expense (1)		(13,094	)		952			2,334			3			172			115			(18,213	)		1,543
EBITDA	$	496,787		$	137,737		$	120,893		$	84,298		$	25,256		$	16,245		$	36,868		$	75,490

EBITDA includes net gains on sale of real estate of $36,725, of which $24,696 is included in the Washington, DC office segment, $3,049 is included in the Retail segment and $8,980 is included in the Other segment. In addition, Other segment EBITDA includes a $18,606 net gain on mark-to-market of derivative instruments and a $1,012 net gain on sale of marketable equity securities.

_______________________

See notes on page 36.

32

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information – continued

(Amounts in thousands)	For the Three Months Ended September 30, 2006
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	364,421		$	122,743		$	97,923		$	65,106		$	56,079		$	—		$	—		$	22,570
Straight-line rents:
Contractual rent increases		11,287			1,281			6,338			2,399			1,387			—			—			(118	)
Amortization of free rent		6,223			1,002			3,000			1,595			626			—			—			—
Amortization of acquired below- market leases, net		7,087			66			1,074			5,451			5			—			—			491
Total rentals		389,018			125,092			108,335			74,551			58,097			—			—			22,943
Temperature Controlled Logistics		190,280			—			—			—			—			190,280			—			—
Tenant expense reimbursements		68,634			29,192			8,880			24,521			5,376			—			—			665
Fee and other income:
Tenant cleaning fees		8,818			11,059			—			—			—			—			—			(2,241	)
Management and leasing fees		2,651			330			1,757			464			100			—			—			—
Lease termination fees		7,522			4,752			2,544			—			226			—			—			—
Other		9,008			3,699			3,519			339			1,449			—			—			2
Total revenues		675,931			174,124			125,035			99,875			65,248			190,280			—			21,369
Operating expenses		346,565			80,310			41,150			32,343			27,613			152,277			—			12,872
Depreciation and amortization		101,799			23,199			26,834			14,335			10,682			18,651			—			8,098
General and administrative		52,096			4,387			8,996			5,063			6,816			7,875			—			18,959
Total expenses		500,460			107,896			76,980			51,741			45,111			178,803			—			39,929
Operating income (loss)		175,471			66,228			48,055			48,134			20,137			11,477			—			(18,560	)
Loss applicable to Alexander’s		(3,586	)		187			—			177			—			—			—			(3,950	)
Loss applicable to Toys “R” Us		(40,699	)		—			—			—			—			—			(40,699	)		—
Income from partially owned entities		23,010			1,042			4,851			1,805			206			285			—			14,821
Interest and other investment income		98,092			110			378			174			83			793			—			96,554
Interest and debt expense		(115,280	)		(20,829	)		(26,101	)		(17,682	)		(12,955	)		(14,044	)		—			(23,669	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		8,032			—			—			—			—			—			—			8,032
Minority interest of partially owned entities		2,534			—			—			37			—			2,036			—			461
Income (loss) before income taxes		147,574			46,738			27,183			32,645			7,471			547			(40,699	)		73,689
Provision for income taxes		(382	)		—			57			—			(215	)		(224	)		—			—
Income (loss) from continuing operations		147,192			46,738			27,240			32,645			7,256			323			(40,699	)		73,689
Income (loss) from discontinued operations, net		577			—			621			(51	)		8			—			—			(1	)
Income (loss) before allocation to minority limited partners		147,769			46,738			27,861			32,594			7,264			323			(40,699	)		73,688
Minority limited partners’ interest in the Operating Partnership		(13,103	)		—			—			—			—			—			—			(13,103	)
Perpetual preferred unit distributions of the Operating Partnership		(6,683	)		—			—			—			—			—			—			(6,683	)
Net income (loss)		127,983			46,738			27,861			32,594			7,264			323			(40,699	)		53,902
Interest and debt expense (1)		168,864			21,566			27,774			20,254			13,175			6,682			43,348			36,065
Depreciation and amortization (1)		141,206			24,179			31,235			15,137			10,827			8,900			34,951			15,977
Income tax (benefit) expense (1)		(383	)		—			3,087			—			215			106			(4,756	)		965
EBITDA	$	437,670		$	92,483		$	89,957		$	67,985		$	31,481		$	16,011		$	32,844		$	106,909

Other Segment EBITDA includes a $70,687 net gain on mark-to-market of derivative instruments, a $10,842 net gain on sale of real estate, and a $8,032 net gain on sale of marketable equity securities.

________________________

See notes on page 36.

33

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information – continued

(Amounts in thousands)	For the Nine Months Ended September 30, 2007
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys		Other (2)
Property rentals	$	1,324,351		$	463,678		$	335,239		$	240,975		$	181,985		$	—		$	—	$	102,474
Straight-line rents:
Contractual rent increases		29,248			11,003			6,772			8,794			2,296			—			—		383
Amortization of free rent		29,244			14,747			11,962			555			1,021			—			—		959
Amortization of acquired below- market leases, net		58,810			32,895			3,178			19,119			130			—			—		3,488
Total rentals		1,441,653			522,323			357,151			269,443			185,432			—			—		107,304
Temperature Controlled Logistics		619,282			—			—			—			—			619,282			—		—
Tenant expense reimbursements		239,310			94,051			31,473			87,922			17,852			—			—		8,012
Fee and other income:
Tenant cleaning fees		33,398			40,820			—			—			—			—			—		(7,422	)
Management and leasing fees		12,894			3,323			10,711			1,234			11			—			—		(2,385	)
Lease termination fees		6,310			3,224			225			2,458			403			—			—		—
Other		29,318			12,081			10,799			1,170			6,029			—			—		(761	)
Total revenues		2,382,165			675,822			410,359			362,227			209,727			619,282			—		104,748
Operating expenses		1,193,857			288,155			133,038			125,861			101,565			492,510			—		52,728
Depreciation and amortization		380,876			107,895			84,607			59,026			35,782			60,330			—		33,236
General and administrative		170,790			14,778			20,540			20,070			21,982			32,691			—		60,729
Costs of acquisition not consummated		8,807			—			—			—			—			—			—		8,807
Total expenses		1,754,330			410,828			238,185			204,957			159,329			585,531			—		155,500
Operating income (loss)		627,835			264,994			172,174			157,270			50,398			33,751			—		(50,752	)
Income applicable to Alexander’s		35,114			567			—			560			—			—			—		33,987
Income applicable to Toys “R” Us		18,343			—			—			—			—			—			18,343		—
Income from partially owned entities		31,599			3,688			8,178			7,360			737			1,148			—		10,488
Interest and other investment income		231,890			1,810			4,609			387			292			2,116			—		222,676
Interest and debt expense		(469,659	)		(97,767	)		(96,331	)		(59,206	)		(39,069	)		(48,946	)		—		(128,340	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		17,699			—			—			—			—			—			—		17,699
Minority interest of partially owned entities		11,819			(2,182	)		—			112			—			10,405			—		3,484
Income (loss) before income taxes		504,640			171,110			88,630			106,483			12,358			(1,526	)		18,343		109,242
Provision for income taxes		(6,815	)		—			(3,914	)		(185	)		(743	)		(1,412	)		—		(561	)
Income (loss) from continuing operations		497,825			171,110			84,716			106,298			11,615			(2,938	)		18,343		108,681
Income (loss) from discontinued operations, net		24,592			—			24,332			3,000			—			—			—		(2,740	)
Income (loss) before allocation to minority limited partners		522,417			171,110			109,048			109,298			11,615			(2,938	)		18,343		105,941
Minority limited partners’ interest in the Operating Partnership		(44,270	)		—			—			—			—			—			—		(44,270	)
Perpetual preferred unit distributions of the Operating Partnership		(14,455	)		—			—			—			—			—			—		(14,455	)
Net income (loss)		463,692			171,110			109,048			109,298			11,615			(2,938	)		18,343		47,216
Interest and debt expense (1)		609,548			96,822			100,002			67,222			39,716			23,289			128,493		154,004
Depreciation and amortization (1)		500,247			106,885			93,959			61,815			36,212			28,788			123,194		49,394
Income tax expense (1)		34,419			2,052			7,738			185			743			672			20,250		2,779
EBITDA	$	1,607,906		$	376,869		$	310,747		$	238,520		$	88,286		$	49,811		$	290,280	$	253,393

EBITDA includes net gains on sale of real estate of $37,218, of which $24,696 is included in the Washington, DC office segment, $3,049 is included in the Retail segment and $9,473 is included in the Other segment. In addition, Other segment EBITDA includes a $100,060 net gain on mark-to-market of derivative instruments, a $17,699 net gain on sale of marketable equity securities, $8,807 of expense for costs of an acquisition not consummated and $1,677 of expense for our share of India Property Fund LP organization costs.

_______________________

See notes on page 36.

34

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

19. Segment Information – continued

(Amounts in thousands)	For the Nine Months Ended September 30, 2006
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	1,079,797		$	362,560		$	293,246		$	190,631		$	171,924		$	—		$	—		$	61,436
Straight-line rents:
Contractual rent increases		24,782			3,435			10,451			6,484			4,579			—			—			(167	)
Amortization of free rent		23,154			4,796			12,623			4,216			1,519			—			—			—
Amortization of acquired below- market leases, net		15,164			44			2,810			9,998			27			—			—			2,285
Total rentals		1,142,897			370,835			319,130			211,329			178,049			—			—			63,554
Temperature Controlled Logistics		573,177			—			—			—			—			573,177			—			—
Tenant expense reimbursements		191,181			77,544			23,136			73,131			15,245			—			—			2,125
Fee and other income:
Tenant cleaning fees		24,471			30,889			—			—			—			—			—			(6,418	)
Management and leasing fees		7,833			818			5,687			1,184			144			—			—			—
Lease termination fees		17,911			13,911			2,610			371			1,019			—			—			—
Other		21,018			8,545			6,552			1,290			4,628			—			—			3
Total revenues		1,978,488			502,542			357,115			287,305			199,085			573,177			—			59,264
Operating expenses		996,350			226,443			110,674			92,507			78,532			452,505			—			35,689
Depreciation and amortization		289,831			68,877			80,695			37,149			32,881			53,641			—			16,588
General and administrative		148,530			12,400			24,746			15,280			19,841			26,883			—			49,380
Total expenses		1,434,711			307,720			216,115			144,936			131,254			533,029			—			101,657
Operating income (loss)		543,777			194,822			141,000			142,369			67,831			40,148			—			(42,393	)
Income applicable to Alexander’s		7,569			586			—			535			—			—			—			6,448
Income applicable to Toys “R” Us		4,177			—			—			—			—			—			4,177			—
Income from partially owned entities		43,696			2,852			10,575			4,035			985			1,049			—			24,200
Interest and other investment income		137,186			478			1,067			647			209			2,789			—			131,996
Interest and debt expense		(339,118	)		(61,951	)		(74,260	)		(61,474	)		(20,024	)		(46,758	)		—			(74,651	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		65,527			—			—			—			—			—			—			65,527
Minority interest of partially owned entities		5,378			—			—			66			4			4,415			—			893
Income before income taxes		468,192			136,787			78,382			86,178			49,005			1,643			4,177			112,020
Provision for income taxes		(2,362	)		—			(778)			—			(334	)		(1,250	)		—			—
Income from continuing operations		465,830			136,787			77,604			86,178			48,671			393			4,177			112,020
Income from discontinued operations, net		37,865			—			20,768			9,247			5,744			2,107			—			(1	)
Income before allocation to minority limited partners		503,695			136,787			98,372			95,425			54,415			2,500			4,177			112,019
Minority limited partners’ interest in the Operating Partnership		(46,301	)		—			—			—			—			—			—			(46,301	)
Perpetual preferred unit distributions of the Operating Partnership		(17,030	)		—			—			—			—			—			—			(17,030	)
Net income		440,364			136,787			98,372			95,425			54,415			2,500			4,177			48,688
Interest and debt expense (1)		511,103			64,000			82,173			69,710			20,686			22,247			148,797			103,490
Depreciation and amortization (1)		400,014			71,393			92,620			41,703			33,308			25,601			101,637			33,752
Income tax (benefit) expense (1)		(3,287	)		—			6,940			—			334			595			(12,312	)		1,156
EBITDA	$	1,348,194		$	272,180		$	280,105		$	206,838		$	108,743		$	50,943		$	242,299		$	187,086

EBITDA includes net gains on sale of real estate of $44,611, of which $17,609 is included in the Washington, DC segment $9,218 is included in the Retail segment, $4,835 is included in the Merchandise Mart segment, $2,107 is included in the Temperature Controlled Logistics segment and $10,842 is included in the Other segment. In addition, Other segment EBITDA includes a $65,527 net gain on sale of marketable equity securities and a $65,589 net gain on mark-to-market of derivative instruments.

________________________

See notes on the following page.

35

VORNADO REALTY TRUST

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 a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Other EBITDA is comprised of:

(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
Alexander’s	$	19,012		$	3,732		$	56,511		$	29,238
Hotel Pennsylvania		9,973			6,448			24,754			17,007
555 California Street (70% interest acquired on May 24, 2007)		12,164			—			18,513			—
Lexington MLP		9,022			18,067			15,006			34,804
GMH		9,527			8,427			17,872			8,427
Industrial warehouses		1,399			1,146			3,595			4,167
Other investments		3,419			4,022			9,171			10,425
		64,516			41,842			145,422			104,068
Investment income and other		46,551			102,648			229,385			192,145
Corporate general and administrative expenses		(20,518	)		(17,795	)		(53,882	)		(45,796	)
Minority limited partners’ interest in the Operating Partnership		(10,241	)		(13,103	)		(44,270	)		(46,301	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		(6,683	)		(14,455	)		(17,030	)
Costs of acquisition not consummated		—			—			(8,807	)		—
	$	75,490		$	106,909		$	253,393		$	187,086

36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Trustees

Vornado Realty Trust

New York, New York

We have reviewed the accompanying consolidated balance sheet of Vornado Realty Trust (“the Company”) as of September 30, 2007, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2007 and 2006, and of cash flows for the nine-month periods ended September 30, 2007 and 2006. 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 Trust as of December 31, 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended. Prior to reclassification for the discontinued operations described in Note 11 to the accompanying financial statements (not presented herein); and in our report dated February 27, 2007, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 11 that were applied to reclassify the December 31, 2006 consolidated balance sheet of Vornado Realty Trust (not presented herein) for discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted consolidated balance sheet as of December 31, 2006.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

October 30, 2007

37

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 involve risks, uncertainties and assumptions. 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 similar expressions in this quarterly report on Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those set forth in our Annual Report on Form 10-K for the year ended December 31, 2006 under “Forward Looking Statements” and “Item 1. Business – Certain Factors That May Adversely Affect Our Business and Operations.” 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. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our consolidated financial statements for the three and nine months ended September 30, 2007. 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, 2006 in Management’s Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2007.

38

Overview

Business Objective and Operating Strategy

Our business objective is to maximize shareholder value. We measure our success in meeting this objective by our total return to shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) for the following periods ending September 30, 2007:

	Total Return (1)
	Vornado	RMS
One-year	3.8%	4.7%
Three-years	95.9%	68.4%
Five-years	251.0%	163.0%
Ten-years	333.8%	211.8%

_________________________

(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;

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

• Providing specialty financing to real estate related companies.

Competition

We compete with a large number of real estate property owners and developers. Principal factors of competition are rent charged, attractiveness of location and quality and breadth of services provided. Our success depends upon, among other factors, trends of the national and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends. Economic growth has been fostered, in part, by low interest rates, Federal tax cuts, and increases in government spending. To the extent economic growth stalls, we may experience lower occupancy rates, which may lead to lower initial rental rates, higher leasing costs and a corresponding decrease in our net income, funds from operations and cash flow. Alternatively, if economic growth is sustained, we may experience higher occupancy rates leading to higher initial rents and higher interest rates causing an increase in our weighted average cost of capital and a corresponding effect on our net income, funds from operations and cash flow. Our net income and funds from operations will also be affected by the seasonality of Toys’ business and competition from discount and mass merchandisers.

