<Page>

________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-Q

(MARK ONE)

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

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

                                       OR

   [ ]        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 1-9516

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

                      AMERICAN REAL ESTATE PARTNERS, L.P.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

<Table>
<S>                                              <C>
                    DELAWARE                                        13-3398766
        (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

     100 SOUTH BEDFORD ROAD, MT. KISCO, NY                            10549
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)
                                         (914) 242-7700
                      (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
</Table>

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

    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 [ ]

________________________________________________________________________________




<Page>

                                     INDEX

<Table>
<Caption>
                                                              PAGE NO.
                                                              --------
<S>                                                           <C>
PART I. FINANCIAL INFORMATION

    ITEM 1. FINANCIAL STATEMENTS

    Consolidated Balance Sheets
    March 31, 2003 and December 31, 2002....................      2

    Consolidated Statements of Earnings
    Three Months Ended March 31, 2003 and 2002..............      3

    Consolidated Statement of Changes In Partners' Equity
    and Comprehensive Income Three Months Ended
    March 31, 2003..........................................      4

    Consolidated Statements of Cash Flows
    Three Months Ended March 31, 2003 and 2002..............      5

    Notes to Consolidated Financial Statements..............      6

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS...     11

    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
     MARKET RISKS...........................................     16

    ITEM 4. CONTROLS AND PROCEDURES.........................     16

PART II. OTHER INFORMATION..................................     17

    Item 1. Legal Proceedings...............................     17

    Item 6. Exhibits and Reports on Form 8-K................     17

    Certification -- Section 906 of the Sarbanes-Oxley Act
     of 2002................................................     19

    Certification -- Section 302(a) of the Sarbanes-Oxley
     Act of 2002............................................     21
</Table>

                                       1




<Page>

                      AMERICAN REAL ESTATE PARTNERS, L.P.
                            FORM 10-Q MARCH 31, 2003

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

    The financial information contained herein is unaudited; however, in the
opinion of management, all adjustments necessary for a fair presentation of such
financial information have been included. All such adjustments are of a normal
recurring nature.

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<Table>
<Caption>
                                                              MARCH 31,    DECEMBER 31,
                                                                 2003          2002
                                                                 ----          ----
                                                                     (IN $000'S)
<S>                                                           <C>          <C>
                           ASSETS
Real estate leased to others:
    Accounted for under the financing method................  $  149,871    $  155,458
    Accounted for under the operating method, net of
      accumulated depreciation..............................     205,936       204,242
Investment in U.S. Government and Agency obligations........     320,653       336,051
Note receivable due from affiliate..........................     250,000       250,000
Cash and cash equivalents...................................      59,023        51,394
Marketable equity and debt securities.......................      27,969        26,728
Mortgages and notes receivable..............................      83,357        56,216
Equity interest in GB Holdings, Inc. .......................      35,683        37,280
Hotel, casino and resort operating properties net of
  accumulated depreciation:
    Stratosphere Corporation hotel and casino...............     168,231       171,430
    Hotel and resort........................................      43,653        44,346
Land and construction-in-progress...........................      38,719        40,415
Receivables and other assets................................      46,259        48,111
                                                              ----------    ----------
        Total...............................................  $1,429,354    $1,421,671
                                                              ----------    ----------
                                                              ----------    ----------

              LIABILITIES AND PARTNERS' EQUITY
Mortgages payable...........................................  $  169,813    $  171,848
Accounts payable, accrued expenses and other liabilities....      43,966        46,657
                                                              ----------    ----------
                                                                 213,779       218,505
                                                              ----------    ----------
Commitments and contingencies (Notes 2 and 3)
Limited partners:
    Preferred units, $10 liquidation preference, 5%
      cumulative pay-in-kind redeemable; 9,900,000
      authorized; 9,797,511 and 9,330,963 issued and
      outstanding as of March 31, 2003 and Dec. 31, 2002....      97,974        96,808
    Depositary units; 47,850,000 authorized; 47,235,484
      outstanding...........................................   1,082,853     1,071,857
General partner.............................................      46,669        46,422
Treasury units at cost:
    1,137,200 depositary units..............................     (11,921)      (11,921)
                                                              ----------    ----------
Partners' equity............................................   1,215,575     1,203,166
                                                              ----------    ----------
        Total...............................................  $1,429,354    $1,421,671
                                                              ----------    ----------
                                                              ----------    ----------
</Table>

                See notes to consolidated financial statements.

                                       2




<Page>

                      AMERICAN REAL ESTATE PARTNERS, L.P.
                            FORM 10-Q MARCH 31, 2003
                      CONSOLIDATED STATEMENTS OF EARNINGS
                                  (UNAUDITED)

<Table>
<Caption>
                                                                    THREE MONTHS ENDED
                                                                        MARCH 31,
                                                                  ----------------------
                                                                    2003          2002
                                                                    ----          ----
                                                                  (IN $000'S EXCEPT PER
                                                                        UNIT DATA)
<S>                                                               <C>           <C>
Revenues:
    Hotel and casino operating income.......................      $40,642       $37,151
    Land, house and condominium sales.......................        4,860        19,129
    Interest income on financing leases.....................        3,418         3,924
    Interest income on U.S. Government and Agency
      obligations and other investments.....................        4,560         6,104
    Rental income...........................................        7,491         6,876
    Hotel and resort operating income.......................        3,249         2,854
    Dividend and other income...............................          892           825
    Equity in (losses) earnings of GB Holdings, Inc.........         (857)        1,556
                                                                  -------       -------
                                                                   64,255        78,419
                                                                  -------       -------
Expenses:
    Hotel and casino operating expenses.....................       34,096        31,637
    Cost of land, house and condominium sales...............        4,103        13,829
    Hotel and resort operating expenses.....................        3,125         3,113
    Interest expense........................................        3,263         4,142
    Depreciation and amortization...........................        5,633         4,935
    General and administrative expenses.....................        1,660         1,648
    Rental property expenses................................        1,869         1,525
                                                                  -------       -------
                                                                   53,749        60,829
                                                                  -------       -------

Operating income............................................       10,506        17,590
Other gains and (losses):
    Provision for loss on real estate.......................         (200)        --
    Write-down of equity securities available for sale......         (961)        --
    Gain on sales and disposition of real estate............        1,138         1,639
    Minority interest in net earnings of Stratosphere
      Corporation...........................................        --             (407)
                                                                  -------       -------
Net earnings................................................      $10,483       $18,822
                                                                  -------       -------
                                                                  -------       -------

Net earnings attributable to (Note 10):
    Limited partners........................................      $10,274       $18,447
    General partner.........................................          209           375
                                                                  -------       -------
                                                                  $10,483       $18,822
                                                                  -------       -------
                                                                  -------       -------
Net earnings per limited partnership unit:
    Basic earnings..........................................      $  0.20       $  0.38
                                                                  -------       -------
                                                                  -------       -------

Weighted average limited partnership units outstanding......   46,098,284    46,098,284
                                                               ----------    ----------
                                                               ----------    ----------

    Diluted earnings........................................      $  0.18       $  0.33
                                                                  -------       -------
                                                                  -------       -------

Weighted average limited partnership units and equivalent
  partnership units outstanding.............................   55,641,655    56,377,391
                                                               ----------    ----------
                                                               ----------    ----------
</Table>

                See notes to consolidated financial statements.

