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                                                                   Exhibit 10.16

                              EMPLOYMENT AGREEMENT


                  AGREEMENT, dated as of May 19, 2000, by and between Vornado
Operating Company, a Delaware corporation, with its principal offices at Park 80
West, Plaza II, Saddle Brook, New Jersey 07663 (the "Company") and Emanuel
Pearlman ("Employee").

                  IN CONSIDERATION of the premises and the mutual covenants set
forth below, the parties hereby agree as follows:

                  1. Employment. The Company hereby agrees to employ Employee as
its Chief Operating Officer and Employee hereby accepts such employment, on the
terms and conditions hereinafter set forth.

                  2. Term. The period of employment of Employee by the Company
hereunder (the "Employment Period") shall commence as of June 15, 2000 (the
"Commencement Date") and shall continue until the third anniversary thereof. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement. At least ninety (90) days prior to the expiration
of the Employment Period, each party shall notify the other party in writing of
its intention either (i) to negotiate an extension thereof on at least the same
terms, conditions and compensation as then in effect or (ii) that the Employment
Period shall expire.

                  3. Duties and Responsibilities. During the Employment Period,
Employee's duties and responsibilities shall include sourcing and executing
non-real estate investments on behalf of the Company or Vornado Realty Trust
("Vornado Realty") as well as other executive duties on behalf of the Company
consistent with his position as Chief Operating Officer, as are assigned during
the Employment Period by Steve Roth or Michael Fascitelli. It is intended that
Employee shall report to Steve Roth or Michael Fascitelli. In addition to
reporting to Steve Roth or Michael Fascitelli, Employee may be required to
report to a third party. However, at all times Employee shall retain primary
responsibility for all acquisition activities of the Company. Employee shall
devote all of his working time, attention and energies during normal business
hours (other than absences due to illness or vacation) to the performance of his
duties for the Company, it being understood that Employee may engage in money
management and investment related activities for his family and family entities
which he manages in such a manner as do not interfere with his performance of
his duties for the Company.

                  4. Place of Performance. The principal place of employment of
Employee shall be at the Company's executive offices in New York City.

                  5. Compensation and Related Matters.
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                  (a) Base Salary and Bonus. During the Employment Period the
Company shall pay Employee a base salary at the rate of not less than $300,000
per year ("Base Salary"). Employee's Base Salary shall be paid in approximately
equal installments in accordance with the Company's customary payroll practices.
If Employee's Base Salary is increased by the Company, such increased Base
Salary shall then constitute the Base Salary for all purposes of the Agreement.
In addition to Base Salary, the Employee may be entitled to an annual incentive
bonus ("Bonus"), each fiscal year at the sole discretion of the Company, to be
payable at the same time as bonuses are paid to other executive officers.

                  (b) Company Share Option. (i) The Company shall grant to
Employee share options (the "Company Share Option") to acquire 175,000 shares of
the common stock of the Company, par value $.01 per share (the "Company Stock"),
pursuant to the Company's 1998 Omnibus Stock Plan (the "Company Option Plan").
Such Company Share Options shall first consist of "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") to the maximum extent permitted thereunder, and
non-qualified stock options thereafter. The Company Share Option shall be
granted on the Commencement Date, and shall be granted at an exercise price per
share equal to the fair market value of the Company Stock on the date hereof and
shall be subject to the general terms of the Company Option Plan and Company
Share Option agreement (the "Option Agreement"). Company Share Options granted
pursuant to this Section 5(b)(i) shall become exercisable at a rate of 33-1/3%
after the first anniversary of the date of grant, an additional 33-1/3% on each
of the second and third anniversaries of such date, provided Employee remains an
employee after such respective dates, and shall be exercisable for a ten (10)
year period following the date of grant, except as otherwise provided in the
Company Option Plan or Option Agreement. Such Company Share Options, and any
Additional Company Share Options granted pursuant to (ii) below, shall become
fully exercisable on the earliest of (A) the Company's termination of Employee's
employment without Cause, (B) Employee's termination of his employment for
material breach or (C) the expiration of the Employment Period if Employee is
then employed by the Company or (D) a Change in Control, and in each case shall
remain exercisable for a period of at least one year thereafter.

                      (ii) Additional Company Share Options may be granted to
Employee during the Employment Period, at the sole discretion of the Company, in
accordance with the Company's customary practices.