39

Overview (continued)

Quarter Ended September 30, 2007 Financial Results Summary

Net income applicable to common shares for the quarter ended September 30, 2007 was $116,546,000, or $0.74 per diluted share, versus $113,632,000, or $0.76 per diluted share, for the quarter ended September 30, 2006. Net income for the quarters ended September 30, 2007 and 2006 includes certain items that affect comparability which are listed in the table on page 42. Net income for the quarters ended September 30, 2007 and 2006 also includes our share of net gains on sales of real estate of $31,922,000 and $10,842,000, respectively. The aggregate of these items, net of minority interest, increased net income applicable to common shares for the quarter ended September 30, 2007 by $50,524,000, or $0.31 per diluted share and increased net income for the quarter ended September 30, 2006 by $52,276,000, or $0.34 per diluted share.

Funds from operations applicable to common shares plus assumed conversions (“FFO”) for the quarter ended September 30, 2007 was $221,199,000, or $1.35 per diluted share, compared to $204,535,000, or $1.31 per diluted share, for the prior year’s quarter. FFO for the quarters ended September 30, 2007 and 2006 includes certain items that affect comparability which are listed in the table on page 42. The aggregate of these items, net of minority interest, increased FFO for the quarter ended September 30, 2007 by $21,533,000, or $0.13 per diluted share and increased FFO for the quarter ended September 30, 2006 by $42,162,000, or $0.27 per diluted share.

Net income per diluted share and FFO per diluted share for the quarter ended September 30, 2007 were negatively impacted by an 8.4 million increase in weighted average common shares outstanding over the prior year’s quarter.

We did not recognize income on certain assets with an aggregate carrying amount of approximately $1.1 billion during the quarter ended September 30, 2007, because they were out of service for redevelopment. Assets under development include all or portions of the Bergen Town Center, 2101 L Street, Crystal Mall Two, Crystal Plaza Two, 1999 K Street, 220 Central Park South, 40 East 66^th Street, and investments in joint ventures including our Beverly Connection and Wasserman ventures.

The percentage increase (decrease) in the same-store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the quarter ended September 30, 2007 over the quarter ended September 30, 2006 and the trailing quarter ended December 31, 2006 are summarized below.

Quarter Ended:	Office				Temperature
	New York	Washington, DC	Retail	Merchandise Mart	Controlled Logistics
September 30, 2007 vs. September 30, 2006	9.4%	4.0%	4.2%	0.0%	(1.9)%
September 30, 2007 vs. June 30, 2007	0.2%	(2.3)%	1.0%	0.2%	(4.0)%

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

40

Overview (continued)

Nine Months Ended September 30, 2007 Financial Results Summary

Net income applicable to common shares for the nine months ended September 30, 2007 was $420,806,000, or $2.65 per diluted share, versus $397,202,000, or $2.66 per diluted share, for the nine months ended September 30, 2006. Net income for the nine months ended September 30, 2007 and 2006 includes certain items that affect comparability which are listed in the table on the following page. Net income for the nine months ended September 30, 2007 and 2006 also includes our share of net gains on sale of real estate of $32,415,000 and $44,611,000, respectively. The aggregate of these items, net of minority interest, increased net income applicable to common shares for the nine months ended September 30, 2007 by $111,857,000, or $0.68 per diluted share and increased net income for the nine months ended September 30, 2006 by $115,322,000, or $0.74 per diluted share.

Funds from operations applicable to common shares plus assumed conversions (“FFO”) for the nine months ended September 30, 2007 was $773,457,000, or $4.71 per diluted share, compared to $646,881,000, or $4.17 per diluted share, for the prior year’s nine months. FFO for the nine months ended September 30, 2007 and 2006 include certain items that affect comparability which are listed in the table on the following page. The aggregate of these items, net of minority interest, increased FFO for the nine months ended September 30, 2007 by $82,409,000, or $0.50 per diluted share and increased FFO for the nine months ended September 30, 2006 by $75,988,000, or $0.49 per diluted share.

The percentage increase (decrease) in the same-store EBITDA of our operating segments for the nine months ended September 30, 2007 over the nine months ended September 30, 2006 is summarized below.

Nine Months Ended:	Office				Temperature
	New York	Washington, DC	Retail	Merchandise Mart	Controlled Logistics
September 30, 2007 vs. September 30, 2006	9.4%	5.1%	2.6%(1)	(2.3)%	(4.1)%

_____________________

(1) The same store increase would be 4.4% exclusive of the effect of tenants vacating 47,550 square feet of New York City retail space in December 2006, at an average rent of $61.00 per square foot. As of September 30, 2007, 10,600 of this square feet has been re-leased at an initial rent of $204.00 per square foot.

41

Overview (continued)

(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
Items that affect comparability (income)/expense:
Derivatives:
McDonalds common shares	$	(28,190	)	$	(68,796	)	$	(102,803	)	$	(60,581	)
Sears Holdings common shares		—			—			—			(18,611	)
GMH warrants		—			—			—			16,370
Other		9,584			(1,891	)		2,743			(2,767	)
Alexander’s:
Stock appreciation rights		(3,075	)		10,797			(8,991	)		18,356
Net gain on sale of 731 Lexington Avenue condominiums		—			—			—			(4,580	)
Other:
Gain on sale of H Street land parcels		(4,803	)		—			(4,803	)		—
Prepayment penalties and write-off of unamortized financing costs		1,701			8,548			7,562			13,481
H Street litigation costs		—			3,033			1,891			6,594
Costs of acquisition not consummated		—			—			8,807			—
India Property Fund LP – organization costs		—			—			1,677			—
Net gain on sale of Sears Canada common shares		—			—			—			(55,438	)
Other, net		1,073			1,711			3,204			3,126
		(23,710	)		(46,598	)		(90,713	)		(84,050	)
Minority limited partners’ share of above adjustments		2,177			4,436			8,304			8,062
Total items that affect comparability	$	(21,533	)	$	(42,162	)	$	(82,409	)	$	(75,988	)

42

Overview (continued)

2007 Acquisitions, Dispositions and Significant Investments

Acquisitions:

100 West 33^rd Street, New York City (the “Manhattan Mall”)

On January 10, 2007, we acquired the Manhattan Mall for approximately $689,000,000 in cash. This mixed-use property is located on the entire Sixth Avenue block-front between 32^nd and 33^rd Streets in Manhattan and contains approximately 1,000,000 square feet, including 812,000 square feet of office space and 164,000 square feet of retail space. Included as part of the acquisition were 250,000 square feet of additional air rights. The property is adjacent to our Hotel Pennsylvania. At closing, we completed a $232,000,000 financing secured by the property, which bears interest at LIBOR plus 0.55% (5.67% at September 30, 2007) and matures in two years with three one-year extension options. The operations of the office component of the property are included in the New York Office segment and the operations of the retail component are included in the Retail segment. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

Bruckner Plaza, Bronx, New York

On January 11, 2007, we acquired the Bruckner Plaza shopping center, containing 386,000 square feet, for approximately $165,000,000 in cash. Also included as part of the acquisition was an adjacent parcel which is ground leased to a third party. The property is located on Bruckner Boulevard in the Bronx, New York. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

1290 Avenue of the Americas and 555 California Street

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas, a 2,000,000 square foot Manhattan office building, located on the block-front between 51^st and 52^nd Street on Avenue of the Americas, and the 3-building 555 California Street complex (“555 California Street”) containing 1,800,000 square feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district. The purchase price for our 70% interest in the real estate was approximately $1.8 billion, consisting of $1.0 billion of cash and $797,000,000 of existing debt. Our share of the debt is comprised of $308,000,000 secured by 1290 Avenue of the Americas and $489,000,000 secured by 555 California Street. 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. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

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 various of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records.  In a decision dated October 1, 2007, the Court determined that Mr. Trump already received access to the books and records to which he was entitled, with the exception of certain documents which the general partners have requested from third parties but have not yet been received. Mr. Trump has sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  

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 would not be material to our consolidated financial statements.

43

Overview (continued)

1290 Avenue of the Americas and 555 California Street - continued

The following summarizes our allocation of the purchase price to the assets and liabilities acquired.

(Amounts in thousands)
Land	$	652,144
Building		1,219,968
Acquired above-market leases		33,205
Other assets		223,083
Acquired in-place leases		173,922
Assets acquired		2,302,322
Mortgage debt		812,380
Acquired below-market leases		223,764
Other liabilities		40,784
Liabilities acquired		1,076,928
Net assets acquired ($1.0 billion excluding net working capital acquired and closing costs)	$	1,225,394

Our initial valuation of the assets and liabilities acquired (70% interest) is preliminary and subject to change within the one-year period from the date of closing as additional valuation information becomes available.

The following table presents our pro forma condensed consolidated statements of income for the three and nine months ended September 30, 2006 and the nine months ended September 30, 2007, as if the above transaction occurred on January 1, 2006. The unaudited pro forma information is not necessarily indicative of what our actual results would have been had the transaction been consummated on January 1, 2006, nor does it represent the results of operations for any future periods. In our opinion all adjustments necessary to reflect this transaction have been made.

	Actual			Pro forma
Condensed Consolidated Statements of Income	For the Three Months Ended			For the Three Months Ended			For the Nine Months Ended September 30,
(Amounts in thousands, except per share amounts)	September 30, 2007			September 30, 2006			2007			2006
Revenues	$	853,036		$	741,511		$	2,480,783		$	2,174,124
Income before allocation to limited partners	$	145,900		$	136,838		$	478,788		$	468,708
Minority limited partners’ interest in the Operating Partnership		(10,241	)		(12,046	)		(39,802	)		(42,697	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		(6,683	)		(14,455	)		(17,030	)
Net income		130,841			118,109			424,531			408,981
Preferred share dividends		(14,295	)		(14,351	)		(42,886	)		(43,162	)
Net income applicable to common shares	$	116,546		$	103,758		$	381,645		$	365,819
Net income per common share – basic	$	0.77		$	0.73		$	2.52		$	2.59
Net income per common share - diluted	$	0.74		$	0.69		$	2.41		$	2.45

44

Overview (continued)

H Street Building Corporation (“H Street”)

In July 2005, we acquired H Street, which owns a 50% interest in real estate assets located in Pentagon City, Virginia and Washington, DC. On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets for approximately $383,000,000, consisting of $333,000,000 in cash and $50,000,000 of existing mortgages. These assets include twin office buildings located in Washington, DC, containing 577,000 square feet, and assets located in Pentagon City, Virginia comprised of 34 acres of land leased to three residential and retail operators, a 1,670 unit high-rise apartment complex and 10 acres of vacant land. In conjunction with this acquisition all existing litigation has been dismissed. Beginning on April 30, 2007, we consolidate the accounts of these entities into our consolidated financial statements and no longer account for them on the equity method.

Further, we agreed to sell approximately 19.6 of the 34 acres of land to one of the existing ground lessees in two closings over a two-year period for approximately $220,000,000. On May 11, 2007, we closed on the sale of 11 of the 19.6 acres for $104,000,000 and received $5,000,000 in cash and a $99,000,000 note due December 31, 2007. On September 28, 2007, the buyer pre-paid the note in cash and we recognized the net gain on sale of $4,803,000. The balance of the net gain of $11,028,000, representing deferred taxes will be reversed and recognized as income in the first quarter of 2008 when H Street and its affiliates elect to be taxed as REITs. In April 2007, we received letters from the two remaining ground lessees claiming a right of first offer on the sale of the land, one of which has since retracted its letter and reserved its rights under the lease.

Our total purchase price for 100% of the assets we will own, after the anticipated proceeds from the land sales, is $409,000,000, consisting of $286,000,000 in cash and $123,000,000 of existing mortgages.

Toys “R” Us Stores

On May 31, 2007, we acquired four properties from Toys “R” Us (“Toys”) for $12,242,000 in cash, which completed our September 2006 agreement to acquire 43 stores that were closed as part of Toys’ January 2006 store closing program. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition. Our $1,045,000 share of Toys net gain on this transaction was recorded as an adjustment to the basis of our investment in Toys and was not recorded as income.

India Property Fund LP

In 2005 and 2006, we invested $94,200,000 in two joint ventures established to acquire, manage and develop real estate in India. On June 14, 2007, we committed to contribute $95,000,000 to a third venture, the India Property Fund, LP (the “Fund”), also established to acquire, manage and develop real estate in India. We satisfied $77,000,000 of our commitment by contributing our interest in one of the above mentioned joint ventures to the Fund. The Fund will seek to raise additional equity. As of September 30, 2007, we own 95% of the Fund and therefore consolidate the accounts of the Fund into our consolidated financial statements, pursuant to the requirements of FIN 46 (R) - Consolidation of Variable Interest Entities.  

Shopping Center Portfolio Acquisition

On June 26, 2007, we entered into an agreement to acquire a 15 shopping center portfolio aggregating approximately 1.9 million square feet. The properties are located primarily in Northern New Jersey and Long Island, New York. The purchase price is approximately $351,000,000, consisting of approximately $120,000,000 of cash, $89,000,000 of newly issued Vornado Realty L.P. redeemable preferred and common units and $142,000,000 of existing debt. On June 28, 2007, we completed the acquisition of five of the shopping centers for $116,561,000, consisting of $94,179,000 in cash, $15,993,000 in Vornado Realty L.P. preferred units and $6,389,000 of Vornado Realty L.P. common units. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition. The closing of the remaining shopping centers is expected to occur in two additional tranches and be completed by the end of 2007, subject to customary closing conditions.

45

Overview (continued)

Dispositions:

Vineland, New Jersey Shopping Center Property

On July 16, 2007, we sold our Vineland, New Jersey shopping center property for $2,774,000 in cash, which resulted in a net gain of $1,708,000.

BNA Complex

On August 9, 2007, we completed our previously announced sale of Crystal Mall Two, a 277,000 square foot office building located at 1801 South Bell Street in Crystal City, to The Bureau of National Affairs, Inc. (“BNA”), and simultaneously completed the acquisition of a three building complex from BNA. The three buildings acquired contain approximately 300,000 square feet and are located in Washington’s West End between Georgetown and the Central Business District. Vornado received sales proceeds of approximately $103,600,000 from BNA and recognized a net gain of $19,893,000. All of the proceeds from the sale were reinvested in a tax-free “like-kind” exchange in accordance with Section 1031 of the Internal Revenue Code (“Section 1031”). Vornado paid BNA $111,000,000 for the three buildings acquired. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

Arlington Plaza

On October 17, 2007, we sold Arlington Plaza, a 188,000 square foot office building located in Arlington, Virginia for $71,500,000, resulting in a gain of $33,900,000 which will be recognized in the fourth quarter of 2007.

2007 Mezzanine Loan Activity:

Blackstone/Equity Office Properties Loan

On March 29, 2007, we acquired a 9.4% interest in a $772,600,000 mezzanine loan for $72,400,000 in cash. During April and May of 2007, we were repaid the $72,400,000 outstanding balance of the loan.

Fortress Loan

In 2006, we acquired bonds for $99,500,000 in cash, representing a 7% interest in two margin loans aggregating $1.430 billion. On March 30, 2007, we were repaid $35,348,000. On July 10, 2007 and October 2, 2007, we were repaid an additional $13,221,000 and $13,290,000, respectively. The remaining balance of $37,641,000, is due in December 2007.