                                       3




<Page>

                      AMERICAN REAL ESTATE PARTNERS, L.P.
                            FORM 10-Q MARCH 31, 2003
                CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS'
                        EQUITY AND COMPREHENSIVE INCOME
                       THREE MONTHS ENDED MARCH 31, 2003
                                  (UNAUDITED)

<Table>
<Caption>
                                                LIMITED PARTNERS' EQUITY
                                     GENERAL    ------------------------   HELD IN TREASURY     TOTAL
                                    PARTNER'S   DEPOSITARY    PREFERRED    ----------------   PARTNERS'
                                     EQUITY        UNITS        UNITS      AMOUNTS    UNITS     EQUITY
                                     ------        -----        -----      -------    -----     ------
                                                                (IN $000'S)
<S>                                 <C>         <C>           <C>          <C>        <C>     <C>
Balance, December 31, 2002........   $46,422    $1,071,857     $96,808     $(11,921)  1,137   $1,203,166
Comprehensive income:
    Net earnings..................       209        10,274       --           --       --         10,483
    Reversal of unrealized losses
      on securities available for
      sale........................        15           746       --           --       --            761
    Net unrealized gains on
      securities available for
      sale........................        23         1,142       --           --       --          1,165
                                     -------    ----------     -------     --------   -----   ----------
Comprehensive income..............       247        12,162       --           --       --         12,409
Pay-in-kind distribution..........     --           (1,166)      1,166        --       --         --
                                     -------    ----------     -------     --------   -----   ----------
Balance, March 31, 2003...........   $46,669    $1,082,853     $97,974     $(11,921)  1,137   $1,215,575
                                     -------    ----------     -------     --------   -----   ----------
                                     -------    ----------     -------     --------   -----   ----------
</Table>

    Accumulated other comprehensive income at March 31, 2003 was $1,684.

                See notes to consolidated financial statements.

                                       4




<Page>

                      AMERICAN REAL ESTATE PARTNERS, L.P.
                            FORM 10-Q MARCH 31, 2003
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2003       2002
                                                                ----       ----
                                                                  (IN $000'S)
<S>                                                           <C>        <C>
Cash flows from operating activities:
    Net earnings............................................  $ 10,483   $ 18,822
    Adjustments to reconcile net earnings to net cash
      provided by operating activities:
        Depreciation and amortization.......................     5,633      4,935
        Gain on sales and disposition of real estate........    (1,138)    (1,639)
        Provision for loss on real estate...................       200      --
        Write-down of equity securities available for
          sale..............................................       961      --
        Minority interest in net earnings of Stratosphere
          Corporation.......................................     --           407
        Equity in losses (earnings) of GB Holdings, Inc.....       857     (1,556)
        Changes in operating assets and liabilities:
            Decrease in land and construction-in progress...     1,755      4,473
            Increase in accounts payable, accrued expenses
              and other liabilities.........................     3,333      5,696
            Increase in receivables and other assets........      (438)    (2,826)
                                                              --------   --------
                Net cash provided by operating activities...    21,646     28,312
                                                              --------   --------
Cash flows from investing activities:
    Increase in mortgages and notes receivable..............   (30,963)   (12,222)
    Net proceeds from the sales and disposition of real
      estate................................................     3,279      5,554
    Principal payments received on leases accounted for
      under the financing method............................     1,386      1,626
    Additions to hotel, casino and resort operating
      property..............................................    (1,139)    (1,090)
    Additions to rental real estate.........................       (76)      (107)
    Decrease in investment in U.S. Government and Agency
      Obligations...........................................    15,398      6,278
    Decrease in due to affiliate............................     --          (181)
    Other...................................................       134         48
                                                              --------   --------
                Net cash used in investing activities.......   (11,981)       (94)
                                                              --------   --------
Cash flows from financing activities:
    Debt:
        Periodic principal payments.........................    (2,036)    (2,108)
                                                              --------   --------
                Net cash used in financing activities.......    (2,036)    (2,108)
                                                              --------   --------
Net increase in cash and cash equivalents...................     7,629     26,110
Cash and cash equivalents-beginning of period...............    51,394     61,015
                                                              --------   --------
Cash and cash equivalents-end of period.....................  $ 59,023   $ 87,125
                                                              --------   --------
                                                              --------   --------
Supplemental information:
    Cash payments for interest..............................  $  3,683   $  3,686
                                                              --------   --------
                                                              --------   --------
Supplemental schedule of noncash investing and financing
  activities:
    Reclassification of real estate to operating lease......  $  2,158   $  --
    Reclassification of real estate from financing lease....    (2,158)     --
    Reclassification from receivables and other assets......    (1,631)     --
    Reclassification to mortgages and notes receivable......     1,631      --
    Decrease in mortgages and notes receivable..............    (3,453)     --
    Decrease in deferred income.............................     2,565      --
    Increase in real estate accounted for under the
      operating method......................................       888      --
                                                              --------   --------
                                                              $  --      $  --
                                                              --------   --------
                                                              --------   --------
Net unrealized gains (losses) on securities available for
  sale......................................................  $  1,165   $ (1,917)
                                                              --------   --------
                                                              --------   --------
</Table>

                See notes to consolidated financial statements.

                                       5




<Page>

                      AMERICAN REAL ESTATE PARTNERS, L.P.
                            FORM 10-Q MARCH 31, 2003
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1. GENERAL

    The accompanying consolidated financial statements and related footnotes
should be read in conjunction with the consolidated financial statements and
related footnotes contained in the Company's annual report on Form 10-K for the
year ended December 31, 2002.

    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.

    The results of operations for the three months ended March 31, 2003 are not
necessarily indicative of the results to be expected for the full year. Hotel,
casino and resort operations are highly seasonal in nature and are not
necessarily indicative of results expected for the full year.

2. RELATED PARTY TRANSACTIONS

    a. A committee of the Board of Directors of the General Partner is in
advanced discussions concerning the possible acquisition by the Company of
interests in National Energy Group, Inc. and related companies from entities
owned by Carl C. Icahn ('Icahn'), the Chairman of the Board of the General
Partner. The committee has retained independent advisors and has been engaged in
evaluating the possible acquisition.

    b. The Company is a party to a license agreement with an affiliate of the
General Partner for a portion of office space at an annual rental of
approximately $135,000, plus its share of certain additional rent. Such
agreement was approved by the Audit Committee of the Board of Directors of the
General Partner (the 'Audit Committee'). For the three months ended March 31,
2003 and 2002 the Company paid rent of approximately $37,000 and $36,000,
respectively.

    c. Stratosphere Corp. ('Stratosphere'), a wholly-owned subsidiary, received
approximately $579,000 and $476,000 from affiliates of the General Partner as
reimbursement for administrative services performed by Stratosphere personnel
during the three months ended March 31, 2003 and 2002, respectively.

    d. As of May 1, 2003 affiliates of Icahn owned 8,477,139 Preferred Units and
39,706,836 Depositary Units.

    e. See Note 4 regarding Note Receivable -- Affiliate.

3. COMMITMENTS AND CONTINGENCIES

    a. In January 2002, the Cape Cod Commission (the 'Commission'), a regional
planning body created in 1989, concluded that the Company's New Seabury
development is within its jurisdiction (the 'Administrative Decision'). It is
the Company's position that the proposed residential and commercial development
is allowed under a special permit issued for the property in 1964 and is exempt
from the Commission's jurisdiction.