                      (c) Benefit Plans. Employee shall be entitled to
participate in such existing employee benefit plans and insurance programs
offered by the Company (which are similar to those offered by Vornado Realty
Trust), or which it may adopt from time to time, for its employees generally, in
accordance with the eligibility requirements for participation therein with the
exception of any employee benefit plans or insurance programs offered by the
Company which provide health insurance benefits. Nothing herein shall be
construed so as to prevent the Company from modifying or terminating

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any employee benefit plans or programs, or employee fringe benefits, it may
adopt from time to time. In addition, during the Employment Period, the Company
shall reimburse Gemini Partners II, on behalf of Employee, up to $1,000 per
month for health insurance maintained for the Employee.

                      (d) Vacation. Employee shall be entitled to four (4) weeks
vacation with pay for each year during the Employment Period.

                      (e) Expenses. The Company shall promptly reimburse
Employee for all reasonable business expenses upon the presentation of
reasonably itemized statements of such expenses in accordance with the Company's
policies and procedures now in force or as such policies and procedures may be
modified with respect to all executive officers of the Company. In addition, the
Company shall provide Employee with reimbursement for expenses incurred in the
"winding-down" of Gemini Partners II, in a total amount not to exceed $13,887.50
if and only if such expenses are not covered by his former employer.

                      (f) Indemnification. The Company shall indemnify the
Executive to the full extent permitted by law and the By-laws of the Company for
all expenses, costs, liabilities and legal fees which the Executive may incur in
the discharge of all his duties hereunder, other than for any such expenses,
costs, liabilities or legal fees incurred resulting from the Executive's bad
faith or gross negligence. Any termination of the Executive's employment or of
this Agreement shall have no effect on the continuing operation of this Section
5(f).

                  6. Termination. Employee's employment hereunder shall be
terminated upon the earliest of:

                      (a) Expiration. The expiration of the Employment Period.

                      (b) Death. The death of Employee.

                      (c) Disability. If, as a result of Employee's Disability,
Employee shall have been substantially unable to perform his duties hereunder
for an entire period of six (6) consecutive months and within thirty (30) days
after written Notice of Termination is given by the Company after such six (6)
month period, Employee shall not have returned to the substantial performance of
his duties on a full-time basis, the Company shall have the right to terminate
Employee's employment hereunder for "Disability". For purposes of this
Agreement, "Disability" shall have the same meaning as that term is defined in
the Company's Long Term Disability Plan; provided, that, if no such plan exists,
"Disability" shall have the same meaning as provided in Section 22(e)(3) of the
Code.

                      (d) Cause. The Company terminates Employee for Cause. For
purposes of this Agreement, the Company shall have "Cause" to terminate
Employee's employment upon Employee's (i) willful and continued failure to
substantially perform

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his duties with the Company (other than any such failure resulting from his
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to Employee which identifies the manner in
which the Company believes that Employee has not substantially performed his
duties, which failure is not cured within 30 days after such notice, or (ii)
willful misconduct which is materially economically injurious to the Company or
to any entity in control of, controlled by or under common control with the
Company (an "Affiliate"), including, but not limited to, any breach of Sections
9 and 10 hereof, or (iii) the conviction of, or plea of guilty or nolo
contendere to, a felony, or (iv) habitual drug or alcohol abuse which materially
impairs Employee's ability to perform his duties hereunder.

                  (e) Material Breach. Employee terminates his employment for a
material breach of this Agreement by the Company. For purposes of this
Agreement, a "material breach" shall be deemed to occur upon a failure by the
Company to comply with any material provision of this Agreement which has not
been reasonably cured within thirty (30) days after written notice of such
noncompliance has been given by Employee to the Company.

                  (f) Without Cause. The Company shall have the right to
terminate Employee's employment hereunder without Cause by providing Employee
with a Notice of Termination.

                  (g) Voluntary Termination. Employee may terminate this
Agreement and Employee's employment hereunder at any time upon ninety (90) days
prior written notice to the Company.

                  (h) The Company or its successor, or Employee, may terminate
this Agreement and Employee's employment herewith upon a Change in Control. For
purposes of this Agreement, a Change in Control shall mean any of the following
events which has not been approved by the Company's Board of Directors:

                      (i) The acquisition by an entity (other than (a) an
affiliate of the Company on the day preceding the closing of the acquisition, or
(b) an entity in which Employee owns at least 5% of the outstanding capital
stock on a fully diluted basis) of more than 50% of the outstanding capital
stock or assets of the Company; or

                      (ii) The acquisition by any person (as defined in the
Exchange Act) (other than the Company or a subsidiary of the Company) of
beneficial ownership of 20% or more of the outstanding voting stock of the
Company.

                  7. Termination Procedure.

                      (a) Notice of Termination. Any termination of Employee by
the Company or by Employee (other than termination pursuant to Section 6(a) or
(b) hereof) shall be communicated by written Notice of Termination to the other
party hereto in

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accordance with Section 13. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee under the provisions so indicated.