MPH Mezzanine Loans

On June 5, 2007, we acquired a 42% interest in two mezzanine loans totaling $158,700,000, for $66,403,000 in cash. The loans bear interest at LIBOR plus 5.32% (10.44% at September 30, 2007) and mature in February 2008. The loans are subordinate to $2.9 billion of other debt and are secured by the equity interests in four New York City properties: Worldwide Plaza, 1540 Broadway office condominium, 527 Madison Avenue and Tower 56.

Manhattan House Loan

On October 12, 2007, we were repaid the $42,000,000 outstanding balance of the Manhattan House mezzanine loan.

46

Overview (continued)

Other Investments:

The Lexington Master Limited Partnership (“Lexington MLP”)

On December 31, 2006, Newkirk Realty Trust (NYSE: NKT) was acquired in a merger by Lexington Corporate Properties Trust (“Lexington”) (NYSE: LXP), a real estate investment trust. We owned 10,186,991 limited partnership units (representing a 15.8% investment ownership interest) of Newkirk MLP, which was also acquired by Lexington as a subsidiary, and was renamed Lexington MLP. The units in Newkirk MLP, which we accounted for on the equity method, were converted on a 0.80 for 1 basis into limited partnership units of Lexington MLP, which we also account for on the equity method. The Lexington MLP units are exchangeable on a one-for-one basis into common shares of Lexington. We record our pro rata share of Lexington MLP’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, 2007, we own 8,149,593 limited partnership units of Lexington MLP, or a 7.3% ownership interest. We record our pro rata share of Lexington MLP’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. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of Lexington MLP’s net income for its three months ended June 30, 2007.

As of September 30, 2007, the market value of our investment in Lexington MLP based on Lexington’s September 28, 2007 closing share price of $20.01, was $163,073,000, or $17,238,000 below the carrying amount on our consolidated balance sheet. We have concluded that as of September 30, 2007, the decline in the value of our investment is not “other-than-temporary.”

GMH Communities L.P. (“GMH”)

As of September 30, 2007, we own 7,337,857 limited partnership units (which are exchangeable on a one-for-one basis into common shares of GMH Communities Trust (“GCT”) (NYSE: GCT), a real estate investment trust that conducts its business through GMH and of which it is the sole general partner) and 2,517,247 common shares of GCT, or 13.5% of the limited partnership interest of GMH. We account for our investment in GMH on the equity method and record our pro rata share of GMH’s net income or loss on a one-quarter lag basis as we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that GCT files its financial statements. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of GMH’s net income for its three months ended June 30, 2007.

As of September 30, 2007, the market value of our investment in GMH and GCT based on GCT’s September 28, 2007 closing share price of $7.75, was $76,377,000, or $27,473,000 below the carrying amount on our consolidated balance sheet. We have concluded that as of September 30, 2007, the decline in the value of our investment is not “other-than-temporary.”

Downtown Crossing Joint Venture

On January 26, 2007, a joint venture in which we have a 50% interest acquired the Filene’s property located in the Downtown Crossing district of Boston, Massachusetts for approximately $100,000,000 in cash, of which our share was $50,000,000. The venture plans to redevelop the property to include over 1,200,000 square feet, consisting of office, retail, condominium apartments and a hotel. The project is subject to governmental approvals. Our investment in the joint venture is accounted for under the equity method.

47

Overview (continued)

Other Investments: (continued)

Investment in McDonald’s Corporation (“McDonalds”) (NYSE: MCD)

As of September 30, 2007, we owned 858,000 common shares of McDonalds. These shares are recorded as marketable equity securities on our consolidated balance sheets and are classified as “available for sale.” Appreciation or depreciation in the fair market value of these shares is recorded as an increase or decrease in “accumulated other comprehensive income” in the shareholders’ equity section of our consolidated balance sheets and not recognized in income. At September 30, 2007, based on McDonalds’ September 28, 2007 closing stock price of $54.47 per share, $21,388,000 of appreciation in the value of these shares was included in “accumulated other comprehensive income” on our consolidated balance sheet. During October 2007, we sold all of the McDonalds common shares at a weighted average price of $56.45 per share, resulting in a net gain of $23,090,000 which will be recognized in the fourth quarter of 2007.

In addition to the above, at July 1, 2007, we owned 13,695,500 McDonalds common shares (“option shares”) through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on McDonalds’ common shares. The option shares had a weighted-average strike price of $32.70 per share, or an aggregate of $447,822,000, expired on various dates between July 30, 2007 and September 10, 2007 and provided for net cash settlement. During the three months ended September 30, 2007, we settled 10,118,800 option shares and received $234,242,000 in cash. At September 30, 2007, there were 3,576,700 option shares remaining in the derivative position at a price of $54.47 per share. During the three months ended September 30, 2007, we recognized a net gain of $28,190,000 as a result of the above transactions. The aggregate net gain recognized for the nine months ended September 30, 2007 was $102,803,000. During the three and nine months ended September 30, 2006, we recognized net gains of $68,796,000 and $60,581,000, respectively.

In October 2007, we settled all of the remaining option shares at a weighted average price of $56.24 per share, resulting in a net gain of $6,018,000 which will be recognized in the fourth quarter of 2007.

The aggregate net gain realized from inception of our investments in McDonalds in 2005 through final settlement in October 2007 was $289,414,000.

48

Overview (continued)

2007 Financings:

On January 26, 2007, we completed a $678,000,000 financing of our Skyline Complex in Fairfax Virginia, consisting of eight office buildings containing 2,560,000 square feet. This loan bears interest only at 5.74% and matures in February 2017. We retained net proceeds of approximately $515,000,000 after repaying existing loans and closing costs, including $5,771,000 for prepayment penalties and defeasance costs which is included in “interest and debt expense” in the nine months ended September 30, 2007.

On March 1, 2007, we repaid the $19,394,000 balance of the 1999 K Street mortgage loan.

On March 30, 2007, we repaid the $47,011,000 balance of the Crystal Park 2 mortgage loan.

On May 11, 2007, we redeemed our $500,000,000 5.625% senior unsecured notes at the face amount plus accrued interest.

On May 14, 2007, we completed a $45,000,000 financing of our 866 UN Plaza property. The loan bears interest at LIBOR plus 0.40% and matures in May 2009. The net proceeds were used to repay the existing loan and closing costs.

On July 3, 2007, we repaid $21,030,000 of the $46,837,000 outstanding balance of the mortgage loan which was secured by the Garfield, Edison and East Brunswick industrial warehouses. We incurred $1,701,000 of prepayment penalties and defeasance costs which is included in interest and debt expense in the quarter ended September 30, 2007.

On September 28, 2007, the Operating Partnership entered into a new $1.510 billion unsecured revolving credit facility, which was increased by $85,000,000 on October 12, 2007 and can be increased up to $2.0 billion during the initial term. The new facility has a three-year term with two one-year extension options, bears interest at LIBOR plus 55 basis points (5.67% at September 30, 2007), based on our current credit ratings and requires the payment of an annual facility fee of 15 basis points. Together with the existing $1.0 billion credit facility we have an aggregate of $2.595 billion of unsecured revolving credit. Vornado is the guarantor of the Operating Partnership’s obligations under both revolving credit agreements. The existing $1.0 billion credit facility’s financial covenants have been modified to conform to the financial covenants under the new agreement. Significant modifications include (i) changing the definition of Capitalization Value to exclude corporate unallocated general and administrative expenses and to reduce the capitalization rate to 6.5% from 7.5%, and (ii) changing the definition of Total Outstanding Indebtedness to exclude indebtedness of unconsolidated joint ventures. Under the new agreement, “Equity Value” may not be less than Three Billion Dollars; “Total Outstanding Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value;” the ratio of “Combined EBITDA” to “Fixed Charges,” each measured as of the most recently ended calendar quarter, may not be less than 1.40 to 1.00; the ratio of “Unencumbered Combined EBITDA” to “Unsecured Interest Expense,” each measured as of the most recently ended calendar quarter, may not be less than 1.50 to 1.00; at any time, “Unsecured Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value of Unencumbered Assets;” and the ratio of “Secured Indebtedness” to “Capitalization Value,” each measured as of the most recently ended calendar quarter, may not exceed fifty percent (50%). The new agreement also contains standard representations and warranties and other covenants. The terms in quotations in this paragraph are all defined in the new agreement, which was filed as an exhibit to our Current Report on Form 8-K dated September 28, 2007, filed on October 4, 2007.

On October 11, 2007, we repaid the $51,678,000 balance of the Crystal Gateway N. and Arlington Plaza mortgage loan.

49

Overview (continued)

2007 Financings: (continued)

2.85% Convertible Senior Debentures due 2027

On March 21, 2007, Vornado Realty Trust sold $1.4 billion aggregate principal amount of 2.85% convertible senior debentures due 2027, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $1.37 billion. The debentures are redeemable at our option beginning in 2012 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2012, 2017, and 2022 and in certain other limited circumstances. The debentures are convertible, under certain circumstances, for cash and Vornado common shares at an initial conversion rate of 6.1553 common shares per $1,000 of principal amount of debentures. The initial conversion price is $162.46, which represents a premium of 30% over the March 21, 2007 closing price of $124.97 for our common shares. The principal amount of debentures will be settled for cash and the amount in excess of the principal defined as the conversion value will be settled in cash or, at our election, Vornado common shares.

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the interest method) over the period from the date of issuance to the date of earliest redemption of April 1, 2012. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate.

The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership guaranteed the payment of the debentures. The Operating Partnership used the net proceeds primarily for acquisitions and investments and for general corporate purposes.

On August 31, 2007, the FASB issued a proposed FASB Staff Position (the “proposed FSP”) that affects the accounting for our convertible and exchangeable senior debentures and Series D-13 convertible preferred units. The proposed FSP requires the initial proceeds from the sale of our convertible and exchangeable senior debentures and Series D-13 convertible preferred units to be allocated between a liability component and an equity component. The resulting discount must be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The proposed FSP, if adopted, would be effective for fiscal years beginning after December 15, 2007 and would require retroactive application. The adoption of the proposed FSP on January 1, 2008 would result in the recognition of an aggregate unamortized debt discount of $190,697,000 (as of September 30, 2007) on our consolidated balance sheet and additional interest expense on our consolidated statements of income. Our current estimate of the incremental interest expense, net of minority interest, for each reporting period is as follows:

(Amounts in thousands)
For the year ended December 31:
2005	$	3,405
2006	$	6,065
2007	$	28,590
2008	$	35,721
2009	$	37,856
2010	$	40,114
2011	$	41,112
2012	$	8,192
For the three months ended:
March 31, 2007	$	3,127
June 30, 2007	$	8,344
September 30, 2007	$	8,487

50

Overview (continued)

The following table sets forth certain information for the properties we own directly or indirectly, including leasing activity. Tenant improvements and leasing commissions are presented below based on square feet leased during the period and on a per annum basis based on the weighted average term of the leases.

(Square feet and cubic feet in thousands)	Office								Merchandise Mart					Temperature
As of September 30, 2007:	New York			Washington, DC		Retail			Office			Showroom		Controlled Logistics
Square feet/ cubic feet		15,979			17,587		21,071			2,763			6,320	18,940/	497,700
Number of properties		28			83		173			9			9		91
Occupancy rate		97.7%			93.5%		93.9%			95.5%			91.6%		77.0%
Leasing Activity:
Quarter Ended September 30, 2007:
Square feet		454			384		160			20			310
Initial rent (1)	$	78.25		$	35.29	$	30.22		$	23.12		$	28.68
Weighted average lease terms (years)		10.9			4.7		7.7			10.8			5.2
Rent per square foot – relet space:
Square feet		440			339		76			18			275
Initial Rent (1)	$	78.55		$	35.69	$	33.04		$	23.50		$	29.31
Prior escalated rent	$	44.90		$	31.97	$	23.95		$	18.00		$	29.20
Percentage increase:
Cash basis		74.9%	(2)		11.6%		38.0%	(2)		30.6%			0.4%
GAAP basis		71.1%	(2)		15.6%		24.3%	(2)		59.6%			10.6%
Rent per square foot – vacant space:
Square feet		14			45		84			2			36
Initial rent (1)	$	68.82		$	32.26	$	27.65		$	19.50		$	23.57
Tenant improvements and leasing commissions:
Per square foot	$	56.33		$	14.93	$	5.40		$	50.75		$	10.04
Per square foot per annum	$	5.18		$	3.18	$	0.70		$	4.70		$	1.93
Percentage of initial rent		6.6%			9.0%		2.3%			20.3%			6.7%
Nine Months Ended September 30, 2007:
Square feet		901			1,806		622			164			901
Initial rent (1)	$	72.63		$	35.55	$	33.79		$	23.69		$	26.63
Weighted average lease terms (years)		9.0			5.9		8.6			12.6			4.9
Rent per square foot – relet space:
Square feet		830			1,397		266			162			856
Initial Rent (1)	$	74.05		$	34.17	$	42.83		$	23.74		$	26.77
Prior escalated rent	$	45.81		$	32.44	$	26.97		$	24.98		$	26.44
Percentage increase (decrease):
Cash basis		61.7%			5.3%		58.8%	(2)		(5.0%	)		1.2%
GAAP basis		67.2%			6.8%		42.3%	(2)		23.5%			12.2%
Rent per square foot – vacant space:
Square feet		71			409		356			2			45
Initial rent (1)	$	55.91		$	40.26	$	26.90		$	19.50		$	24.04
Tenant improvements and leasing commissions:
Per square foot	$	48.69		$	14.93	$	10.40		$	64.10		$	8.63
Per square foot per annum	$	5.41		$	2.53	$	1.21		$	5.09		$	1.76
Percentage of initial rent		7.4%			7.1%		3.6%			21.5%			6.6%
Retail space contained in office buildings of the New York Office segment:
Square feet/cubic feet		9
Initial Rent	$	103.00
Percentage increase over prior escalated rent for relet space		110.6%

The information above does not include 555 California Street, in which we acquired a 70% interest on May 24, 2007, because its operations are included in the “Other” for segment reporting purposes. 555 California Street, located in San Francisco’s financial district, aggregates 1.8 million square feet and is 96.3% occupied as of September 30, 2007.

_________________________

See notes on following page.

51

Overview (continued)

(Square feet and cubic feet in thousands)	Office						Merchandise Mart				Temperature
	New York		Washington, DC		Retail		Office		Showroom		Controlled Logistics
As of June 30, 2007:
Square feet/ cubic feet		15,962		17,900		21,053		2,756		6,330		18,940/	497,700
Number of properties		28		84		175		9		9		91
Occupancy rate		97.8%		93.2%		93.4%		96.3%		91.3%		70.4%
As of December 31, 2006:
Square feet/ cubic feet		13,692		17,017		19,264		2,714		6,370		18,940	/497,700
Number of properties		25		81		158		9		9		91
Occupancy rate		97.5%		92.2%		92.7%		97.4%		93.6%		77.4%
As of September 30, 2006:
Square feet/ cubic feet		13,138		18,006		17,790		2,720		6,357		17,595	/445,400
Number of properties		24		91		122		9		9		86
Occupancy rate		97.4%		91.2%		95.3%		97.1%		93.5%		78.3%

_______________________________

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

(2) Because generally accepted accounting principles require tenant leases to be marked to fair value when they are acquired, the cash basis increase is greater than the GAAP basis rent increase when the acquired space is relet.

52

Reconciliation of Net Income and EBITDA – Three Months Ended September 30, 2007 and 2006

Below is a summary of net income and a reconciliation of net income to EBITDA⁽¹⁾ by segment for the three months ended September 30, 2007 and 2006.