    In February 2002, New Seabury Properties LLC, the Company's subsidiary and
owner of the property, filed a civil complaint in Barnstable County
Massachusetts Superior Court appealing the Administrative Decision by the
Commission. On October 21, 2002 the Court vacated the Administrative Decision on
the grounds that the Commission's criteria for exercising their jurisdiction
were not adopted in accordance with statutory regulations. The Court directed
that the Commission properly adopt appropriate criteria for exercising their
jurisdiction and reconsider New Seabury Properties LLC's claim that its proposed
development is exempt from Commission review. The Company has also raised
constitutional claims against the Commission which were not resolved by the
Court's October 21, 2002 decision. The Company may appeal certain aspects of the
Court's rulings and may continue to pursue its

                                       6




<Page>

constitutional claims against the Commission. The Company cannot predict the
effect on the development process if it loses any appeal or if the Commission is
ultimately successful in asserting jurisdiction over the proposed development.

    b. Tiffiny Decorating Company ('Tiffiny'), a subcontractor to Great Western
Drywall ('Great Western'), filed a legal action against Stratosphere
Corporation, Stratosphere Development, LLC, American Real Estate Holdings
Limited Partnership (collectively referred to as the 'Stratosphere Parties'),
Great Western, Nevada Title and Safeco Insurance, Case No. A443926 in the Eighth
Judicial District Court of the State of Nevada. The legal action asserts claims
that include breach of contract, unjust enrichment and foreclosure of lien. The
Stratosphere Parties have filed a cross-claim against Great Western in that
action. Additionally, Great Western has filed a separate legal action against
the Stratosphere Parties setting forth the same disputed issues. That separate
action, Case No. A448299 in the Eighth Judicial Court of the State of Nevada,
has been consolidated with the case brought by Tiffiny.

    The initial complaint brought by Tiffiny asserts that Tiffiny performed
certain construction services at the Stratosphere and was not fully paid for
those services. Tiffiny claims the sum of $521,562 against Great Western, the
Statosphere Parties, and the other defendants, which the Stratosphere Parties
contend has been paid to Great Western for payment to Tiffiny.

    Great Western is alleging that it is owed payment from the Stratosphere
Parties for work performed and for delay and disruption damages. Great Western
is claiming damages in the sum of $3,935,438 plus interest, costs and legal fees
from the Stratosphere Parties. This amount apparently includes the Tiffiny
claim.

    The Stratosphere Parties have evaluated the project and have determined that
the amount of $1,004,059 (of which $195,953 and $371,873 were disbursed to
Tiffiny and Great Western, respectively) is properly due and payable to satisfy
all claims for the work performed, including the claim by Tiffiny. The remaining
amount has been segregated in a separate interest bearing account. The
Stratosphere Parties intend to vigorously defend the action for claims in excess
of $1,004,059.

    c. In addition, in the ordinary course of business, the Company, its
subsidiaries and other companies in which the Company has invested are parties
to various legal actions. In management's opinion, the ultimate outcome of such
legal actions will not have a material effect on the results of operations or
the financial position of the Company.

    d. In January 2002, Kmart Corp., ('Kmart') a tenant leasing seven properties
owned by the Company which represented approximately $1,374,000 in annual
rentals, filed a voluntary petition for reorganization under Chapter 11 of the
Federal Bankruptcy Code. Pursuant to an order of the Bankruptcy Court, four
leases were rejected representing approximately $713,000 in annual rents. Three
of the rejected properties are being held for sale. The Company previously
recorded a provision for loss on real estate of approximately $1.9 million, on
the four properties whose leases were rejected, in the year ended December 31,
2001. In April 2003, one of the leases representing approximately $242,000 in
annual rentals was assumed by Kmart and assigned to Home Depot. The Company has
not been notified regarding the two remaining leases representing approximately
$418,000 in annual rentals. The tenant is current in its rent payments on these
two leases. At March 31, 2003, the net book value of the seven properties was
approximately $6,499,000, which the Company believes is less than the estimate
of net realizable value.

4. NOTE RECEIVABLE -- AFFILIATE

    On December 27, 2001, the Company entered into a transaction with Carl C.
Icahn, Chairman of the Board of the General Partner, pursuant to which the
Company made a $250 million loan to Mr. Icahn. The loan is secured by securities
consisting of (i) approximately $290 million aggregate market value of the
Company's units owned by affiliates of Mr. Icahn (approximately 21.1 million
depositary units and 8.5 million preferred units) and (ii) shares of a private
company owned by Mr. Icahn, which shares have an aggregate book value of at
least $250 million, together with an irrevocable proxy on sufficient additional
shares of the private company so that the pledged shares and the shares covered
by the proxy equal in excess of 50% of the private company's shares. The private
company owns other

                                       7




<Page>

Icahn investments and does not own the Company's units. The loan is due on or
before December 27, 2003 and by law may not be renewed or extended. The loan
bears interest at a per annum rate equal to the greater of (i) 3.9% or (ii) 200
basis points over 90 day LIBOR to be reset each calendar quarter. The applicable
rate during the three months ended March 31, 2003 and 2002 was 3.9%. The loan
must be prepaid in an amount of up to $125 million to the extent that the
Company requests such funds for an investment opportunity and may be prepaid at
any time by Mr. Icahn. The Company entered into this transaction to earn
interest income on a secured investment. In the event of a loan default, the
Company would at its option, liquidate the shares of the private company or
reacquire its own units, or both, to satisfy the loan. Accrued interest income
of approximately $2.5 million was recorded on this loan in the three months
ended March 31, 2003 and 2002, and is included in 'Interest income on U.S.
Government and Agency obligations and other investments' in the Consolidated
Statements of Earnings. Interest is payable semi-annually and has been paid
through December 31, 2002. The terms of this transaction were reviewed and
approved by the Audit Committee.

5. HOTEL, CASINO AND RESORT OPERATING PROPERTIES

    a. Stratosphere Hotel and Casino

    The Company owns 100% of Stratosphere and consolidates Stratosphere in its
financial statements.

    Stratosphere owns and operates the Stratosphere Casino, Hotel & Tower,
located in Las Vegas Nevada, which is centered around the Stratosphere Tower
(the 'Tower'), the tallest free-standing observation tower in the United States.

    Stratosphere operates, among other things, the Tower, a hotel with 2,444
rooms and suites, a 97,000 square foot casino featuring approximately 1,474 slot
machines, 48 table games, a race and sports book, a keno lounge, a 160,000
square foot second level containing a retail center of approximately 46 shops
and a 650-seat Broadway Showroom, a 3,600-seat Outdoor Events Center, a 120-seat
entertainment lounge and parking for approximately 4,000 cars. The hotel has
seven themed restaurants and a New York style delicatessen.

