<PAGE>   1
                                                               Exhibit 10(i)(c)2


              FIRST MODIFICATION AND EXTENSION OF CREDIT AGREEMENT

                  This FIRST MODIFICATION AND EXTENSION OF CREDIT AGREEMENT
(this "AGREEMENT") dated as of March 15, 2000 between ALEXANDER'S, INC., a
Delaware corporation ("BORROWER"), and VORNADO LENDING L.L.C. (formerly known as
Vornado Lending Corp.) ("LENDER").

                                R E C I T A L S:

                  WHEREAS, Lender is the current holder of that certain
Promissory Note dated October 20, 1999 in the original principal amount of
$50,000,000.00 made by Borrower to Lender (the "NOTE");

                  WHEREAS, the Note was made pursuant to that certain Credit
Agreement between Borrower and Lender dated October 20, 1999 (hereinafter
referred to as the "CREDIT AGREEMENT"), which Note evidences a loan in the
original principal amount of $50,000,000.00 (the "LOAN") made by Lender to
Borrower (terms not otherwise defined herein shall have the meanings ascribed to
them in the Credit Agreement);

                  WHEREAS, the Note is secured by, inter alia, those certain
unrecorded Mortgages, Assignments of Leases, Security Agreements and Fixture
Filings, each dated October 20, 1999 in the original principal amount of
$50,000,000.00 and given by Alexander's of Fordham Road, Inc., Seven Thirty One
Limited Partnership, Alexander's of Rego Park II, Inc., Alexander's of Rego Park
III, Inc., Alexander's of Third Avenue, Inc., Alexander's Department Stores of
Lexington Avenue, Inc. and Alexander's Department Stores of New Jersey, Inc. to
Lender (the "MORTGAGES"); and

                  WHEREAS, the parties hereto desire to amend the Credit
Agreement in the manner hereinafter provided.

                  NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

         1. The definition of "Interest Rate" appearing on page 6 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following
definition:

                  "Interest Rate" has the meaning specified in Section 2.04(a).

         2. The definition of "Maturity Date" appearing on page 8 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following
definition:

                  "Maturity Date" means March 15, 2002."
<PAGE>   2
         3. Section 2.04(a) appearing on Page 14 of the Credit Agreement is
hereby deleted in its entirety and replaced by the following new Section
2.04(a):

         "(a) Ordinary Interest. The Borrower shall pay interest on the unpaid
         principal amount of the Loan owing to Lender from the Closing Date,
         until such principal amount shall be paid in full, payable in arrears
         on the fifteenth day of each month (each an "Interest Payment Date") at
         a rate per annum (the "Interest Rate") equal to (i) prior to March 15,
         2000, 14.18%, (ii) on or after March 15, 2000 but prior to March 15,
         2001, 15.72% and (iii) on or after March 15, 2001, a rate per annum
         equal to the one-year treasury bill rate as of such date plus 9.48%.

         4. Except with respect to Sections 4.01(g) of the Credit Agreement,
Borrower hereby reaffirms and makes again to Lender, as of the date hereof, all
of the representations and warranties contained in the Credit Agreement and
hereby further represents and warrants to Lender as follows:

                  (a) Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and has full power and
authority to execute, deliver and perform its obligations under this Agreement
and any other documents and instruments executed by Borrower in connection with
this Agreement;

                  (b) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and any other documents and
instruments executed by Borrower in connection with this Agreement, have been
duly and properly taken; and

                  (c) Borrower is in good standing under the laws of the State
of Delaware.

         5. Borrower hereby releases all claims, demands, and causes of action
of any kind or nature against Lender which Borrower now has or may have by
reason of any matter, cause or thing relating to or arising out of the Loan or
the "Loan Documents" (as defined in the Credit Agreement), to the date of this
Agreement.

         6. This Agreement may be executed in any number of counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same instrument.

         7. Except as herein amended, the terms and provisions of the Credit
Agreement shall, in all other respects, remain unmodified, are hereby ratified
and reaffirmed, and shall remain in full force and effect.

         8. This Agreement shall be binding upon and shall inure to the benefit
of Borrower and Lender and their respective successors and assigns. This
Agreement shall be governed by


                                       2
<PAGE>   3
the law of the State of New York. This Agreement may not be modified orally, but
only by a writing executed by all of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.

                                       VORNADO LENDING L.L.C.

                                       By:      VORNADO REALTY, L.P.,
                                                Managing Member

                                             By:  /s/ Irwin Goldberg
                                                --------------------------------
                                                  Name:  Irwin Goldberg
                                                  Title: Vice President
                                                         Chief Financial Officer

                                       ALEXANDER'S, INC.


                                       By:        /s/ Joseph Macnow
                                                --------------------------------
                                                Name:  Joseph Macnow
                                                Title: Vice President
                                                       Chief Financial Officer



                                       3
<PAGE>   4
STATE OF NEW JERSEY       )

                          )ss.:
COUNTY OF BERGEN          )

On August 1, 2000 before me, the undersigned, personally appeared
Irwin Goldberg personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacit(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument, and that such individual made such
appearance before the undersigned in Saddle Brook, New Jersey.

                                            /s/ Ann Pelligra
                                          --------------------------------------
                                          Name:  Ann Pelligra
                                          Office:  Notary Public of New Jersey

(SEAL)                                    My Commission Expires Feb. 25, 2001



STATE OF NEW JERSEY        )
                           )ss.:
COUNTY OF BERGEN           )

On August 2, 2000 before me, the undersigned, personally appeared
Joseph Macnow personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacit(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument, and that such individual made such
appearance before the undersigned in Saddle Brook, New Jersey.

                                              /s/ Deborah Anthony
                                          --------------------------------------
                                          Name:  Deborah Anthony
                                          Office: Notary Public of New Jersey
                                          My Commission Expires Feb. 6, 2001
(SEAL)


                                       4