(Amounts in thousands)	For the Three Months Ended September 30, 2007
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	481,964		$	173,180		$	120,299		$	83,184		$	57,176		$	—		$	—		$	48,125
Straight-line rents:
Contractual rent increases		10,565			3,124			3,376			2,986			1,023			—			—			56
Amortization of free rent		5,797			1,562			3,353			44			91			—			—			747
Amortization of acquired below- market leases, net		24,488			15,216			1,055			6,272			10			—			—			1,935
Total rentals		522,814			193,082			128,083			92,486			58,300			—			—			50,863
Temperature Controlled Logistics		212,715			—			—			—			—			212,715			—			—
Tenant expense reimbursements		89,482			35,701			11,843			30,338			7,043			—			—			4,557
Fee and other income:
Tenant cleaning fees		13,028			15,672			—			—			—			—			—			(2,644	)
Management and leasing fees		2,891			1,494			2,178			310			8			—			—			(1,099	)
Lease termination fees		1,575			1,326			—			51			198			—			—			—
Other		10,531			4,058			4,079			515			2,026			—			—			(147	)
Total revenues		853,036			251,333			146,183			123,700			67,575			212,715			—			51,530
Operating expenses		431,339			106,616			50,501			43,656			35,240			171,214			—			24,112
Depreciation and amortization		140,377			41,346			30,804			19,634			12,715			20,495			—			15,383
General and administrative		58,366			5,330			6,193			6,739			7,497			10,474			—			22,133
Total expenses		630,082			153,292			87,498			70,029			55,452			202,183			—			61,628
Operating income (loss)		222,954			98,041			58,685			53,671			12,123			10,532			—			(10,098	)
Income applicable to Alexander’s		12,111			189			—			187			—			—			—			11,735
Loss applicable to Toys “R” Us		(20,289	)		—			—			—			—			—			(20,289	)		—
Income from partially owned entities		13,901			1,290			743			3,972			(50	)		340			—			7,606
Interest and other investment income		56,906			668			3,558			195			104			325			—			52,056
Interest and debt expense		(165,889	)		(36,186	)		(31,289	)		(19,423	)		(13,174	)		(16,167	)		—			(49,650	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		1,012			—			—			—			—			—			—			1,012
Minority interest of partially owned entities		3,587			(1,613	)		—			54			—			3,869			—			1,277
Income (loss) before income taxes		124,293			62,389			31,697			38,656			(997	)		(1,101	)		(20,289	)		13,938
Provision for income taxes		(3,048	)		—			(2,330	)		(3	)		(172	)		(242	)		—			(301	)
Income (loss) from continuing operations		121,245			62,389			29,367			38,653			(1,169	)		(1,343	)		(20,289	)		13,637
Income (loss) from discontinued operations, net		24,655			—			24,324			3,078			—			—			—			(2,747	)
Income (loss) before allocation to minority limited partners		145,900			62,389			53,691			41,731			(1,169	)		(1,343	)		(20,289	)		10,890
Minority limited partners’ interest in the Operating Partnership		(10,241	)		—			—			—			—			—			—			(10,241	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		—			—			—			—			—			—			(4,818	)
Net income (loss)		130,841			62,389			53,691			41,731			(1,169	)		(1,343	)		(20,289	)		(4,169	)
Interest and debt expense (1)		207,934			34,853			31,999			21,947			13,388			7,693			40,875			57,179
Depreciation and amortization (1)		171,106			39,543			32,869			20,617			12,865			9,780			34,495			20,937
Income tax (benefit) expense (1)		(13,094	)		952			2,334			3			172			115			(18,213	)		1,543
EBITDA	$	496,787		$	137,737		$	120,893		$	84,298		$	25,256		$	16,245		$	36,868		$	75,490

EBITDA includes net gains on sale of real estate of $36,725, of which $24,696 is included in the Washington, DC office segment, $3,049 is included in the Retail segment and $8,980 is included in the Other segment. In addition, Other segment EBITDA includes a $18,606 net gain on mark-to-market of derivative instruments and a $1,012 net gain on sale of marketable equity securities.

___________________

See notes on page 55.

53

Reconciliation of Net Income and EBITDA – Three Months Ended September 30, 2007 and 2006 (continued)

(Amounts in thousands)	For the Three Months Ended September 30, 2006
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	364,421		$	122,743		$	97,923		$	65,106		$	56,079		$	—		$	—		$	22,570
Straight-line rents:
Contractual rent increases		11,287			1,281			6,338			2,399			1,387			—			—			(118	)
Amortization of free rent		6,223			1,002			3,000			1,595			626			—			—			—
Amortization of acquired below- market leases, net		7,087			66			1,074			5,451			5			—			—			491
Total rentals		389,018			125,092			108,335			74,551			58,097			—			—			22,943
Temperature Controlled Logistics		190,280			—			—			—			—			190,280			—			—
Tenant expense reimbursements		68,634			29,192			8,880			24,521			5,376			—			—			665
Fee and other income:
Tenant cleaning fees		8,818			11,059			—			—			—			—			—			(2,241	)
Management and leasing fees		2,651			330			1,757			464			100			—			—			—
Lease termination fees		7,522			4,752			2,544			—			226			—			—			—
Other		9,008			3,699			3,519			339			1,449			—			—			2
Total revenues		675,931			174,124			125,035			99,875			65,248			190,280			—			21,369
Operating expenses		346,565			80,310			41,150			32,343			27,613			152,277			—			12,872
Depreciation and amortization		101,799			23,199			26,834			14,335			10,682			18,651			—			8,098
General and administrative		52,096			4,387			8,996			5,063			6,816			7,875			—			18,959
Total expenses		500,460			107,896			76,980			51,741			45,111			178,803			—			39,929
Operating income (loss)		175,471			66,228			48,055			48,134			20,137			11,477			—			(18,560	)
Loss applicable to Alexander’s		(3,586	)		187			—			177			—			—			—			(3,950	)
Loss applicable to Toys “R” Us		(40,699	)		—			—			—			—			—			(40,699	)		—
Income from partially owned entities		23,010			1,042			4,851			1,805			206			285			—			14,821
Interest and other investment income		98,092			110			378			174			83			793			—			96,554
Interest and debt expense		(115,280	)		(20,829	)		(26,101	)		(17,682	)		(12,955	)		(14,044	)		—			(23,669	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		8,032			—			—			—			—			—			—			8,032
Minority interest of partially owned entities		2,534			—			—			37			—			2,036			—			461
Income (loss) before income taxes		147,574			46,738			27,183			32,645			7,471			547			(40,699	)		73,689
Provision for income taxes		(382	)		—			57			—			(215	)		(224	)		—			—
Income (loss) from continuing operations		147,192			46,738			27,240			32,645			7,256			323			(40,699	)		73,689
Income (loss) from discontinued operations, net		577			—			621			(51	)		8			—			—			(1	)
Income (loss) before allocation to minority limited partners		147,769			46,738			27,861			32,594			7,264			323			(40,699	)		73,688
Minority limited partners’ interest in the Operating Partnership		(13,103	)		—			—			—			—			—			—			(13,103	)
Perpetual preferred unit distributions of the Operating Partnership		(6,683	)		—			—			—			—			—			—			(6,683	)
Net income (loss)		127,983			46,738			27,861			32,594			7,264			323			(40,699	)		53,902
Interest and debt expense (1)		168,864			21,566			27,774			20,254			13,175			6,682			43,348			36,065
Depreciation and amortization (1)		141,206			24,179			31,235			15,137			10,827			8,900			34,951			15,977
Income tax (benefit) expense (1)		(383	)		—			3,087			—			215			106			(4,756	)		965
EBITDA	$	437,670		$	92,483		$	89,957		$	67,985		$	31,481		$	16,011		$	32,844		$	106,909

Other segment EBITDA includes a $70,687 net gain on mark-to-market of derivative instruments, a $10,842 net gain on sale of real estate and a $8,032 net gain on sale of marketable equity securities.

______________________________

See notes on following page.

54

Reconciliation of Net Income and EBITDA – Three Months Ended September 30, 2007 and 2006 (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 a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Other EBITDA is comprised of:

(Amounts in thousands)	For the Three Months Ended September 30,
	2007			2006
Alexander’s	$	19,012		$	3,732
Hotel Pennsylvania		9,973			6,448
555 California Street (acquired 70% interest on May 24, 2007)		12,164			—
Lexington MLP, formerly Newkirk MLP		9,022			18,067
GMH		9,527			8,427
Industrial warehouses		1,399			1,146
Other investments		3,419			4,022
		64,516			41,842
Investment income and other		46,551			102,648
Corporate general and administrative expenses		(20,518	)		(17,795	)
Minority limited partners’ interest in the Operating Partnership		(10,241	)		(13,103	)
Perpetual preferred unit distributions of the Operating Partnership		(4,818	)		(6,683	)
	$	75,490		$	106,909

55

Results of Operations – Three Months Ended September 30, 2007 and 2006

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, Temperature Controlled Logistics revenues, hotel revenues, trade shows revenues, amortization of acquired below market leases, net of above market leases pursuant to SFAS No. 141 and 142, and fee income, were $853,036,000 for the three months ended September 30, 2007, compared to $675,931,000 for the prior year’s three months, an increase of $177,105,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)				Office												Temperature
Property rentals:	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Other
Increase (decrease) due to:
Acquisitions:
1290 Avenue of the Americas	$	24,824		$	24,824		$	—		$	—		$	—		$	—		$	—
555 California Street		22,519			—			—			—			—			—			22,519
H Street – (consolidated from May 1, 2007, vs. equity method prior)		13,392			—			13,392			—			—			—			—
Manhattan Mall		12,899			8,809			—			4,090			—			—			—
350 Park Avenue		8,063			8,063			—			—			—			—			—
Former Toys “R” Us stores		5,139			—			—			5,139			—			—			—
Bruckner Plaza		1,889			—			—			1,889			—			—			—
1540 Broadway		177			21			—			156			—			—			—
Other		7,284			—			1,710			4,712			862			—
Development/Redevelopment:
Bergen Town Center – portion out of service		(804	)		—			—			(804	)		—			—			—
Springfield Mall portion out of service		(628	)		—			—			(628	)		—			—			—
2101 L Street – portion phased into service		574			—			574			—			—			—			—
Other		(4,256	)		—			(855	)		(169	)		—			—			(3,232	)
Amortization of acquired below market leases, net		17,401			15,150			(19	)		821			5			—			1,444
Operations:
Leasing activity (see page 51)		20,562			11,123			4,946			2,729			(781	)		—			2,545
Hotel Pennsylvania		4,644			—			—			—			—			—			4,644	(1)
Trade shows		117			—			—			—			117			—			—
Total increase in property rentals		133,796			67,990			19,748			17,935			203			—			27,920
Temperature Controlled Logistics:
Increase due to acquisitions (ConAgra warehouses)		7,132			—			—			—			—			7,132			—
Increase due to operations		15,303			—			—			—			—			15,303	(2)		—
Total increase		22,435			—			—			—			—			22,435			—
Tenant expense reimbursements:
Increase (decrease) due to:
Acquisitions/development		16,122			8,832			293			3,674			—			—			3,323
Operations		4,726			(2,323	) (3)		2,670			2,143			1,667			—			569
Total increase in tenant expense reimbursements		20,848			6,509			2,963			5,817			1,667			—			3,892
Fee and other income:
Increase (decrease) in:
Lease cancellation fee income		(5,947	)		(3,426	)(4)		(2,544	)		51			(28	)		—			—
BMS Cleaning fees		4,210			4,613			—			—			—			—			(403	)
Management and leasing fees		240			1,164			421			(154	)		(92	)		—			(1,099	)
Other		1,523			359			560			176			577			—			(149	)
Total increase (decrease) in fee and other income		26			2,710			(1,563	)		73			457			—			(1,651	)
Total increase in revenues	$	177,105		$	77,209		$	21,148		$	23,825		$	2,327		$	22,435		$	30,161

______________________________

See Notes on the following page.

56

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

Notes to the preceding tabular information:

(1) Revenue per available room (“REVPAR”) was $136.85 for the three months ended September 30, 2007 compared to $107.65 for the prior year’s quarter.

(2) Primarily from (i) a $8,725 increase in transportation operations resulting from new transportation business in connection with the acquisition of the ConAgra warehouses in the fourth quarter of 2006, (ii) a $4,369 increase in owned warehouse operations and (iii) a $2,855 increase in managed warehouse operations (resulting in a $102 increase in EBITDA) as a result of a new management contract beginning in March 2007. See page 58 for a discussion of AmeriCold’s gross margin.

(3) Primarily as a result of lower real estate taxes on certain New York office properties.

(4) Primarily due to lease termination fee income received from MONY Life Insurance Company in connection with the termination of their 289,000 square foot lease at 1740 Broadway in 2006.

57

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $630,082,000 for the three months ended September 30, 2007, compared to $500,460,000 for the prior year’s three months, an increase of $129,622,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)				Office												Temperature
Operating:	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Other
Increase (decrease) due to:
Acquisitions:
1290 Avenue of the Americas	$	13,684		$	13,684		$	—		$	—		$	—		$	—		$	—
555 California Street		12,305			—			—			—			—			—			12,305
Manhattan Mall		6,220			3,305			—			2,915			—			—			—
H Street – (consolidated from May 1, 2007 vs. equity method prior)		5,507			—			5,507			—			—			—			—
Former Toys stores		4,310			—			—			4,310			—			—			—
350 Park Avenue		4,164			4,164			—			—			—			—			—
Bruckner Plaza		740			—			—			740			—			—			—
1540 Broadway		220			123			—			97			—			—			—
Other		10,020			—			934			2,218			695			6,173			—
Development/Redevelopment:
2101 L Street – portion out of service		(424	)		—			(424	)		—			—			—			—
Springfield Mall – portion out of service		(304	)		—			—			(304	)		—			—			—
Bergen Town Center – portion out of service		(47	)		—			—			(47	)		—			—			—
Other		(3,300	)		—			(557	)		(209	)		—			—			(2,534	)
Operations:
Operations		29,694			5,030	(1)		3,891			1,593			6,034	(2)		12,764	(3)		382
Hotel activity		1,087			—			—			—			—			—			1,087
Trade shows activity		898			—			—			—			898			—			—
Total increase in operating expenses		84,774			26,306			9,351			11,313			7,627			18,937			11,240
Depreciation and amortization:
Increase (decrease) due to:
Acquisitions/Development		33,884			16,684			2,008			4,023			—			2,137			9,032
Operations (due to additions to buildings and improvements)		4,694			1,463			1,962			1,276			2,033			(293	)		(1,747	)
Total increase in depreciation and amortization		38,578			18,147			3,970			5,299			2,033			1,844			7,285
General and administrative:
Increase (decrease) due to:
Acquisitions/Development and Other		3,710			1,257			(33	)		1,356			—			1,523			(393	)
Operations		2,560			(314	)		(2,770	) (4)		320			681			1,076			3,567	(5)
Total increase (decrease) in general and administrative		6,270			943			(2,803	)		1,676			681			2,599			3,174
Total increase in expenses	$	129,622		$	45,396		$	10,518		$	18,288		$	10,341		$	23,380		$	21,699

__________________________

(1) Primarily from a $1,013 increase in property level operating expenses and a $4,017 increase in operating expenses of Building Maintenance Services, Inc., a wholly-owned subsidiary which provides cleaning, security and engineering services principally to New York office properties (for which the corresponding increase in BMS revenues is included in “other income”).

(2) Reflects an increase in real estate taxes as a result of a reassessment of 2006 ($2,800) and 2007 ($2,200).

(3) AmeriCold’s gross margin from comparable warehouses was $37,720 or 32.3%, for the quarter ended September 30, 2007, compared to $35,528 or 31.1% for the quarter ended September 30, 2006, an increase of $2,192. Gross margin from transportation management services, managed warehouses and other non-warehouse activities was $4,510 for the quarter ended September 30, 2007, compared to $3,021 for the quarter ended September 30, 2006, an increase of $1,489.