    Stratosphere's operations for the three months ended March 31, 2003 and 2002
have been included in 'Hotel and casino operating income and expenses' in the
Consolidated Statements of Earnings. Hotel and casino operating expenses include
all expenses except for approximately $3,388,000 and $3,317,000 of depreciation
and amortization for the three months ended March 31, 2003 and 2002,
respectively. Such amounts have been included in 'Depreciation and amortization
expense' in the Consolidated Statements of Earnings.

    b. Hotel and Resort Operating Properties

    Hotel and resort operations for the three and nine months ended March 31,
2003 and 2002 have been included in 'Hotel and resort operating income and
expenses' in the Consolidated Statements of Earnings. Hotel and resort operating
expenses include all expenses except for approximately $742,000 and $394,000 of
depreciation and amortization for the three months ended March 31, 2003 and 2002
respectively. Such amounts have been included in 'Depreciation and amortization
expense' in the Consolidated Statements of Earnings.

6. EQUITY INTEREST IN GB HOLDINGS, INC. (SANDS HOTEL AND CASINO)

    The Company reflects its pro-rata equity interest in GB Holdings, Inc.
('GBH') under this caption in the Consolidated Balance Sheets. The Company owns
approximately 3.6 million shares, 36%, of GBH. GBH is the holding company for
the Sands Hotel and Casino (the 'Sands') located in Atlantic City, New Jersey.
The Sands operates a casino facility with approximately 79,000 square feet of
gaming space, a hotel with 511 rooms (including 57 suites) and related
amenities.

    'Equity in (losses) earnings of GB Holdings, Inc.' of ($857,000) and
$1,556,000 have been recorded in the Consolidated Statements of Earnings for the
three months ended March 31, 2003 and 2002, respectively.

                                       8




<Page>

7. MARKETABLE EQUITY AND DEBT SECURITIES

    The Company owns equity and debt securities of Philip Services Corp.
('Philip'). Philip stated in a recent Securities and Exchange Commission filing
that it intends to restructure its balance sheet and refinance its debt, which
may be accomplished through a Chapter 11 proceeding under the Federal Bankruptcy
Code.

    Based on a review of its Philip investments, management of the Company
determined to write-off the balance of its investment in the Philip common stock
by a charge to earnings of approximately $961,000; of this amount $761,000 was
previously charged to other comprehensive income in 2002, which was reversed in
2003, and included in the $961,000 charge to earnings in the three months ended
March 31, 2003.

8. MORTGAGES AND NOTES RECEIVABLE

    The Company owns Philip Term and Payment-in-kind ('PIK') notes in the
principal amount of approximately $32.7 million; the cost basis of these
investments is approximately $22.1 million, which management of the Company
believes approximates the amount recoverable.

    The Company has provided development financing for certain real estate
projects. The security for these loans is a pledge of the developers' ownership
interest in the properties. Such loans are subordinate to construction financing
and are generally referred to as mezzanine loans. The Company's mezzanine loans
accrue interest at approximately 22% per annum. However interest is not paid
periodically and is due at maturity or earlier from unit sales or refinancing
proceeds. The Company defers recognition of interest income on mezzanine loans,
prior to construction completion, pending receipt of principal and interest
payments.

    Upon construction completion, anticipated in the second half of 2003, the
Company will review the status of each loan to determine whether or not
recognition of interest income in the financial statements is appropriate.

    At March 31, 2003, the Company had funded three mezzanine loans in the
principal amount of approximately $54.2 million (of which approximately $31
million was funded in the three months ended March 31, 2003) and had deferred
approximately $6.5 million of accrued interest income for financial statement
purposes.

9. PREFERRED UNITS

    Pursuant to the terms of the Preferred Units, on February 21, 2003, the
Company declared its scheduled annual preferred unit distribution payable in
additional Preferred Units at the rate of 5% of the liquidation preference of
$10. The distribution was payable March 31, 2003 to holders of record as of
March 14, 2003. A total of 466,548 additional Preferred Units were issued. At
March 31, 2003, 9,797,511 Preferred Units are issued and outstanding.

10. EARNINGS PER SHARE

    Basic earnings per share are based on earnings after the preferred
pay-in-kind distribution to Preferred Unitholders.

    Diluted earnings per share uses net earnings attributable to limited partner
interests as the numerator with the denominator based on the weighted average
number of units and equivalent units outstanding. The Preferred Units are
considered to be equivalent units. The number of limited partnership units used
in the calculation of diluted income per limited partnership unit increased as
follows: 9,543,371 and 10,279,107 limited partnership units for the three months
ended March 31, 2003 and 2002, respectively, to reflect the effects of the
conversion of preferred units.

11. COMPREHENSIVE INCOME

    The components of comprehensive income include net income and certain
amounts reported directly in equity.

                                       9




<Page>

    Comprehensive income for the three months ended March 31, 2003 and 2002 is
as follows (in $000's):

<Table>
<Caption>
                                                                THREE MONTHS
                                                                    ENDED
                                                              -----------------
                                                              3/31/03   3/31/02
                                                              -------   -------
<S>                                                           <C>       <C>
Net income..................................................  $10,483   $18,822
Reversal of unrealized losses on securities available for
  sale......................................................      761     --
Net unrealized gains (losses) on securities available for
  sale......................................................    1,165    (1,917)
                                                              -------   -------
Comprehensive income........................................  $12,409   $16,905
                                                              -------   -------
                                                              -------   -------
</Table>

12. SEGMENT REPORTING

    The Company is engaged in five operating segments consisting of: (i) rental
real estate, (ii) hotel and resort operating properties, (iii) hotel and casino
operating properties, (iv) land sales, house and condominium development, and
(v) investment in securities including investment in other limited partnerships
and marketable equity and debt securities. The Company's reportable segments
offer different services and require different operating strategies and
management expertise. There have been no material changes in segment assets
since December 31, 2002.

    The Company assesses and measures segment operating results based on segment
earnings from operations as disclosed below. Segment earnings from operations
are not necessarily indicative of cash available to fund cash requirements nor
synonymous with cash flow from operations.

    During 2003, the Company realigned its management of its hotel and casino
investments. Previously, the Company's investment in GB Holdings, Inc. and the
results of its operations were considered as part of the Company's 'other
investments' segment. For the quarter ended March 31, 2002, $1,556,000
representing the Company's equity in GB Holdings, Inc.'s net income for the
period, has been reclassified from other investments to hotel and casino
operating income and earnings to conform to the 2003 presentation. This
reclassification has had no effect on total segment revenues or earnings for the
quarter ended March 31, 2002.

