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[SHEARMAN & STERLING LETTERHEAD]
April 26, 1995
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, NJ 07662
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Alexander's REIT Election
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Dear Sirs:
You have requested our opinion in connection with the proposed election
by Alexander's, Inc. ("Alexander's") to be treated for Federal income tax
purposes as a real estate investment trust (a "REIT"), within the meaning of
section 856(a) of the Internal Revenue Code of 1986, as amended (the "Code").
We understand that Alexander's intends to qualify as a REIT initially for its
taxable year ending December 31, 1995, and for subsequent taxable years.
In rendering this opinion, we have relied upon statements and
information contained in Alexander's letter to us, dated the date hereof and
delivered in connection with this opinion, and in the Exhibits to such letter
(such letter and Exhibits hereinafter referred to as the "Representation
Letter"). We have assumed that the statements made in the Representation Letter
are true and correct and that the Representation Letter has been executed by
appropriate and authorized officers of Alexander's.
In rendering this opinion, with your permission we have also made the
following assumptions:
(a) Alexander's will make a valid election to be taxed as a REIT for
its taxable year ending December 31, 1995, which election will not be
revoked or terminated.
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(b) Since January 1, 1995, the outstanding shares of
Alexander's have been held by at least 100 or more persons, and such
shares will continue to be held by 100 or more persons.
(c) Not more than 50 percent in value of the outstanding
shares of Alexander's will be owned directly or indirectly, actually or
constructively (within the meaning of section 542(a)(2) of the Code, as
modified by section 856(h) of the Code) by five or fewer individuals
(or entities treated as individuals for purposes of section 856(h) of
the Code), during the second half of every taxable year following the
taxable year ending December 31, 1995.
(d) Alexander's will not receive or accrue (and since
January 1, 1995, has not received or accrued) any amount from (i) any
corporation in which it owns (or since July 1, 1994, has owned) 10
percent or more of the total combined voting power of all shares of
stock entitled to vote or 10 percent or more of the total number of
shares of all classes of stock of such corporation, or (ii) any
unincorporated entity in which it owns (or since July 1, 1994, has
owned) an interest of 10 percent or more in the assets or net profits of
such person. For purposes of this assumption, ownership is determined
in accordance with section 856(d)(5) of the Code.
(e) Alexander's will request and maintain records
concerning ownership of its outstanding shares in accordance with
section 857(a)(2) of the Code and section 1.857-8 of the Treasury
Regulations.
(f) Alexander's will make distributions to its stockholders
sufficient to meet the 95 percent distribution requirements of section
857(a)(1) of the Code for the taxable year for which the REIT election
is made and every subsequent taxable year.
(g) For its taxable year ending December 31, 1995,
Alexander's will have a deficit in earnings and profits (as defined in
the Code) in excess of its accumulated earnings and profits (if any) as
of the close of its taxable year ended December 31, 1994.
Based on the foregoing and in reliance thereon and subject thereto and
on an analysis of the Code, Treasury Regulations thereunder, judicial authority
and current administrative rulings and such other laws and facts as we have
deemed relevant and necessary, we are of the opinion that Alexander's will be
organized in conformity with the requirements for qualification as a REIT under
the Code, and its proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT.
Qualification of Alexander's as a REIT will depend upon the
satisfaction by Alexander's and its subsidiaries (the "Company"), through
actual operating results, distribution levels, diversity of stock ownership and
otherwise, of the applicable asset
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composition, source of income, shareholder diversification, distribution,
recordkeeping and other requirements of the Code necessary for a corporation to
qualify as a REIT. No assurance can be given that actual results of the
Company's operations for any one taxable year will satisfy all such
requirements. We do not undertake to monitor whether the Company will actually
satisfy the various qualification tests, and we express no opinion whether the
Company actually will satisfy these various qualification tests in the future.
This opinion is based on current Federal income tax law, and we do not
undertake to advise you as to future changes in Federal income tax law that may
affect this opinion unless we are specifically engaged to do so. This opinion
relates solely to Federal income tax law, and we do not undertake to render
any opinion as to the taxation of the Company under any state or local
corporate franchise or income tax law. Furthermore, this opinion is rendered
solely for your benefit and is not to be relied upon by any other person without
our prior written consent.
Very truly yours,
/s/ Shearman & Sterling