(4) Primarily from H Street litigation costs incurred during the prior year’s quarter.

(5) Primarily from a $2,485 increase in amortization of stock-based compensation.

58

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

Income Applicable to Alexander’s

Our 32.8% share of Alexander’s net income (comprised of equity in net income or loss, management, leasing, development and commitment fees) was $12,111,000 for the three months ended September 30, 2007, compared to $3,586,000 for the prior year’s three months, an increase of $15,697,000. This increase was primarily due to $3,075,000 for our share of income in the current quarter for the reversal of accrued stock appreciation rights compensation expense as compared to $10,797,000 of expense in the prior year’s quarter, and an increase of $1,113,000 in development fees in the current quarter.

Loss Applicable to Toys

Our 32.8% share of Toys’ financial results (comprised of our share of Toys’ net loss, interest income on loans receivable, and management fees) for the three months ended September 30, 2007 and September 30, 2006 are for Toys fiscal quarters ended August 5, 2007 and July 29, 2006, respectively. In the three months ended September 30, 2007, our loss applicable to Toys was $20,289,000, or $37,855,000 before our share of Toys’ income tax benefit, as compared to $40,699,000, or $45,627,000 before our share of Toys’ income tax benefit in the prior year’s three months. The decrease in our loss applicable to Toys’ before income tax benefit of $7,772,000 results primarily from (i) an increase in Toys’ net sales due to improvements in comparable store sales across all divisions and benefits in foreign currency translation (comparable store sales increases were 1.1% for Toys “R” Us – U.S., 5.9% for Toys “R” Us – International, and 2.2% for Babies “R” Us), (ii) a net gain related to a lease termination, (iii) decreased interest expense primarily due to reduced borrowings and reduced amortization of deferred financing costs, partially offset by, (iv) an increase in selling, general and administrative expenses as a result of higher payroll, store occupancy, corporate and advertising expenses, which as a percentage of net sales were 31.4% and 30.3% for the quarters ended August 5, 2007 and July 29, 2006, respectively.

59

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the three months ended September 30, 2007 and 2006.

Equity in Net Income (Loss):	For The Three Months Ended September 30,
(Amounts in thousands)	2007			2006
H Street non-consolidated subsidiaries:
50% share of equity in net income (1)	$	—		$	4,065
Beverly Connection:
50% share of equity in net loss		(1,287	)		(1,844	)
Interest and fee income		3,885			2,862
		2,598			1,018
GMH Communities L.P:
13.5% in 2007 and 11.3% in 2006 share of equity in net income (2)		5,709			15
Lexington MLP, formerly Newkirk MLP:
7.1% in 2007 and 15.8% in 2006 share of equity in net income (3)		1,726			13,604
Other (4)		3,868			4,308
	$	13,901		$	23,010

________________________

(1) On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets and we now consolidate the accounts of these entities into our consolidated financial statements and no longer account for them under the equity method. Prior to the quarter ended September 30, 2006, these corporations were contesting our acquisition of H Street and impeded access to their financial information. Accordingly, we were unable to record our pro rata share of their earnings. During the quarter ended September 30, 2006, we recognized equity in net income of $4,065 from these entities of which $1,083 was for the periods from July 20, 2005 (date of acquisition) to December 31, 2005.

(2) We record our pro rata share of GMH’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 GCT files its financial statements. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of GMH’s net income for its second quarter ended June, 2007. On July 31, 2006 GCT filed its annual report on Form 10-K for the year ended December 31, 2005, which restated the quarterly financial results of each of the first three quarters of 2005. On September 15, 2006 GCT filed its quarterly reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2006 included equity in net income of $15, which consists of (i) a $94 net loss representing our share of GMH’s fourth quarter results, net of adjustments to restate its first three quarters of 2005, and (ii) $109 of net income for our share of GMH’s 2006 earnings through June 30, 2006.

(3) Beginning on January 1, 2007, we record our pro rata share of Lexington MLP’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. Prior to the January 1, 2007, we recorded our pro rata share of Newkirk MLP’s (Lexington MLP’s predecessor) quarterly earnings current in our same quarter. Accordingly, our “equity in net income or loss from partially owned entities” for the three months ended September 30, 2007 includes our share of Lexington MLP’s net income for its second quarter ended June, 2007.

	The decrease in our share of earnings from the prior year’s quarter is primarily due to (i) higher depreciation expense and amortization of above market lease intangibles in the current quarter as a result of Lexington’s purchase price accounting adjustments in connection with the merger of Newkirk MLP on December 31, 2006 and (ii) our share of net gains on sale of real estate of $10,842 in 2006.
(4)	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 Group LLC, and others.

60

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

Interest and Other Investment Income

Interest and other investment income (mark-to-market of derivative positions, interest income on mortgage loans receivable, other interest income and dividend income) was $56,906,000 for the three months ended September 30, 2007, compared to $98,092,000 for the prior year’s three months, a decrease of $41,186,000. This decrease resulted primarily from a net gain of $68,796,000 from the mark-to-market of the McDonalds derivative position in the three months ended September 30, 2006, as compared to a net gain of $28,190,000 in the three months ended September 30, 2007.

Interest and Debt Expense

Interest and debt expense was $165,889,000 for the three months ended September 30, 2007, compared to $115,280,000 for the prior year’s three months, an increase of $50,609,000. This increase was primarily due to (i) $40,025,000 from a $2.8 billion increase in outstanding mortgage debt due to property acquisitions, new property financings and refinancings, (ii) $21,339,000 from the November 20, 2006 issuance of $1 billion convertible senior debentures and the March 21, 2007 issuance of $1.4 billion convertible senior debentures, partially offset by (iii) a $3,961,000 increase in the amount of capitalized interest in connection with properties under development and (iv) $6,847,000 of expense arising from the prepayment of debt in the prior year’s quarter.

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

Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate was $1,012,000 and $8,032,000 for the three months ended September 30, 2007, and 2006, respectively, and represent net gains on sale of marketable securities in each period.

Minority Interest of Partially Owned Entities

Minority interest of partially owned entities was income of $3,587,000 for the three months ended September 30, 2007, compared to $2,534,000 of income for the prior year’s three months and represents the minority partners’ pro rata share of the net income or loss of consolidated partially owned entities, including 1290 Avenue of the Americas, the 555 California Street complex, AmeriCold, 220 Central Park South, Wasserman and the Springfield Mall.

Provision for Income Taxes

Provision for income taxes was $3,048,000 for the three months ended September 30, 2007, compared to $382,000 for the prior year’s three months, an increase of $2,666,000. This increase results primarily from two H Street corporations which we consolidate as of April 30, 2007, the date we acquired the remaining 50% of these corporations we did not previously own (we previously accounted for our 50% interest on the equity method). Beginning on January 1, 2008, these corporations will elect to be treated as real estate investment trusts under Sections 856-860 of the Internal Revenue Code of 1986, as amended, which will eliminate their Federal income tax provision to the extent that 100% of their taxable income is distributed to shareholders.

Income From Discontinued Operations

The combined results of operations of the assets related to discontinued operations for the three months ended September 30, 2007 and 2006 include Vineland, New Jersey, which was sold on July 16, 2007; Crystal Mall Two, which was sold on August 9, 2007; and Arlington Plaza, which was sold on October 17, 2007.

.

(Amounts in thousands)	For the Three Months Ended September 30,
	2007			2006
Revenues	$	334		$	2,608
Expenses		3,424			2,031
Net (loss) income		(3,090	)		577
Net gain on sale of Crystal Mall Two		19,893			—
Net gain on sale of H Street land		4,803			—
Net gain on sale of Vineland, New Jersey		1,708			—
Other		1,341
Income from discontinued operations, net of minority interest	$	24,655		$	577

61

Results of Operations – Three Months Ended September 30, 2007 and 2006 (continued)

EBITDA by Segment

Below are the details of the changes in EBITDA by segment for the three months ended September 30, 2007 from the three months ended September 30, 2006.

			Office									Temperature
(Amounts in thousands)	Total		New York		Washington, DC		Retail		Merchandise Mart			Controlled Logistics			Toys		Other
Three Months ended September 30, 2006	$	437,670	$	92,483	$	89,957	$	67,985	$	31,481		$	16,011		$	32,844	$	106,909
2007 Operations: Same store operations(1)				8,739		3,323		2,660		(5	)		(374	)
Acquisitions, dispositions and non-same store income and expenses				36,515		27,613		13,653		(6,220	)		608
Three Months ended September 30, 2007	$	496,787	$	137,737	$	120,893	$	84,298	$	25,256		$	16,245		$	36,868	$	75,490
% increase (decrease) in same store operations				9.4%		4.0%		4.2%		0.0%			(1.9)%

__________________________

(1) Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

62

Reconciliation of Net Income and EBITDA – Nine Months Ended September 30, 2007 and 2006

Below is a summary of net income and a reconciliation of net income to EBITDA⁽¹⁾ by segment for the nine months ended September 30, 2007 and 2006.

(Amounts in thousands)	For the Nine Months Ended September 30, 2007
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys		Other (2)
Property rentals	$	1,324,351		$	463,678		$	335,239		$	240,975		$	181,985		$	—		$	—	$	102,474
Straight-line rents:
Contractual rent increases		29,248			11,003			6,772			8,794			2,296			—			—		383
Amortization of free rent		29,244			14,747			11,962			555			1,021			—			—		959
Amortization of acquired below- market leases, net		58,810			32,895			3,178			19,119			130			—			—		3,488
Total rentals		1,441,653			522,323			357,151			269,443			185,432			—			—		107,304
Temperature Controlled Logistics		619,282			—			—			—			—			619,282			—		—
Tenant expense reimbursements		239,310			94,051			31,473			87,922			17,852			—			—		8,012
Fee and other income:
Tenant cleaning fees		33,398			40,820			—			—			—			—			—		(7,422	)
Management and leasing fees		12,894			3,323			10,711			1,234			11			—			—		(2,385	)
Lease termination fees		6,310			3,224			225			2,458			403			—			—		—
Other		29,318			12,081			10,799			1,170			6,029			—			—		(761	)
Total revenues		2,382,165			675,822			410,359			362,227			209,727			619,282			—		104,748
Operating expenses		1,193,857			288,155			133,038			125,861			101,565			492,510			—		52,728
Depreciation and amortization		380,876			107,895			84,607			59,026			35,782			60,330			—		33,236
General and administrative		170,790			14,778			20,540			20,070			21,982			32,691			—		60,729
Costs of acquisition not consummated		8,807			—			—			—			—			—			—		8,807
Total expenses		1,754,330			410,828			238,185			204,957			159,329			585,531			—		155,500
Operating income (loss)		627,835			264,994			172,174			157,270			50,398			33,751			—		(50,752	)
Income applicable to Alexander’s		35,114			567			—			560			—			—			—		33,987
Income applicable to Toys “R” Us		18,343			—			—			—			—			—			18,343		—
Income from partially owned entities		31,599			3,688			8,178			7,360			737			1,148			—		10,488
Interest and other investment income		231,890			1,810			4,609			387			292			2,116			—		222,676
Interest and debt expense		(469,659	)		(97,767	)		(96,331	)		(59,206	)		(39,069	)		(48,946	)		—		(128,340	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		17,699			—			—			—			—			—			—		17,699
Minority interest of partially owned entities		11,819			(2,182	)		—			112			—			10,405			—		3,484
Income (loss) before income taxes		504,640			171,110			88,630			106,483			12,358			(1,526	)		18,343		109,242
Provision for income taxes		(6,815	)		—			(3,914	)		(185	)		(743	)		(1,412	)		—		(561	)
Income (loss) from continuing operations		497,825			171,110			84,716			106,298			11,615			(2,938	)		18,343		108,681
(Loss) income from discontinued operations, net		24,592			—			24,332			3,000			—			—			—		(2,740	)
Income (loss) before allocation to minority limited partners		522,417			171,110			109,048			109,298			11,615			(2,938	)		18,343		105,941
Minority limited partners’ interest in the Operating Partnership		(44,270	)		—			—			—			—			—			—		(44,270	)
Perpetual preferred unit distributions of the Operating Partnership		(14,455	)		—			—			—			—			—			—		(14,455	)
Net income (loss)		463,692			171,110			109,048			109,298			11,615			(2,938	)		18,343		47,216
Interest and debt expense (1)		609,548			96,822			100,002			67,222			39,716			23,289			128,493		154,004
Depreciation and amortization (1)		500,247			106,885			93,959			61,815			36,212			28,788			123,194		49,394
Income tax expense (1)		34,419			2,052			7,738			185			743			672			20,250		2,779
EBITDA	$	1,607,906		$	376,869		$	310,717		$	238,520		$	88,286		$	49,811		$	290,280	$	253,393

EBITDA includes net gains on sale of real estate of $37,218, of which $24,696 is included in the Washington, DC office segment, $3,049 is included in the Retail segment and $9,473 is included in the Other segment. In addition, Other segment EBITDA includes a $100,060 net gain on mark-to-market of derivative instruments, a $17,699 net gain on sale of marketable equity securities, $8,807 of expense for costs of an acquisition not consummated and $1,677 of expense for our share of India Property Fund LP organization costs.

_______________________

See notes on page 65.

63

Reconciliation of Net Income and EBITDA – Nine Months Ended September 30, 2007 and 2006 (continued)

(Amounts in thousands)	For the Nine Months Ended September 30, 2006
				Office												Temperature
	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Toys			Other (2)
Property rentals	$	1,079,797		$	362,560		$	293,246		$	190,631		$	171,924		$	—		$	—		$	61,436
Straight-line rents:
Contractual rent increases		24,782			3,435			10,451			6,484			4,579			—			—			(167	)
Amortization of free rent		23,154			4,796			12,623			4,216			1,519			—			—			—
Amortization of acquired below- market leases, net		15,164			44			2,810			9,998			27			—			—			2,285
Total rentals		1,142,897			370,835			319,130			211,329			178,049			—			—			63,554
Temperature Controlled Logistics		573,177			—			—			—			—			573,177			—			—
Tenant expense reimbursements		191,181			77,544			23,136			73,131			15,245			—			—			2,125
Fee and other income:
Tenant cleaning fees		24,471			30,889			—			—			—			—			—			(6,418	)
Management and leasing fees		7,833			818			5,687			1,184			144			—			—			—
Lease termination fees		17,911			13,911			2,610			371			1,019			—			—			—
Other		21,018			8,545			6,552			1,290			4,628			—			—			3
Total revenues		1,978,488			502,542			357,115			287,305			199,085			573,177			—			59,264
Operating expenses		996,350			226,443			110,674			92,507			78,532			452,505			—			35,689
Depreciation and amortization		289,831			68,877			80,695			37,149			32,881			53,641			—			16,588
General and administrative		148,530			12,400			24,746			15,280			19,841			26,883			—			49,380
Total expenses		1,434,711			307,720			216,115			144,936			131,254			533,029			—			101,657
Operating income (loss)		543,777			194,822			141,000			142,369			67,831			40,148			—			(42,393	)
Income applicable to Alexander’s		7,569			586			—			535			—			—			—			6,448
Income applicable to Toys “R” Us		4,177			—			—			—			—			—			4,177			—
Income from partially owned entities		43,696			2,852			10,575			4,035			985			1,049			—			24,200
Interest and other investment income		137,186			478			1,067			647			209			2,789			—			131,996
Interest and debt expense		(339,118	)		(61,951	)		(74,260	)		(61,474	)		(20,024	)		(46,758	)		—			(74,651	)
Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate		65,527			—			—			—			—			—			—			65,527
Minority interest of partially owned entities		5,378			—			—			66			4			4,415			—			893
Income before income taxes		468,192			136,787			78,382			86,178			49,005			1,643			4,177			112,020
Provision for income taxes		(2,362	)		—			(778)			—			(334	)		(1,250	)		—			—
Income from continuing operations		465,830			136,787			77,604			86,178			48,671			393			4,177			112,020
Income from discontinued operations, net		37,865			—			20,768			9,247			5,744			2,107			—			(1	)
Income before allocation to minority limited partners		503,695			136,787			98,372			95,425			54,415			2,500			4,177			112,019
Minority limited partners’ interest in the Operating Partnership		(46,301	)		—			—			—			—			—			—			(46,301	)
Perpetual preferred unit distributions of the Operating Partnership		(17,030	)		—			—			—			—			—			—			(17,030	)
Net income		440,364			136,787			98,372			95,425			54,415			2,500			4,177			48,688
Interest and debt expense (1)		511,103			64,000			82,173			69,710			20,686			22,247			148,797			103,490
Depreciation and amortization (1)		400,014			71,393			92,620			41,703			33,308			25,601			101,637			33,752
Income tax (benefit) expense (1)		(3,287	)		—			6,940			—			334			595			(12,312	)		1,156
EBITDA	$	1,348,194		$	272,180		$	280,105		$	206,838		$	108,743		$	50,943		$	242,299		$	187,086

EBITDA includes net gains on sale of real estate of $44,611, of which $17,609 is included in the Washington, DC segment, $9,218 is included in the Retail segment, $4,835 is included in the Merchandise Mart segment, $2,107 is included in the Temperature Controlled Logistics segment and $10,842 is included in the Other segment. In addition, Other segment EBITDA includes a $65,527 net gain on sale of marketable equity securities and a $65,589 net gain on mark-to-market of derivative instruments.