                                       10




<Page>

    The revenues and net earnings for each of the reportable segments are
summarized as follows for the three months ended March 31, 2003 and 2002 (in
$000's):

<Table>
<Caption>
                                                                THREE MONTHS
                                                                    ENDED
                                                              -----------------
                                                              3/31/03   3/31/02
                                                              -------   -------
<S>                                                           <C>       <C>
Revenues:
    Hotel and casino operating income.......................  $39,785   $38,707
    Land, house and condominium sales.......................    4,860    19,129
    Rental real estate......................................   10,909    10,800
    Hotel and resort operating income.......................    3,249     2,854
    Other investments.......................................    1,898     1,047
                                                              -------   -------
        Sub-total...........................................   60,701    72,537
Reconciling items -- primarily interest income on U.S.
  Government obligations and the Icahn note receivable......    3,554     5,882
                                                              -------   -------
        Total revenues......................................  $64,255   $78,419
                                                              -------   -------
                                                              -------   -------
Net earnings:
  Segment earnings:
    Hotel and casino operating properties...................  $ 5,689   $ 7,070
    Land, house and condominium development.................      757     5,300
    Rental real estate......................................    9,040     9,275
    Hotel and resort operating properties...................      124      (259)
    Other investments.......................................    1,898     1,047
                                                              -------   -------
        Total segment earnings..............................   17,508    22,433
Other expenses net..........................................   (7,025)   (3,611)
General partner's share of net income.......................     (209)     (375)
                                                              -------   -------
        Net earnings-limited partner unitholders............  $10,274   $18,447
                                                              -------   -------
                                                              -------   -------
</Table>

13. NEW ACCOUNTING PRONOUNCEMENTS

    As of January 1, 2002 the Company has adopted the Statement of Financial
Accounting Standards No. 144 (SFAS 144) 'Accounting for the Impairment or
Disposal of Long-Lived Assets.' Under SFAS No. 144, the properties sold by the
Company to third parties are considered to be discontinued operations. For the
three months ended March 31, 2003, the Company is not reporting discontinued
operations for the properties disposed of to third parties, which excludes those
grandfathered by the effective date of SFAS 144, during the period as the effect
of such presentation in the Company's Consolidated Statements of Earnings is not
material. The adoption of SFAS 144 has not had any material impact on the
Company's consolidated financial statements. In April 2002, the FASB issued SFAS
No. 145 which rescinds SFAS's Nos. 4, 44 and 64 which, among other things,
required all gains and losses on extinguishment of debt to be classified as an
extraordinary item. The Company has adopted SFAS No. 145 effective January 1,
2003. The adoption of SFAS 145 has not had any material impact on the Company's
Consolidated Financial Statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, 'forward looking statements' for
purposes of the safe harbor provided by Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended by
Public Law 104-67.

    Forward looking statements regarding management's present plans or
expectations involve risks and uncertainties and changing economic or
competitive conditions, as well as the negotiation of agreements with third
parties, which could cause actual results to differ from present plans or
expectations, and such differences could be material. Readers should consider
that such statements speak only as to the date hereof.

                                       11




<Page>

GENERAL

    The Company is a master limited partnership primarily engaged in acquiring
and managing real estate investments with a primary focus on office, retail,
industrial, hotel, gaming and residential properties.

    The Company believes that it will benefit from the diversification of its
portfolio of assets. To further its investment objectives, the Company may
consider the acquisition or seek effective control of land development companies
and other real estate operating companies which may have a significant inventory
of quality assets under development, as well as experienced personnel.
Additionally, in selecting future real estate investments, the Company intends
to focus on assets that it believes are undervalued in the real estate market,
which investments may require substantial liquidity to maintain a competitive
advantage. The Company believes that there are still opportunities available to
acquire investments that are undervalued. These may include commercial
properties, land, assets in the gaming and entertainment industries,
non-performing loans, the securities of entities which own, manage or develop
significant real estate assets, including limited partnership units and
securities issued by real estate investment trusts and the acquisition of debt
or equity securities of companies which may be undergoing restructuring and
under-performing properties that may require active asset management and
significant capital improvements.

    Acquisition opportunities in the real estate market for value-added
investors have become more competitive to source and the increased competition
may have some impact on the spreads and the ability to find quality assets that
provide returns that are sought. These investments may not be readily
financeable and may not generate immediate positive cash flow for the Company.
As such, they require the Company to maintain a strong capital base in order to
react quickly to these market opportunities as well as to allow the Company the
financial strength to develop or reposition these assets. While this may impact
cash flow in the near term and there can be no assurance that any asset acquired
by the Company will increase in value or generate positive cash flow, the
Company intends to focus on assets that it believes may provide opportunities
for long-term growth and further its objective to diversify its portfolio.

    The Company has made investments in the gaming industry and may consider
additional gaming industry investments and investments related to the
entertainment industry. Such investments may include additional casino
properties and those in the entertainment field, such as movie theater
interests, and the financing and investment in the movie production and
distribution industry. Such investments may include acquisitions from, or in
joint venture or co-management with, Icahn, the General Partner or their
affiliates, provided that the terms thereof are fair and reasonable to the
Company.

    The Company is also considering investments in the oil and gas industry. A
committee of the Board of Directors of the General Partner is in advanced
discussions concerning the possible acquisition by the Company of interests in
National Energy Group, Inc. and related companies from entities owned by
Carl C. Icahn, the Chairman of the Board of the General Partner. The committee
has retained independent advisors and has been engaged in evaluating the
possible acquisition.

    Historically, substantially all of the Company's real estate assets leased
to others have been net leased to single corporate tenants under long-term
leases. With certain exceptions, these tenants are required to pay all expenses
relating to the leased property and therefore the Company is not typically
responsible for payment of expenses, such as maintenance, utilities, taxes and
insurance associated with such properties.

    By the end of the year 2005, net leases representing approximately 22% of
the Company's net annual rentals from its real estate portfolio will be due for
renewal, and by the end of the year 2007, net leases representing approximately
35% of the Company's net annual rentals will be due for renewal. Since most of
the Company's properties are net-leased to single corporate tenants, it may be
difficult and time-consuming to re-let or sell those properties that existing
tenants decline to re-let or purchase, and therefore the Company may be required
to incur expenditures to renovate such properties for new tenants. In addition,
the Company may become responsible for the payment of certain operating
expenses, including maintenance, utilities, taxes, insurance and environmental
compliance costs

                                       12




<Page>

associated with such properties, which are presently the responsibility of the
tenant. As a result, the Company could experience an adverse impact on net cash
flow in the future from such properties.

    Earnings from land, house and condominium operations have decreased
significantly, in 2003, due to a decline in inventory of completed units
available for sale. This trend is expected to continue as land inventory is
depleted and cannot be replenished cost effectively.

    The Partnership Agreement permits the Company to invest in securities issued
by companies that are not necessarily engaged as one of their primary activities
in the ownership, development or management of real estate while remaining in
the real estate business and continuing to pursue suitable investments for the
Company in real estate and real estate related investments.

    Expenses relating to environmental clean-up have not had a material effect
on the earnings, capital expenditures, or competitive position of the Company.
Management believes that substantially all such costs would be the
responsibility of the tenants pursuant to lease terms. While most tenants have
assumed responsibility for the environmental conditions existing on their leased
property, there can be no assurance that the Company will not be deemed to be a
responsible party or that the tenant will bear the costs of remediation. Also,
as the Company acquires more operating properties, its exposure to environmental
clean-up costs may increase. The Company completed Phase I Environmental Site
Assessments on most of its properties by third-party consultants. Based on the
results of these Phase I Environmental Site Assessments, the environmental
consultant has recommended that certain sites may have environmental conditions
that should be further reviewed.

    The Company has notified each of the responsible tenants to attempt to
ensure that they cause any required investigation and/or remediation to be
performed and most tenants continue to take appropriate action. However, if the
tenants fail to perform responsibilities under their leases referred to above,
based solely upon the consultant's estimates resulting from its Phase I
Environmental Site Assessments referred to above, it is presently estimated that
the Company's exposure could amount to $2-3 million. However, as no Phase II
Environmental Site Assessments have been conducted by the consultants, there can
be no accurate estimation of the need for or extent of any required remediation,
or the costs thereof. In addition, the Company has notified all tenants of the
Resource Conservation and Recovery Act's ('RCRA') December 22, 1998 requirements
for regulated underground storage tanks. The Company may, at its own cost, have
to cause compliance with RCRA's requirements in connection with vacated
properties, bankrupt tenants and new acquisitions. Phase I Environmental Site
Assessments will also be performed in connection with new acquisitions and
property refinancings.