________________________

See notes on the following page.

64

Reconciliation of Net Income and EBITDA – Nine Months Ended September 30, 2007 and 2006 (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 a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Other EBITDA is comprised of:

(Amounts in thousands)	For the Nine Months Ended June 30,
	2007			2006
Alexander’s	$	56,511		$	29,238
Hotel Pennsylvania		24,754			17,007
GMH		17,872			8,427
555 California Street (70% interest acquired on May 24, 2007)		18,513			—
Lexington MLP, formerly Newkirk MLP		15,006			34,804
Industrial warehouses		3,595			4,167
Other investments		9,171			10,425
		145,422			104,068
Investment income and other		229,385			192,145
Corporate general and administrative expenses		(53,882	)		(45,796	)
Minority limited partners’ interest in the Operating Partnership		(44,270	)		(46,301	)
Perpetual preferred unit distributions of the Operating Partnership		(14,455	)		(17,030	)
Costs of acquisition not consummated		(8,807	)		—
	$	253,393		$	187,086

65

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, Temperature Controlled Logistics revenues, hotel revenues, trade shows revenues, amortization of acquired below market leases, net of above market leases pursuant to SFAS No. 141 and 142, and fee income, were $2,382,165,000 for the nine months ended September 30, 2007, compared to $1,978,488,000 for the prior year’s nine months, an increase of $403,677,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)				Office												Temperature
Property rentals:	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Other
Increase (decrease) due to:
Acquisitions:
Manhattan Mall	$	37,700		$	25,601		$	—		$	12,099		$	—		$	—		$	—
1290 Avenue of the Americas		35,227			35,227			—			—			—			—			—
555 California Street		33,038			—			—			—			—			—			33,038
350 Park Avenue		23,873			23,873			—			—			—			—			—
H Street – (effect of consolidating from May 1, 2007, vs. equity method prior)		23,077			—			23,077			—			—			—			—
Former Toys “R” Us stores		14,973			—			—			14,973			—			—			—
Bruckner Plaza		5,530			—			—			5,530			—			—			—
1540 Broadway		3,619			407			—			3,212			—			—			—
Other		19,789			—			3,355			8,385			8,049			—			—
Development/Redevelopment:
2101 L Street – taken out of service		(4,368	)		—			(4,368	)		—			—			—			—
Bergen Town Center – portion out of service		(1,108	)		—			—			(1,108	)		—			—			—
Springfield Mall – portion out of service		243			—			—			243			—			—			—
Other		(4,507	)		—			(833	)		(442	)		—			—			(3,232	)
Amortization of acquired below market leases, net		43,646			32,851			368			9,121			103			—			1,203
Operations:
Leasing activity (see page 51)		58,247			33,529			16,422			6,101			(498	)		—			2,693
Hotel Pennsylvania		10,048			—			—			—			—			—			10,048	(1)
Trade shows		(271	)		—			—			—			(271	)		—			—
Total increase in property rentals		298,756			151,488			38,021			58,114			7,383			—			43,750
Temperature Controlled Logistics:
Increase due to acquisitions (ConAgra warehouses)		20,124			—			—			—			—			20,124			—
Increase due to operations		25,981			—			—			—			—			25,981	(2)		—
Total increase		46,105			—			—			—			—			46,105			—
Tenant expense reimbursements:
Increase due to:
Acquisitions/development		30,013			16,009			1,141			8,165			—			—			4,698
Operations		18,116			498	(3)		7,196			6,626			2,607			—			1,189
Total increase in tenant expense reimbursements		48,129			16,507			8,337			14,791			2,607			—			5,887
Fee and other income:
Increase (decrease) in:
Lease cancellation fee income		(11,601	)		(10,687	)(4)		(2,385	)		2,087			(616	)		—			—
BMS Cleaning fees		8,927			9,931			—			—			—			—			(1,004	)
Management and leasing fees		5,061			2,505			5,024			50			(133	)		—			(2,385	)
Other		8,300			3,536			4,247			(120	)		1,401			—			(764	)
Total increase (decrease) in fee and other income		10,687			5,285			6,886			2,017			652			—			(4,153	)
Total increase in revenues	$	403,677		$	173,280		$	53,244		$	74,922		$	10,642		$	46,105		$	45,484

_____________________

See Notes on the following page.

66

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Notes to the preceding tabular information:

(1) Revenue per available room (“REVPAR”) was $121.91 for the nine months ended September 30, 2007 compared to $101.52 for the prior year’s nine months.

(2) Primarily from (i) a $19,395 increase in transportation operations resulting from new transportation business in connection with the acquisition of the ConAgra warehouses in the fourth quarter of 2006, (ii) a $5,438 increase in managed warehouse operations (resulting in a $238 increase in EBITDA) as a result of a new management contract beginning in March 2007, and (iii) a $2,057 increase in owned warehouse operations. See page 68 for a discussion of AmeriCold’s gross margin.

(3) Reflects an increase in tenant expense reimbursements associated with higher operating expenses, offset by leases with new base-years as a result of space re-let.

(4) Primarily due to lease termination fee income received from MONY Life Insurance Company in connection with the termination of their 289,000 square foot lease at 1740 Broadway in 2006.

67

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $1,754,330,000 for the nine months ended September 30, 2007, compared to $1,434,711,000 for the prior year’s nine months, an increase of $319,619,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)				Office												Temperature
Operating:	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics			Other
Increase (decrease) due to:
Acquisitions:
1290 Avenue of the Americas	$	18,931		$	18,931		$	—		$	—		$	—		$	—		$	—
Manhattan Mall		17,298			9,823			—			7,475			—			—			—
555 California Street		16,076			—			—			—			—			—			16,076
350 Park Avenue		12,498			12,498			—			—			—			—			—
Former Toys stores		11,575			—			—			11,575			—			—			—
H Street – (effect of consolidating from May 1, 2007, vs. equity method prior)		10,529			—			10,529			—			—			—			—
1540 Broadway		2,309			748			—			1,561			—			—			—
Bruckner Plaza		2,183			—			—			2,183			—			—			—
Other		30,222			—			1,774			3,704			9,987			14,757			—
Development/Redevelopment:
2101 L Street – portion out of service		(2,596	)		—			(2,596	)		—			—			—			—
Bergen Town Center – portion out of service		(954	)		—			—			(954	)		—			—			—
Springfield Mall – portion out of service		(215	)		—			—			(215	)		—			—			—
Other		(3,355	)		—			(559	)		(262	)		—			—			(2,534	)
Operations:
Operations		79,954			19,712	(1)		13,216			8,287			12,527	(2)		25,248	(3)		964
Hotel activity		2,533			—			—			—			—			—			2,533
Trade shows activity		519			—			—			—			519			—			—
Total increase in operating expenses		197,507			61,712			22,364			33,354			23,033			40,005			17,039
Depreciation and amortization:
Increase due to:
Acquisitions/Development		72,809			33,776			3,453			17,545			—			5,197			12,838
Operations (due to additions to buildings and improvements)		18,236			5,242			459			4,332			2,901			1,492			3,810
Total increase in depreciation and amortization		91,045			39,018			3,912			21,877			2,901			6,689			16,648
General and administrative:
Increase (decrease) due to:
Acquisitions/Development and Other		13,519			2,653			—			3,830			—			5,679			1,357	(4)
Operations		8,741			(275	)		(4,206	) (5)		960			2,141			129			9,992	(6)
Total increase (decrease) in general and administrative		22,260			2,378			(4,206	)		4,790			2,141			5,808			11,349
Costs of acquisition not consummated		8,807			—			—			—			—			—			8,807
Total increase in expenses	$	319,619		$	103,108		$	22,070		$	60,021		$	28,075		$	52,502		$	53,843

_____________________________

(1) The $19,712 increase in New York Office operating expenses is primarily due to (i) a $7,500 increase in property level costs, (ii) an $8,547 increase in operating expenses of Building Maintenance Services, Inc., a wholly-owned subsidiary which provides cleaning, security and engineering services to New York office properties (for which the corresponding increase in BMS revenues is included in “other income”) and (iii) a $2,409 increase in bad debt expense for which there is no corresponding tenant expense reimbursement.

(2) Reflects an increase in real estate taxes as a result of a reassessment of 2006 ($2,800) and 2007 ($2,200), and from a $1,900 reversal of a reserve for bad debts in 2006.

(3) AmeriCold’s gross margin from comparable warehouses was $113,326 or 33.4% for the nine months ended September 30, 2007, compared to $111,888 or 32.5% for the nine months ended September 30, 2006, an increase of $1,438. Gross margin from transportation management services, managed warehouses and other non-warehouse activities was $13,047 for the nine months ended September 30, 2007, compared to $12,026 for the nine months ended September 30, 2006, an increase of $1,021.

(4) Primarily from India Property Fund organization costs in the current year’s nine months.

(5) Primarily from H Street litigation costs incurred in the prior year’s nine months.

(6) Primarily from an $8,811 increase in amortization of stock-based compensation.

68

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Income Applicable to Alexander’s

Our 32.8% share of Alexander’s net income (comprised of equity in net income or loss, management, leasing, development and commitment fees) was $35,114,000 for the nine months ended September 30, 2007, compared to $7,569,000 for the prior year’s nine months, an increase of $27,545,000. This increase was primarily due to (i) our $8,991,000 share of income in the current nine month period for the reversal of accrued stock appreciation rights compensation expense as compared to $18,356,000 for our share of expense in the prior year’s nine months, (ii) an increase of $3,101,000 in our equity in earnings of Alexander’s before stock appreciation rights and net gains on sales of condominiums, (iii) an increase of $2,504,000 in development fees in the current period, partially offset by (iv) our $4,580,000 share of Alexander’s net gain on sale of 731 Lexington Avenue condominiums in the prior year’s nine months.

Income Applicable to Toys

Our 32.8% share of Toys’ net income (comprised of equity in net income, interest income on loans receivable, and management fees) was $18,343,000 for the nine months ended September 30, 2007, compared to $4,177,000 for the prior year’s nine months, an increase of $14,166,000.

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the nine months ended September 30, 2007 and 2006.

Equity in Net Income (Loss):	For The Nine Months Ended September 30,
(Amounts in thousands)	2007			2006
H Street non-consolidated subsidiaries:
50% share of equity in net income (1)	$	5,923		$	8,376
Beverly Connection:
50% share of equity in net loss		(3,676	)		(7,867	)
Interest and fee income		8,492			9,199
		4,816			1,332
GMH Communities L.P:
13.5% in 2007 and 11.3% in 2006 share of equity in net income (2)		5,428			15
Lexington MLP:
7.1% in 2007 and 15.8% in 2006 share of equity in net income (3)		1,484			22,177
Other (4)		13,948			11,796
	$	31,599		$	43,696

________________________

(1) On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets and we now consolidate the accounts of these entities into our consolidated financial statements and no longer account for them under the equity method. Prior to the quarter ended September 30, 2006, these corporations were contesting our acquisition of H Street and impeded access to their financial information. Accordingly, we were unable to record our pro rata share of their unable to record our pro rata share of their earnings. During the quarter ended September 30, 2006, we recognized equity in net income of $8,376 from these entities of which $3,890 was for the periods from July 20, 2005 (date of acquisition) to December 31, 2005.

(2) We record our pro rata share of GMH’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 GCT files its financial statements. On July 31, 2006 GCT filed its annual report on Form 10-K for the year ended December 31, 2005, which restated the quarterly financial results of each of the first three quarters of 2005. On September 15, 2006 GCT filed its quarterly reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. Accordingly, our “equity in net income or loss from partially owned entities” for the nine months ended September 30, 2006 includes equity in net income of $15, which consists of (i) a $94 net loss representing our share of GMH’s fourth quarter results, net of adjustments to restate its first three quarters of 2005 and (ii) $109 of net income for our share of GMH’s 2006 earnings through June 30, 2006.

(3) Beginning on January 1, 2007, we record our pro rata share of Lexington MLP’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. Prior to the January 1, 2007, we recorded our pro rata share of Newkirk MLP’s (Lexington MLP’s predecessor) quarterly earnings current in our same quarter. Accordingly, our “equity in net income or loss from partially owned entities” for the nine months ended September 30, 2007 includes our share of Lexington MLP’s net income or loss for its six months ended June 30, 2007.

The decrease in our share of earnings from the prior year’s nine months is primarily due to (i) the current year including our share of Lexington MLP’s first and quarter results (lag basis) compared to the prior year’s nine months including our share of Newkirk MLP’s first, second and third quarter results, (ii) higher depreciation expense and amortization of above market lease intangibles in the current year as a result of Lexington’s purchase price accounting adjustments in connection with the merger of Newkirk MLP on December 31, 2006 and (iii) $10,842 for our share of net gains on sale of real estate in 2006.

(4)

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 Group LLC, and others.

69

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Interest and Other Investment Income

Interest and other investment income (mark-to-market of derivative positions, interest income on mortgage loans receivable, other interest income and dividend income) was $231,890,000 for the nine months ended September 30, 2007, compared to $137,186,000 for the prior year’s nine months, an increase of $94,704,000. This increase resulted primarily from:

(Amounts in thousands)
McDonalds derivative position – net gain of $102,803 in this year’s nine months compared to a net gain of $60,581 in the prior year’s nine months	$	42,222
Increase in interest income on higher average cash balances ($1,295,000 through September 30, 2007, compared to $391,000 for the prior year’s nine months)		36,930
GMH warrants derivative position – net loss of $16,370 in the prior year’s nine months (investment converted to common shares of GCT in the second quarter of 2006)		16,370
Sears Holdings derivative position – net gain of $18,611 in the prior year’s nine months (investment sold in the first quarter of 2006)		(18,611	)
Other derivatives – net loss of $2,743 in this year’s nine months compared to a net gain of 2,767 in the prior year’s nine months		(5,510	)
Other, net – primarily due to interest earned on higher average loans receivable and from prepayment premiums received upon loan repayments		23,303
	$	94,704

Interest and Debt Expense

Interest and debt expense was $469,659,000 for the nine months ended September 30, 2007, compared to $339,118,000 for the prior year’s nine months, an increase of $130,541,000. This increase was primarily due to (i) $96,532,000 from a $2.8 billion increase in outstanding mortgage debt due to property acquisitions, new property financings and refinancings and repayments, (ii) $53,295,000 from the November 20, 2006 issuance of $1 billion convertible senior debentures and the March 21, 2007 issuance of $1.4 billion convertible senior debentures, partially offset by (iii) an $22,054,000 increase in the amount of capitalized interest in connection with properties under development.

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

Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate was $17,699,000 and $65,527,000 for the nine months ended September 30, 2007, and 2006, respectively, and represents net gains on sale of marketable securities in each period.

Minority Interest of Partially Owned Entities

Minority interest of partially owned entities was income of $11,819,000 for the nine months ended September 30, 2007, compared to income of $5,378,000 for the prior year’s nine months and represents the minority partners’ pro rata share of the net income or loss of consolidated partially owned entities, including 1290 Avenue of the Americas, the 555 California Street complex, AmeriCold, 220 Central Park South, Wasserman and the Springfield Mall.

Provision For Income Taxes

The provision for income taxes was $6,815,000 for the nine months ended September 30, 2007, compared to $2,362,000 for the prior year’s nine months, an increase of $4,453,000. This increase results from two H Street corporations, which we consolidate as of April 30, 2007, the date we acquired the remaining 50% of these corporations we did not previously own (we previously accounted for our 50% investment on the equity method). Beginning on January 1, 2008, these corporations will elect to be treated as real estate investment trusts under Sections 856-860 of the Internal Revenue Code of 1986, as amended, which will eliminate their Federal income tax provision to the extent that 100% of their taxable income is distributed to shareholders.

70

Results of Operations – Nine Months Ended September 30, 2007 and 2006 (continued)

Income From Discontinued Operations

The combined results of operations of the assets related to discontinued operations for the nine months ended September 30, 2007 and 2006 include Vineland, New Jersey, which was sold on July 16, 2007; Crystal Mall Two, which was sold on August 9, 2007; Arlington Plaza, which was sold on October 17, 2007; 33 North Dearborn Street, which was sold on March 14, 2006; 424 Sixth Avenue, which was sold on March 13, 2006 and 1919 South Eads Street, which was sold on June 22, 2006.

(Amounts in thousands)	For the Nine Months Ended September 30,
	2007			2006
Revenues	$	1,746		$	12,820
Expenses		4,899			8,724
Net (loss) income		(3,153	)		4,096
Net gains on sale of real estate		27,745			33,769
Income from discontinued operations, net of minority interest	$	24,592		$	37,865

EBITDA by Segment

Below are the details of the changes in EBITDA by segment for the nine months ended September 30, 2007 from the nine months ended September 30, 2006.

			Office										Temperature
(Amounts in thousands)	Total		New York		Washington, DC		Retail			Merchandise Mart			Controlled Logistics			Toys		Other
Nine months ended September 30, 2006	$	1,348,194	$	272,180	$	280,105	$	206,838		$	108,743		$	50,943		$	242,299	$	187,086
2007 Operations: Same store operations(1)				25,516		12,585		4,823			(2,720	)		(2,519	)
Acquisitions, dispositions and non-same store income and expenses				79,173		18,057		26,859			(17,737	)		1,387
Nine months ended September 30, 2007	$	1,607,906	$	376,869	$	310,747	$	238,520		$	88,286		$	49,811		$	290,280	$	253,393
% increase (decrease) in same store operations				9.4%		5.1%		2.6%	(2)		(2.3)%	(3)		(4.1)%

__________________________

(1) Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

(2) The same store increase would be 4.4% exclusive of the effect of tenants vacating 47,550 square feet of New York City retail space in December 2006, at an average rent of $61.00 per square foot. As of September 30, 2007, 10,600 of this square feet has been re-leased at an initial rent of $204.00 per square foot.

(3) Reflects income of $1,900 in 2006 from the reversal of a reserve for bad debts on receivables arising from the straight-lining of rents. The same store operations decreased by 0.7% exclusive of this item.

71

Liquidity and Capital Resources – Nine Months ended September 30, 2007 and 2006

Cash Flows for the Nine Months Ended September 30, 2007

Our cash and cash equivalents was $834,274,000 at September 30, 2007, a $1,399,043,000 decrease over the balance at December 31, 2006. This decrease resulted from $3,065,557,000 of net cash used in investing activities, partially offset by, $1,179,421,000 of net cash provided by financing activities and $487,093,000 of net cash provided by operating 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 our 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 common and preferred shareholders, as well as acquisition and development costs.

Our consolidated outstanding debt was $12,576,484,000 at September 30, 2007, a $3,021,686,000 increase over the balance at December 31, 2006. This increase resulted primarily from the issuance of $1,400,000,000 of convertible senior debentures due 2026 and from mortgage debt associated with asset acquisitions and property refinancings during the current quarter. As of September 30, 2007 and December 31, 2006, our revolving credit facilities had a $94,000,000 balance. During 2007 and 2008, $51,689,000 and $538,198,000 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 $3,104,451,000 at September 30, 2007, a $218,556,000 decrease from the balance at December 31, 2006. This decrease resulted primarily from our $297,906,000 share of Toys’ decrease in outstanding debt.

Cash flows provided by operating activities of $487,093,000 was primarily comprised of (i) net income of $463,692,000, after adjustments of $125,150,000 for non-cash items, including depreciation and amortization expense, net gains from derivative positions, the effect of straight-lining of rental income, equity in net income of partially owned entities, minority interest expense, (ii) distributions of income from partially owned entities of $18,047,000, partially offset by, (iii) the net change in operating assets and liabilities of $119,796,000.

Net cash used in investing activities of $3,065,557,000 was primarily comprised of (i) acquisitions of real estate of $2,775,982,000, (ii) investments in notes and mortgage loans receivable of $211,942,000, (iii) deposits in connection with real estate acquisitions and pre-acquisition costs of $21,231,000, (iv) investments in partially owned entities of $201,432,000, (v) development and redevelopment expenditures of $231,575,000, (vi) investments in marketable securities of $152,683,000, partially offset by, (vii) proceeds received from repayments on mortgage loans receivable of $211,942,000 and (viii) proceeds received from sales of real estate of $217,941,000.

Net cash provided by financing activities of $1,179,421,000 was primarily comprised of (i) proceeds from borrowings of $2,517,105,000, of which $1,372,000,000 were proceeds received from the offering of the 2.85% convertible senior debentures due 2027, partially offset by, (ii) repayments of borrowings of $727,730,000, (iii) dividends paid on common shares of $387,268,000, (iv) purchases of marketable securities in connection with the legal defeasance of mortgage notes payable of $109,092,000, (v) distributions to minority partners of $62,169,000, and (vi) dividends paid on preferred shares of $42,940,000.

Capital Expenditures

Our capital expenditures consist of expenditures to maintain assets, tenant improvements 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.

72

Liquidity and Capital Resources – Nine Months ended September 30, 2007 and 2006 (continued)

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, 2007.

				Office												Temperature
(Amounts in thousands)	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics		Other
Capital Expenditures (Accrual basis):
Expenditures to maintain the assets:
Recurring	$	40,047		$	9,380		$	8,808		$	1,477		$	9,172		$	11,188	$	22
Non-recurring		—			—			—			—			—			—		—
Total		40,047			9,380			8,808			1,477			9,172			11,188		22
Tenant improvements:
Recurring		61,107			25,781			17,472			2,184			15,670			—		—
Non-recurring		260			—			—			260			—			—		—
Total		61,367			25,781			17,472			2,444			15,670			—		—
Leasing Commissions:
Recurring		29,311			18,581			5,871			2,228			2,631			—		—
Non-recurring		381			—			—			381			—			—		—
Total		29,692			18,581			5,871			2,609			2,631			—		—
Tenant improvements and leasing commissions:
Per square foot	$	21.75		$	48.69		$	14.93		$	10.40		$	17.17
Per square foot per annum	$	3.12		$	5.41		$	2.53		$	1.21		$	2.82
Percentage of initial rent		7.7%			7.4%			7.1%			3.6%			10.8%
Total Capital Expenditures and Leasing Commissions (accrual basis)	$	131,106		$	53,742		$	32,151		$	6,530		$	27,473		$	11,188	$	22
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods		49,843			13,420			25,115			3,368			7,940			—		—
Expenditures to be made in future periods for the current period		(63,695	)		(32,594	)		(16,873	)		(3,797	)		(10,431	)		—		—
Total Capital Expenditures and Leasing Commissions (Cash basis)	$	117,254		$	34,568		$	40,393		$	6,101		$	24,982		$	11,188	$	22
Development and Redevelopment Expenditures (1):
Bergen Town Center	$	41,043		$	—		$	—		$	41,043		$	—		$	—	$	—
2101 L Street		28,387			—			28,387			—			—			—		—
Crystal Mall Two		26,895			—			26,895			—			—			—		—
Wasserman venture		26,893			—			—			—			—			—		26,893
Green Acres Mall		26,830			—			—			26,830			—			—		—
North Bergen, New Jersey (Ground-up development)		14,493			—			—			14,493			—			—		—
220 Central Park South		12,400			—			—			—			—			—		12,400
Springfield Mall		4,412			—			—			4,412			—			—		—
888 Seventh Avenue		4,211			4,211			—			—			—			—		—
Other		46,011			2,953			21,353			12,596			—			—		9,109
	$	231,575		$	7,164		$	76,635		$	99,374		$	—		$	—	$	48,402

_______________________

(1) Excludes development expenditures of partially owned, non-consolidated investments.

73

Liquidity and Capital Resources – Nine Months ended September 30, 2007 and 2006 (continued)

Cash Flows for the Nine Months Ended September 30, 2006

Our cash and cash equivalents was $386,882,000 at September 30, 2006, a $92,378,000 increase over the balance at December 31, 2005. This increase resulted from $486,838,000 of net cash provided by operating activities, $374,854,000 of net cash provided by financing activities, partially offset by $769,314,000 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 our cash requirements include proceeds from debt financings, including mortgage loans and corporate level unsecured borrowings; our $1 billion revolving credit facility; 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 common and preferred shareholders, as well as acquisition and development costs.

Our consolidated outstanding debt was $7,382,460,000 at September 30, 2006, a $1,139,334,000 increase over the balance at December 31, 2005. This increase resulted primarily from debt associated with asset acquisitions and property refinancings during 2006.

Our share of debt of unconsolidated subsidiaries was $3,286,180,000 at September 30, 2006, a $283,834,000 increase over the balance at December 31, 2005. This increase resulted primarily from our $92,120,000 share of an increase in Toys “R” Us outstanding debt and from debt associated with asset acquisitions and refinancings.

Cash flows provided by operating activities of $486,838,000 was primarily comprised of (i) net income of $440,364,000, after adjustments of $96,823,000 for non-cash items, including depreciation and amortization expense, the effect of straight-lining of rental income, minority interest expense and net gains on sale of real estate and assets other than depreciable real estate, (ii) distributions of income from partially-owned entities of $27,518,000, partially offset by, (iii) the net change in operating assets and liabilities of $77,867,000.

Net cash used in investing activities of $769,314,000 was primarily comprised of (i) investments in notes and mortgage loans receivable of $361,841,000, (ii) capital expenditures of $139,751,000, (iii) development and redevelopment expenditures of $156,051,000, (iv) investments in partially-owned entities of $112,729,000, (v) acquisitions of real estate of $572,472,000, (vi) investments in marketable securities of $83,698,000, (vii) deposits in connection with real estate acquisitions, including pre-acquisition costs, of $21,676,000, (viii) restricted cash, including mortgage escrows, of $2,527,000, partially offset by, (ix) proceeds received on the settlement of derivatives (primarily Sears Holdings) of $135,028,000, (x) proceeds from the sale of real estate of $110,388,000, (xi) distributions of capital from partially-owned entities of $108,779,000, (xii) proceeds from the sale of, and returns of investment in, marketable securities of $157,363,000, and (xiii) proceeds from  repayments on notes and mortgages receivable of $169,746,000.

Net cash provided by financing activities of $374,854,000 was primarily comprised of (i) proceeds from borrowings of $1,807,091,000, (ii) proceeds from the issuance of preferred units of $43,862,000, (iii) proceeds of $9,510,000 from the exercise by employees of share options, partially offset by, (iv) dividends paid on common shares of $339,844,000, (v) repayments of borrowings of $802,785,000, (vi) purchases of marketable securities in connection with the legal defeasance of mortgage notes payable of $174,254,000, (vii) dividends paid on preferred shares of $43,257,000, (viii) distributions to minority partners of $65,303,000 and (ix) debt issuance costs of $15,166,000.

74

Liquidity and Capital Resources – Nine Months ended September 30, 2007 and 2006 (continued)

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, 2006.

(Amounts in thousands)				Office												Temperature
Capital Expenditures (Accrual basis):	Total			New York			Washington, DC			Retail			Merchandise Mart			Controlled Logistics		Other
Expenditures to maintain the assets:
Recurring	$	35,863		$	9,260		$	13,459		$	618		$	7,690		$	1,520	$	3,316
Non-recurring		2,021			—			2,021			—			—			—		—
Total		37,884			9,260			15,480			618			7,690			1,520		3,316
Tenant improvements:
Recurring		75,007			38,493			22,059			4,910			9,545			—		—
Non-recurring		1,737			—			89			1,648			—			—		—
Total		76,744			38,493			22,148			6,558			9,545			—		—
Leasing Commissions:
Recurring		25,636			17,640			5,218			2,049			729			—		—
Non-recurring		290			—			32			258			—			—		—
Total		25,926			17,640			5,250			2,307			729			—		—
Tenant improvements and leasing commissions:
Per square foot	$	19.46		$	38.83		$	16.21		$	7.92		$	9.97
Per square foot per annum	$	2.33		$	4.03		$	2.42		$	0.64		$	1.59
Percentage of initial rent		7.0%			8.0%			7.7%			2.9%			6.6%
Total Capital Expenditures and Leasing Commissions (accrual basis)	$	140,554		$	65,393		$	42,878		$	9,483		$	17,964		$	1,520	$	3,316
Adjustments to reconcile accrual basis to cash basis:
Expenditures in the current year applicable to prior periods		49,122			21,324			22,736			768			4,294			—		—
Expenditures to be made in future periods for the current period		(64,003	)		(33,494	)		(19,787	)		(8,184	)		(2,538	)		—		—
Total Capital Expenditures and Leasing Commissions (Cash basis)	$	125,673		$	53,223		$	45,827		$	2,067		$	19,720		$	1,520	$	3,316
Development and Redevelopment Expenditures: (1)
North Bergen, New Jersey (Ground-up development)	$	27,294		$	—		$	—		$	27,294		$	—		$	—	$	—
Green Acres Mall		26,235			—			—			26,235			—			—		—
Wasserman Venture		24,422			—			—			—			—			—		24,422
Bergen Town Center		15,582			—			—			15,582			—			—		—
Crystal Plazas (PTO)		9,671			—			9,671			—			—			—		—
7 W. 34th Street		8,883			—			—			—			8,883			—		—
220 Central Park South		8,646			—			—			—			—			—		8,646
1740 Broadway		8,127			8,127			—			—			—			—		—
2101 L Street		2,582			—			2,582			—			—
640 Fifth Avenue		1,729			1,729			—			—			—			—		—
Crystal Mall Two		1,609			—			1,609			—			—
Other		13,244			668			1,678			9,073			—			—		1,825
	$	148,024		$	10,524		$	15,540		$	78,184		$	8,883		$	—	$	34,893

___________________

(1) Excludes development expenditures of partially owned, non-consolidated investments.