    The Company is in the process of updating its Phase I Site Assessments for
certain of its environmentally sensitive properties including properties with
open RCRA requirements. Approximately thirty-three updates are expected to be
completed in 2003.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

    Gross revenues decreased by $14,164,000 or 18.06%, during the three months
ended March 31, 2003 as compared to the same period in 2002. This decrease
reflects decreases of $14,269,000 in land, house and condominium sales,
$2,413,000 in equity in earnings of GB Holdings, Inc., $1,544,000 in interest
income on U.S. Government and Agency Obligations and other investments and
$506,000 in financing lease income partially offset by increases of $3,491,000
in hotel and casino operating income, $615,000 in rental income, $395,000 in
hotel and resort operating income and $67,000 in dividend and other income. The
decrease in land, house and condominium sales is primarily due to a decrease in
the number of units sold, as approved land inventory has been depleted by sales.
The decrease in equity in earnings of GB Holdings, Inc. is due to decreased
casino revenue primarily attributable to a reduction in the number of table
games as new slot machines were added in 2002 as well as the inclement weather
in Atlantic City, NJ in 2003 (including blizzard conditions during Presidents'
Day weekend) and a gaming loss of $1 million to a high-end patron which was
partially offset by decreased casino expenses. The decrease in interest income
on U.S. Government and Agency obligations and other investments is primarily
attributable to a decline in interest rates on U.S. Agency obligations as higher
rate bonds were called in 2002. The decrease in financing lease income is the
result of lease expirations, reclassifications

                                       13




<Page>

of financing leases and normal financing lease amortization. The increase in
hotel and casino operating income is primarily attributable to an increase in
gaming, hotel and food and beverage revenues and a decrease in promotional
allowances. Gaming revenues increased due to an increased hold percentage. The
average daily rate ('ADR') decreased $4 to $46 and percentage occupancy
increased approximately 4% to 90.1%. The increase in rental income is primarily
attributable to a property acquisition and reclassifications of financing leases
to operating leases. The increase in hotel and resort operating income is
primarily attributable to increased membership dues at the New Seabury resort
and Florida golf course.

    Expenses decreased by $7,080,000, or 11.6%, during the three months ended
March 31, 2003 as compared to the same period in 2002. This decrease reflects
decreases of $9,726,000 in the cost of land, house and condominium sales and,
$879,000 in interest expense partially offset by increases of $2,459,000 in
hotel and casino operating expenses, $698,000 in depreciation and amortization,
$344,000 in rental property expenses $12,000 in hotel and resort operating
expenses and $12,000 in general and administrative expenses. The decrease in the
cost of land, house and condominium sales is due to decreased sales as discussed
above. Costs as a percentage of sales increased from 72% in 2002 to 84% in 2003
primarily due to lower margin sales in 2003. The decrease in interest expense is
primarily due to repayment of debt to affiliates in May of 2002 in connection
with the Sands repurchase obligation. The increase in hotel and casino operating
expenses is primarily attributable to increased costs associated with increased
revenues. Costs as a percentage of sales declined from 85% in 2002 to 84% in
2003 as hotel and casino revenues increased at a greater rate than hotel and
casino expenses. The increase in depreciation expense is primarily attributable
to an increase in rental real estate and resort properties. The increase in
rental property expenses is primarily due to expenses of the New Seabury
development litigation.

    Earnings from land, house and condominium operations decreased in the first
quarter of 2003 compared to the first quarter of 2002 due to a decline in
inventory of completed units available for sale. Based on current information,
sales will decline significantly during the rest of 2003 as compared to 2002.
The decrease in land inventory in approved sub-divisions is expected to
negatively impact earnings from this business segment.

    Earnings from hotel, casino and resort properties are expected to be
constrained by recessionary pressures, international tensions and competition.

    Operating income decreased during the three months ended March 31, 2003 by
$7,084,000 as compared to the same period in 2002 as detailed above.

    Gain on property transactions decreased by $501,000 during the three months
ended March 31, 2003 as compared to the same period in 2002 due to the size and
number of transactions.

    A provision for loss on real estate of $200,000 was recorded in the three
months ended March 31, 2003. There was no such provision in the comparable
period of 2002.

    A write-down of marketable equity securities available for sale of $961,000
was recorded in the three months ended March 31, 2003. There was no such
write-down in the comparable period of 2002.

    Minority interest in the net earnings of Stratosphere Corporation was
$407,000 during the three months ended March 31, 2002. As a result of the
acquisition of the minority interest in December 2002, there will be no minority
interest in Stratosphere in 2003 and thereafter.

    Net earnings for the three months ended March 31, 2003 decreased by
$8,339,000 as compared to the three months ended March 31, 2002 primarily due to
decreased earnings from land, house and condominium operations ($4.5 million),
decreased equity in earnings of GB Holdings, Inc. ($2.4 million) and a
write-down of equity securities available for sale ($1.0 million).

CAPITAL RESOURCES AND LIQUIDITY

    Cash provided by operating activities was $21.6 million for the three months
ended March 31, 2003 as compared to $28.3 million in the comparable period of
2002. This decrease resulted primarily from a decrease in the land, house and
condominium operations ($12.9 million) partially offset by an increase in cash
flow from hotel and casino operations ($5.2 million) and an increase in cash
flow from the other operations ($1.0 million). The Company expects the decrease
in land inventory in approved sub-divisions to negatively impact cash flow from
land, house and condominium operations.

                                       14




<Page>

    The following table reflects the Company's contractual cash obligations due
over the indicated periods and when they come due (in $millions):

<Table>
<Caption>
                                               LESS THAN    1-3     4-5     AFTER
                                                1 YEAR     YEARS   YEARS   5 YEARS    TOTAL
                                                ------     -----   -----   -------    -----
<S>                                            <C>         <C>     <C>     <C>        <C>
Mortgages payable............................    $ 7.9     $23.9   $76.7    $61.3     $169.8
Mezzanine loan commitments...................     20.0      --      --       --         20.0
Construction and development obligations.....     16.0      --      --       --         16.0
                                                 -----     -----   -----    -----     ------
    Total....................................    $43.9     $23.9   $76.7    $61.3     $205.8
                                                 -----     -----   -----    -----     ------
                                                 -----     -----   -----    -----     ------
</Table>

    In 2003, seventeen leases covering seventeen properties and representing
approximately $2.2 million in annual rentals are scheduled to expire. Twelve
leases originally representing $1.6 million in annual rental income were renewed
for $1,388,000 in annual rentals. Such renewals are generally for a term of five
years. Five properties with annual rental income of $613,000 were not renewed
and are currently being marketed for sale or lease.

    On March 31, 2003, the Board of Directors of the General Partner announced
that no distributions on its Depositary Units are expected to be made in 2003.
The Company believes that it should continue to hold and invest, rather than
distribute, cash. In making its announcement, the Company noted it plans to
continue to apply available cash flow toward its operations, repayment of
maturing indebtedness, tenant requirements, investments, acquisitions and other
capital expenditures and cash reserves for Partnership contingencies including
environmental matters and scheduled lease expirations. By the end of the year
2005, net leases representing approximately 22% of the Company's net annual
rentals will be due for renewal, and by the end of the year 2007, 35% of such
rentals will be due for renewal. Another factor that the Company took into
consideration was that net leases representing approximately 26% of the
Company's annual rentals are with tenants in the retail sector, some of which
are currently experiencing cash flow difficulties and restructurings.

    The types of investments the Company is pursuing, including assets that may
not be readily financeable or generating positive cash flow, such as development
properties, non-performing mortgage loans or securities of companies which may
be undergoing restructuring or require significant capital investments, require
the Company to maintain a strong capital base in order to own, develop and
reposition these assets.

    Sales proceeds from the sale or disposal of portfolio properties totaled
approximately $3.3 million in the three months ended March 31, 2003. During the
comparable period of 2002, sales proceeds totaled approximately $5.6 million.
The Company intends to use asset sales, financing and refinancing proceeds for
new investments.

    Capital expenditures for real estate, and hotel, casino and resort
operations were approximately $1.2 million during the three months ended
March 31, 2003 and 2002. In 2003, capital expenditures are currently expected to
be approximately $10 million.

    During the three months ended March 31, 2003 and 2002, approximately $2.0
million of mortgage principal payments were repaid.

    A committee of the Board of Directors of the General Partner is in advanced
discussions concerning the possible acquisition by the Company of interests in
National Energy Group, Inc. and related companies from entities owned by
Carl C. Icahn, the Chairman of the Board of the General Partner. The committee
has retained independent advisors and has been engaged in evaluating the
possible acquisition.

    The Company may possibly consider making tender offers for real estate
operating companies and real estate limited partnership units. The Company may
also consider indirect investments in real estate by making loans secured by
ownership interests of certain real properties.

    To further its investment objectives, the Company may consider the
acquisition or seek effective control of other land development companies and
other real estate operating companies which may have a significant inventory of
quality assets under development. This may enhance its ability to further
diversify its portfolio of properties and gain access to additional operating
and development capabilities.

                                       15




<Page>

    The Company's cash and cash equivalents and investment in U.S. Government
and Agency obligations decreased by $7.8 million during the three months ended
March 31, 2003, primarily due to mezzanine loan advances ($31.0 million)
partially offset by net cash flow from operations ($21.6 million) and
miscellaneous other items ($1.6 million).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

    The United States Securities and Exchange Commission requires that
registrants include information about primary market risk exposures relating to
financial instruments. Through its operating and investment activities, the
Company is exposed to market, credit and related risks, including those
described elsewhere herein. As the Company may invest in debt or equity
securities of companies undergoing restructuring or undervalued by the market,
these securities are subject to inherent risks due to price fluctuations, and
risks relating to the issuer and its industry, and the market for these
securities may be less liquid and more volatile than that of higher rated or
more widely followed securities.

    Other related risks include liquidity risks, which arise in the course of
the Company's general funding activities and the management of its balance
sheet. This includes both risks relating to the raising of funding with
appropriate maturity and interest rate characteristics and the risk of being
unable to liquidate an asset in a timely manner at an acceptable price. Real
estate investments by their nature are often difficult or time-consuming to
liquidate. Also, buyers of minority interests may be difficult to secure, while
transfers of large block positions may be subject to legal, contractual or
market restrictions. Other operating risks for the Company include lease
terminations, whether scheduled terminations or due to tenant defaults or
bankruptcies, development risks, and environmental and capital expenditure
matters, as described elsewhere herein.

    The Company invests in U.S. Government and Agency obligations which are
subject to interest rate risk. As interest rates fluctuate, the Company will
experience changes in the fair value of these investments with maturities
greater than one year.

    Whenever practical, the Company employs internal strategies to mitigate
exposure to these and other risks. The Company, on a case by case basis with
respect to new investments, performs internal analyses of risk identification,
assessment and control. The Company reviews credit exposures, and seeks to
mitigate counterparty credit exposure through various techniques, including
obtaining and maintaining collateral, and assessing the creditworthiness of
counterparties and issuers. Where appropriate, an analysis is made of political,
economic and financial conditions, including those of foreign countries.
Operating risk is managed through the use of experienced personnel. The Company
seeks to achieve adequate returns commensurate with the risk it assumes. The
Company utilizes qualitative as well as quantitative information in managing
risk.

ITEM 4. CONTROLS AND PROCEDURES

<Table>
    <S>  <C>
    a.   Within 90 days prior to the date of this report, the
         Company's management, including the Company's Chief
         Executive Officer and Chief Financial Officer, evaluated the
         effectiveness of the design and operation of the Company's
         and its subsidiaries' disclosure controls and procedures
         pursuant to the Exchange Act Rule 13a-14. Based upon that
         evaluation, the Company's Chief Executive Officer and Chief
         Financial Officer concluded that the Company's disclosure
         controls and procedures are effective in timely alerting
         them to material information relating to the Company
         (including its consolidated subsidiaries) required to be
         included in the Company's periodic Securities and Exchange
         Commission filings.
    b.   There have been no significant changes in the Company's
         internal controls or in other factors that could
         significantly affect internal controls subsequent to the
         evaluation date.
</Table>

                                       16




<Page>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    a. In January 2002, the Cape Cod Commission (the 'Commission') a regional
planning body created in 1989, concluded that the Company's New Seabury
development is within its jurisdiction (the 'Administrative Decision'). It is
the Company's position that the proposed residential and commercial development
is allowed under a special permit issued for the property in 1964 and is exempt
from the Commission's jurisdiction.

    In February 2002, New Seabury Properties LLC, the Company's subsidiary and
owner of the property, filed a civil complaint in Barnstable County
Massachusetts Superior Court appealing the Administrative Decision by the
Commission. On October 21, 2002 the Court vacated the Administrative Decision on
the grounds that the Commission's criteria for exercising their jurisdiction
were not adopted in accordance with statutory regulations. The Court directed
that the Commission properly adopt appropriate criteria for exercising their
jurisdiction and reconsider New Seabury Properties LLC's claim that its proposed
development is exempt from Commission review. The Company has also raised
constitutional claims against the Commission which were not resolved by the
Court's October 21, 2002 decision. The Company may appeal certain aspects of the
Court's rulings and may continue to pursue its constitutional claims against the
Commission. The Company cannot predict the effect on the development process if
it loses any appeal or if the Commission is ultimately successful in asserting
jurisdiction over the proposed development.

    b. Tiffiny Decorating Company ('Tiffiny'), a subcontractor to Great Western
Drywall ('Great Western'), filed a legal action against Stratosphere
Corporation, Stratosphere Development, LLC, American Real Estate Holdings
Limited Partnership (Stratosphere Corporation, Stratosphere Development, LLC and
American Real Estate Holding Limited Partnership are herein collectively
referred to as the 'Stratosphere Parties'), Great Western, Nevada Title and
Safeco Insurance, Case No. A443926 in the Eighth Judicial District Court of the
State of Nevada. The legal action asserts claims that include breach of
contract, unjust enrichment and foreclosure of lien. The Stratosphere Parties
have filed a cross-claim against Great Western in that action. Additionally,
Great Western has filed a separate legal action against the Stratosphere Parties
setting forth the same disputed issues. That separate action, Case No. A448299
in the Eighth Judicial Court of the State of Nevada, has been consolidated with
the case brought by Tiffiny.