75

SUPPLEMENTAL INFORMATION

Three Months Ended September 30, 2007 vs. Three Months Ended June 30, 2007

Below are the details of the changes in EBITDA by segment for the three months ended September 30, 2007 from the three months ended June 30, 2007.

			Office											Temperature
(Amounts in thousands)	Total		New York			Washington, DC			Retail		Merchandise Mart			Controlled Logistics			Toys		Other
For the three months ended June 30, 2007	$	526,682	$	124,595		$	98,676		$	79,328	$	30,709		$	17,422		$	39,324	$	136,628
2007 Operations: Same store operations(1)				186			(2,042	)		742		84			(831	)
Acquisitions, dispositions and non-same store income and expenses				12,956			24,259			4,228		(5,537	)		(346	)
For the three months ended September 30, 2007	$	496,787	$	137,737		$	120,893		$	84,298	$	25,256		$	16,245		$	36,868	$	75,490
% increase (decrease) in same store operations				0.2%	(2)		(2.3)%	(2)		1.0%		0.2%	(3)		(4.0)%	(3)

______________________________________

(1) Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

(2) Reflects a seasonal increase in utility costs during the third quarter, of which $4,648 relates to the New York portfolio and $1,597 relates to the Washington, DC portfolio. Same store operations exclusive of the seasonal increase in utilities increased by 4.6% for the New York portfolio and decreased by 0.4% for the Washington, DC portfolio.

(3) Results primarily from seasonality of operations.

The following table reconciles Net income to EBITDA for the quarter ended June 30, 2007.

				Office								Temperature
(Amounts in thousands)	Total			New York		Washington, DC		Retail		Merchandise Mart		Controlled Logistics			Toys			Other
Net income (loss) for the three months ended June 30, 2007	$	165,920		$	55,064	$	29,961	$	33,756	$	5,679	$	(557	)	$	(20,029	)	$	62,046
Interest and debt expense		202,843			31,831		32,095		22,478		13,264		7,735			40,984			54,456
Depreciation and amortization		165,990			36,600		32,831		22,912		11,525		9,740			33,303			19,079
Income tax expense		(8,071	)		1,100		3,789		182		241		504			(14,934	)		1,047
EBITDA for the three months ended June 30, 2007	$	526,682		$	124,595	$	98,676	$	79,328	$	30,709	$	17,422		$	39,324		$	136,628

76

FUNDS FROM OPERATIONS (“FFO”)

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income or loss determined in accordance with Generally Accepted Accounting Principles (“GAAP”), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as disclosed in our Consolidated Statements of Cash Flows. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity.

FFO and FFO per diluted share are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO and FFO per diluted share should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. We believe that FFO and FFO per diluted share are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs.

The calculations of both the numerator and denominator used in the computation of income per share are disclosed in footnote 12 - Income Per Share, in the notes to our consolidated financial statements on page 26 of this Quarterly Report on Form 10-Q.

FFO applicable to common shares plus assumed conversions was $221,199,000, or $1.35 per diluted share for the three months ended September 30, 2007, compared to $204,535,000, or $1.31 per diluted share for the prior year’s quarter. FFO applicable to common shares plus assumed conversions was $773,457,000, or $4.71 per diluted share for the nine months ended September 30, 2007, compared to $646,881,000, or $4.17 per diluted share for the prior years nine months. Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.”

(Amounts in thousands except per share amounts)	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
Reconciliation of Net Income to FFO:	2007			2006			2007			2006
Net income	$	130,841		$	127,983		$	463,692		$	440,364
Depreciation and amortization of real property		117,148			86,235			325,324			246,834
Net gains on sale of real estate		(22,942	)		—			(22,942	)		(33,769	)
Proportionate share of adjustments to equity in net income of Toys to arrive at FFO:
Depreciation and amortization of real property		17,949			13,468			68,984			41,391
Net gains on sale of real estate		—			(329	)		(493	)		—
Income tax effect of above adjustments		(6,282	)		(5,190	)		(23,972	)		(16,031	)
Proportionate share of adjustments to equity in net income of partially owned entities, excluding Toys, to arrive at FFO:
Depreciation and amortization of real property		13,506			14,058			36,091			34,155
Net gains on sale of real estate		(8,980	)		(10,842	)		(8,980	)		(10,842	)
Minority limited partners’ share of above adjustments		(11,070	)		(11,729	)		(37,570	)		(27,849	)
FFO		230,170			213,654			800,134			674,253
Preferred share dividends		(14,295	)		(14,351	)		(42,886	)		(43,162	)
FFO applicable to common shares		215,875			199,303			757,248			631,091
Interest on 3.875% exchangeable senior debentures		5,256			5,093			15,768			15,281
Series A convertible preferred dividends		68			139			441			509
FFO applicable to common shares plus assumed conversions	$	221,199		$	204,535		$	773,457		$	646,881
Reconciliation of Weighted Average Shares:		151,990			141,684			151,739			141,413
Weighted average common shares outstanding
Effect of dilutive securities:
Employee stock options and restricted share awards		6,407			8,174			6,743			7,935
3.875% exchangeable senior debentures		5,559			5,531			5,559			5,531
Series A convertible preferred shares		116			239			172			289
Denominator for diluted FFO per share		164,072			155,628			164,213			155,168
FFO applicable to common shares plus assumed conversions per diluted share	$	1.35		$	1.31		$	4.71		$	4.17

77

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to fluctuations in market interest rates. Market interest rates are highly 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 share amounts)	As at September 30, 2007						As at December 31, 2006
	Balance		Weighted Average Interest Rate	Effect of 1% Change In Base Rates			Balance		Weighted Average Interest Rate
Consolidated debt:
Variable rate	$	675,822	6.59%	$	6,758		$	728,363	6.48%
Fixed rate		11,900,662	5.25%		—			8,826,435	5.56%
	$	12,576,484	5.32%		6,758		$	9,554,798	5.63%
Pro-rata share of debt of non- consolidated entities (non-recourse):
Variable rate – excluding Toys	$	135,614	7.24%		1,356		$	162,254	7.31%
Variable rate – Toys		949,218	7.74%		9,492			1,213,479	7.03%
Fixed rate (including $1,023,797, and $1,057,422 of Toys debt in 2007 and 2006)		2,019,619	6.89%		—			1,947,274	6.95%
	$	3,104,451	7.17%		10,848		$	3,323,007	7.00%
Minority limited partners’ share of above					(1,761	)
Total change in annual net income				$	15,845
Per share-diluted				$	0.10

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. In addition, we have notes and mortgage loans receivables aggregating $295,889,000, as of September 30, 2007, which are based on variable rates and partially mitigate our exposure to a change in interest rates.

Fair Value of Our Debt

The carrying amount of our debt exceeds its aggregate fair value, 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, by approximately $421,002,000 at September 30, 2007.

Derivative Instruments

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our economic interest in McDonald’s common shares. Because these derivatives do not qualify for hedge accounting treatment, the gains or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our investment income or expense. During the three and nine months ended September 30, 2007, we recognized net gains aggregating approximately $18,606,000 and $100,060,000 respectively, from these positions, after all expenses and LIBOR charges.

78

Item 4. Controls and Procedures

Disclosure Controls and Procedures: The Company’s management, with the participation of the Company’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, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2007, 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.

79

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, 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.

The following updates the discussion set forth under “Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2006.

Stop & Shop

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming we had no right to reallocate and therefore continue to collect $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty. 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 re-allocate 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. On April 16, 2007, the Court directed that discovery should be completed by December 2007, with a trial date to be determined thereafter. We intend to vigorously pursue our claims against Stop & Shop.

1290 Avenue of the Americas and 555 California Street

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 various of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump already received access to the books and records to which he was entitled, with the exception of certain documents which the general partners have requested from third parties but have not yet been received. Mr. Trump has sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  

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 would not be material to our consolidated financial statements.

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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, 2006.

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 TRUST
		(Registrant)
Date: October 30, 2007	By:	/s/ Joseph Macnow
		Joseph Macnow, Executive Vice President - Finance and Administration and Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

82

EXHIBIT INDEX

Exhibit No.
3.1		-	Amended and Restated Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 16, 1993 - Incorporated by reference to Exhibit 3(a) to Vornado Realty Trust’s Registration Statement on Form S-4/A (File No. 33-60286), filed on April 15, 1993	*
3.2		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on May 23, 1996 – Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 11, 2002	*
3.3		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 3, 1997 – Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 11, 2002	*
3.4		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on October 14, 1997 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.5		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 22, 1998 - Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.6		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on November 24, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.7		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on April 20, 2000 - Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000	*
3.8		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on September 14, 2000 - Incorporated by reference to Exhibit 4.6 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001	*
3.9		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, dated May 31, 2002, as filed with the State Department of Assessments and Taxation of Maryland on June 13, 2002 - Incorporated by reference to Exhibit 3.9 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*
	*		_______________________ Incorporated by reference.

83

3.10		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, dated June 6, 2002, as filed with the State Department of Assessments and Taxation of Maryland on June 13, 2002 - Incorporated by reference to Exhibit 3.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*
3.11		-	Articles of Amendment of Declaration of Trust of Vornado Realty Trust, dated December 16, 2004, as filed with the State Department of Assessments and Taxation of Maryland on December 16, 2004 – Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 21, 2004	*
3.12		-	Articles Supplementary Classifying Vornado Realty Trust’s $3.25 Series A Convertible Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share - Incorporated by reference to Exhibit 3.11 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*
3.13		-	Articles Supplementary Classifying Vornado Realty Trust’s $3.25 Series A Convertible Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, as filed with the State Department of Assessments and Taxation of Maryland on December 15, 1997- Incorporated by reference to Exhibit 3.10 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 11, 2002	*
3.14		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-6 8.25% Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share, as filed with the State Department of Assessments and Taxation of Maryland on May 1, 2000 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed May 19, 2000	*
3.15		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-8 8.25% Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 28, 2000	*
3.16		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-9 8.75% Preferred Shares, liquidation preference $25.00 per share, as filed with the State Department of Assessments and Taxation of Maryland on September 25, 2001 – Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*
3.17		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-10 7.00% Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share, as filed with the State Department of Assessments and Taxation of Maryland on November 17, 2003 – Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 18, 2003	*
3.18		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-11 7.20% Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share, as filed with the State Department of Assessments and Taxation of Maryland on May 27, 2004 - Incorporated by reference to Exhibit 99.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004	*
	*		_______________________ Incorporated by reference.

84

3.19		-	Articles Supplementary Classifying Vornado Realty Trust’s 7.00% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.27 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on August 20, 2004	*
3.20		-	Articles Supplementary Classifying Vornado Realty Trust’s 6.75% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.28 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on November 17, 2004	*
3.21		-	Articles Supplementary Classifying Vornado Realty Trust’s 6.55% Series D-12 Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 21, 2004	*
3.22		-	Articles Supplementary Classifying Vornado Realty Trust’s 6.625% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 21, 2004	*
3.23		-	Articles Supplementary Classifying Vornado Realty Trust’s 6.750% Series H Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value – Incorporated by reference to Exhibit 3.32 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on June 16, 2005	*
3.24		-	Articles Supplementary Classifying Vornado Realty Trust’s 6.625% Series I Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value – Incorporated by reference to Exhibit 3.33 to Vornado Realty Trust’s Registration Statement on Form 8-A (File No. 001-11954), filed on August 30, 2005	*
3.25		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-14 6.75% Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on September 14, 2005	*
3.26		-	Articles Supplementary Classifying Vornado Realty Trust’s Series D-15 6.875% Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share – Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on May 3, 2006, and Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on August 23, 2006	*
3.27		-	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	*
3.28		-	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	*
3.29		-	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	*
	*		_______________________ Incorporated by reference.

85

3.30		-	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	*
3.31		-	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	*
3.32		-	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	*
3.33		-	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	*
3.34		-	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	*
3.35		-	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	*
3.36		-	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	*
3.37		-	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	*
3.38		-	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	*
3.39		-	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	*
3.40		-	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	*
3.41		-	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	*
3.42		-	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	*
3.43		-	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	*
	*		_______________________ Incorporated by reference.

86

3.44		-	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	*
3.45		-	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	*
3.46		-	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	*
3.47		-	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	*
3.48		-	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	*
3.49		-	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	*
3.50		-	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	*
3.51		-	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	*
3.52		-	Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 – Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*
3.53		-	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	*
3.54		-	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	*
3.55		-	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	*
3.56		-	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	*
	*		_______________________ Incorporated by reference.

87

3.57		-	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	*
3.58		-	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	*
3.59		-	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	*
3.60		-	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	*
3.61		-	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	*
3.62		-	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	*
3.63		-	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	*
3.64		-	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	*
3.65		-	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	*
3.66		-	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	*
3.67		-	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	*
3.68		-	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	*
	*		_______________________ Incorporated by reference.

88

3.69		-	Vornado Realty Trust – Articles Supplementary, dated July 25, 2007 Incorporated by reference to Exhibit 3.69 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	*
3.70		-	Vornado Realty Trust – Articles of Amendment of Declaration of Trust, dated July 25, 2007 Incorporated by reference to Exhibit 3.70 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	*
3.71		-	Vornado Realty Trust – Certificate of Correction of Amendment of Declaration of Trust, dated July 25, 2007 Incorporated by reference to Exhibit 3.71 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	*
3.72		-	Vornado Realty Trust – Certificate of Correction of Amendment of Declaration of Trust, dated July 25, 2007 Incorporated by reference to Exhibit 3.72 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	*
3.73		-	Vornado Realty Trust – Certificate of Correction of Articles Supplementary, dated July 25, 2007 Incorporated by reference to Exhibit 3.73 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	*
3.74		-	Vornado Realty Trust – Certificate of Correction of Articles Supplementary, dated July 25, 2007 Incorporated by reference to Exhibit 3.74 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	*
3.75		-	Vornado Realty Trust – Articles of Restatement of Declaration of Trust, dated July 25, 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	*
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 March 31, 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	*
	*		_______________________ Incorporated by reference.

89

			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	**	-	Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 2, 1996 - Incorporated by reference to Exhibit 10(C)(3) to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 001-11954), filed March 13, 1997	*
10.5		-	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	*
10.6		-	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	*
10.7		-	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	*
10.8		-	Real Estate Retention Agreement between Vornado, Inc., Keen Realty Consultants, Inc. and Alexander’s, Inc., dated as of July 20, 1992 - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*
10.9		-	Amendment to Real Estate Retention Agreement between Vornado, Inc., Keen Realty Consultants, Inc. and Alexander’s, Inc., dated February 6, 1995 - Incorporated by reference to Exhibit 10(F)(2) to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995	*
10.10		-	Stipulation between Keen Realty Consultants Inc. and Vornado Realty Trust re: Alexander’s Retention Agreement - Incorporated by reference to Exhibit 10(F)(2) to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994	*
10.11	**	-	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	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

90

10.12		-	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	*
10.13	**	-	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	*
10.14	**	-	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	*
10.15		-	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	*
10.16		-	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	*
10.17		-	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	*
10.18	**	-	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	*
10.19	**	-	First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*
10.20		-	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	*
10.21		-	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	*
10.22		-	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	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

91

10.23		-	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	*
10.24		-	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	*
10.25		-	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	*
10.26		-	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	*
10.27	**	-	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	*
10.28		-	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	*
10.29		-	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	*
10.30		-	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	*
10.31	**	-	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	*
10.32	**	-	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	*
10.33	**	-	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	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

92

10.34		-	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	*
10.35	**	-	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	*
10.36	**	-	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	*
10.37	**	-	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	*
10.38		-	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	*
10.39	**	-	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	*
10.40	**	-	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	*
10.41		-	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	*
10.42	**	-	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	*
10.43	**	-	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	*
10.44	**	-	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	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

93

10.45		-	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, 2007	*
10.46	**	-	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, 2007	*
10.47		-	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	*
10.48		-	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	*
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.

94