    The initial complaint brought by Tiffiny asserts that Tiffiny performed
certain services on construction at the Stratosphere and was not fully paid for
those services. Tiffiny claims the sum of $521,562 against Great Western, the
Statosphere Parties, and the other defendants, which the Stratosphere Parties
contend have been paid to Great Western for payment to Tiffiny.

    Great Western is alleging that it is owed payment from the Stratosphere
Parties for work performed and for delay and disruption damages. Great Western
is claiming damages in the sum of $3,935,438 plus interest, costs and legal fees
from the Stratosphere Parties. This amount apparently includes the Tiffiny
claim.

    The Stratosphere Parties have evaluated the project and have determined that
the amount of $1,004,059 (of which $195,953 and $371,873 were disbursed to
Tiffiny and Great Western, respectively) is properly due and payable to satisfy
all claims for the work performed, including the claim by Tiffiny. The remaining
amount has been segregated in a separate interest bearing account. The
Stratosphere Parties intend to vigorously defend the action for claims in excess
of $1,004,059.

    c. In addition, in the ordinary course of business, the Company is party to
various legal actions. In management's opinion, the ultimate outcome of such
legal actions will not have a material effect on the results of operations or
the financial position of the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) None

                                       17




<Page>

                                   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.

                                          AMERICAN REAL ESTATE PARTNERS, L.P.

                                          By: American Property Investors, Inc.

                                                  /s/ John P. Saldarelli
                                           .....................................
                                            TREASURER, CHIEF FINANCIAL OFFICER
                                             AND PRINCIPAL ACCOUNTING OFFICER

Date: May 14, 2003

                                       18




<Page>

                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
                           PURSUANT TO 18 U.S.C. 1350
                (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

    I, Albo J. Antenucci, Jr., President and Chief Executive Officer (Principal
Executive Officer) of American Property Investors, Inc., the General Partner of
American Real Estate Partners, L.P. (the 'Registrant'), certify that to the best
of my knowledge, based upon a review of the American Real Estate Partners, L.P.
Quarterly Report on Form 10-Q for the period ended March 31, 2003 of the
Registrant (the 'Report'):

        (1) The Report fully complies with the requirements of Section 13(a) or
    15(d) of the Securities Exchange Act of 1934, as amended; and

        (2) The information contained in the Report fairly presents, in all
    material respects, the financial condition and results of operations of the
    Registrant.

                                                /s/ ALBO J. ANTENUCCI, JR.
                                           .....................................
                                                  ALBO J. ANTENUCCI, JR.
                                          PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                          OF AMERICAN PROPERTY INVESTORS, INC.,
                                                  THE GENERAL PARTNER OF
                                           AMERICAN REAL ESTATE PARTNERS, L.P.

Date: May 14, 2003

                                       19




<Page>

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
                           PURSUANT TO 18 U.S.C. 1350
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

    I, John P. Saldarelli, Treasurer and Chief Financial Officer (Principal
Financial Officer) of American Property Investors, Inc., the General Partner of
American Real Estate Partners, L.P. (the 'Registrant'), certify that to the best
of my knowledge, based upon a review of the American Real Estate Partners, L.P.
Quarterly Report on Form 10-Q for the period ended March 31, 2003 of the
Registrant (the 'Report'):

        (1) The Report fully complies with the requirements of Section 13(a) or
    15(d) of the Securities Exchange Act of 1934, as amended; and

        (2) The information contained in the Report fairly presents, in all
    material respects, the financial condition and results of operations of the
    Registrant.

                                                  /s/ JOHN P. SALDARELLI
                                           .....................................
                                                    JOHN P. SALDARELLI
                                          TREASURER AND CHIEF FINANCIAL OFFICER
                                            AMERICAN PROPERTY INVESTORS, INC.,
                                                  THE GENERAL PARTNER OF
                                           AMERICAN REAL ESTATE PARTNERS, L.P.

Date: May 14, 2003

                                       20




<Page>

                       FORM OF SARBANES-OXLEY ACT OF 2002
                          SECTION 302(a) CERTIFICATION

I, Albo J. Antenucci, Jr. certify that:

    1. I have reviewed the quarterly report on Form 10-Q of American Real Estate
Partners, L.P. (the 'Registrant') for the period ended March 31, 2003 (the
'Report');

    2. Based on my knowledge, the Report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by the Report;

    3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in the Report;

    4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

        a) designed such disclosure controls and procedures to ensure that
    material information relating to the Registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which the Report is being prepared;

        b) evaluated the effectiveness of the Registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of the
    Report (the 'Evaluation Date'); and

        c) presented in the Report our conclusions about the effectiveness of
    the disclosure controls and procedures based on our evaluation as of the
    Evaluation Date;

    5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
functions):

        a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the Registrant's ability to record,
    process, summarize and report financial data and have identified for the
    Registrant's auditors any material weaknesses in internal controls; and

        b) any fraud, whether or not material, that involves management or other
    employees who have a significant role in the Registrant's internal controls;
    and

    6. The Registrant's other certifying officers and I have indicated in the
Report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

<Table>
<S>                                                <C>
Date: May 14, 2003                                          /s/ ALBO J. ANTENUCCI, JR.
                                                   ............................................
                                                              ALBO J. ANTENUCCI, JR
                                                     PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
                                                        AMERICAN PROPERTY INVESTORS, INC.,
                                                              THE GENERAL PARTNER OF
                                                       AMERICAN REAL ESTATE PARTNERS, L.P.
</Table>

                                       21




<Page>

                       FORM OF SARBANES-OXLEY ACT OF 2002
                          SECTION 302(a) CERTIFICATION

I, John P. Saldarelli, certify that:

    1. I have reviewed the quarterly report on Form 10-Q of American Real Estate
Partners, L.P. (the 'Registrant') for the period ended March 31, 2003 (the
'Report');

    2. Based on my knowledge, the Report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by the Report;

    3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in the Report;

    4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

        a) designed such disclosure controls and procedures to ensure that
    material information relating to the Registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which the Report is being prepared;

        b) evaluated the effectiveness of the Registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of the
    Report (the 'Evaluation Date'); and

        c) presented in the Report our conclusions about the effectiveness of
    the disclosure controls and procedures based on our evaluation as of the
    Evaluation Date;

    5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
functions):

        a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the Registrant's ability to record,
    process, summarize and report financial data and have identified for the
    Registrant's auditors any material weaknesses in internal controls; and

        b) any fraud, whether or not material, that involves management or other
    employees who have a significant role in the Registrant's internal controls;
    and

    6. The Registrant's other certifying officers and I have indicated in the
Report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

<Table>
<S>                                                <C>
Date: May 14, 2003                                            /s/ JOHN P. SALDARELLI
                                                   ............................................
                                                                JOHN P. SALDARELLI
                                                     TREASURER AND CHIEF FINANCIAL OFFICER OF
                                                        AMERICAN PROPERTY INVESTORS, INC.,
                                                              THE GENERAL PARTNER OF
                                                       AMERICAN REAL ESTATE PARTNERS, L.P.
</Table>

                                       22