                      (b) Date of Termination. "Date of Termination" shall mean
(i) if Employee's employment is terminated by the expiration of this Agreement,
the date of expiration, (ii) if Employee's employment is terminated by his
death, the date of his death, (iii) if Employee's employment is terminated
pursuant to Section 6(c) hereof, thirty (30) days after Notice of Termination is
given (provided that Employee shall not have again become available for service
on a regular basis during such thirty (30) day period), (iv) if Employee's
employment is terminated pursuant to Sections 6(d), 6(f) or 6(g), the date
specified in the Notice of Termination, and (v) if Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.

                  8. Amounts Due Upon Termination or During Disability. In the
event Employee is disabled or his employment terminates during the Employment
Period, the Company shall provide Employee with the payments set forth below.
Employee acknowledges and agrees that the payments set forth in this Section 8
constitute liquidated damages for termination of his employment during the
Employment Period.

                      (a) During any period that Employee fails to perform his
duties hereunder as a result of Disability ("disability period"), Employee shall
continue to receive his Base Salary at the rate then in effect for such period
until his employment is terminated pursuant to Section 6(c) hereof; provided,
that, payments so made to Employee during the first six (6) months of the
disability period shall be reduced by the sum of the amounts, if any, paid to
the Employee at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce any such
payment. Employee shall also be entitled to any other benefits or payments
provided pursuant to any plan or policy of the Company in accordance with such
plan's or policy's terms.

                      (b) If Employee is terminated pursuant to Sections 6(d) or
6(g) the Company shall pay Employee his accrued, but unpaid Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to Employee under
this Agreement; provided, that, Employee shall be entitled to any other benefit
or payment provided pursuant to any plan or policy of the Company in accordance
with such plan's or policy's terms.

                      (c) If Employee's employment is terminated pursuant to
Sections 6(a), 6(e), 6(f) or 6(h), the Company shall pay to Employee his (A)
Base Salary accrued through the Date of Termination and (B)(i) a lump-sum
payment equal to one (1) times Employee's then current Base Salary, if such
termination occurs prior to June 15, 2001, or (ii) a lump-sum payment equal to
one and one - half (1.5) times Employee's then current


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Base Salary, if such termination occurs on or after June 15, 2001. If Employee's
employment is terminated pursuant to Section 6(b), the Company shall pay to
Employee his (A) Base Salary accrued through the Date of Termination and (B)(i)
a lump-sum payment equal to one (1) times Employee's then current Base Salary.
All such payments shall be made as soon as administratively feasible following
such termination. In addition, for 12 months following such termination, the
Company shall continue to provide Employee, his spouse and his dependants, with
the same level of medical, dental, accident, disability and life insurance
benefits upon substantially the same terms and conditions (including
contributions required by Employee for such benefits) as existed immediately
prior to Employee's termination; provided, that, if Employee cannot continue to
participate in the Company plans providing such benefits, the Company shall
otherwise provide such benefits on the same after-tax basis as if continued
participation had been permitted. Notwithstanding the foregoing, in the event
Employee becomes reemployed with another employer and becomes eligible to
receive comparable welfare benefits from such employer, the welfare benefits
described herein shall cease. Employee shall also be entitled to any other
benefits or payments provided pursuant to any plan or policy of the Company in
accordance with such plan's or policy's terms, except as provided in Section
5(d).

                  9. Confidential Information and Removal of Documents.

                      (a) Employee agrees to keep secret and retain in the
strictest confidence all Confidential Information which relates to the Company
and any of its Affiliates. "Confidential Information" (a) means information (i)
that is learned by Employee from the Company or any Affiliate before or after
the date of this Agreement (other than Confidential Information that was known
by Employee on a nonconfidential basis prior to the disclosure thereof); (ii)
that is commercially valuable to the Company and (iii) that is not published or
of public record or otherwise generally known (other than through failure of
Employee to fully perform his obligations hereunder), and (b) includes, without
limitation, customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company and any of its Affiliates. Employee agrees
not to disclose any such Confidential Information to anyone outside the Company
or any of its Affiliates, whether during or after his period of service with the
Company, except (x) as such disclosure may be required or appropriate in
connection with his service or (y) when required to do so by a court of law, by
any governmental agency or by any administrative or legislative body (including
a committee thereof) with apparent jurisdiction to order his to divulge,
disclose or make accessible such information. Employee agrees to give the
Company advance written notice of any disclosure pursuant to clause (y) of the
preceding sentence and to cooperate with any efforts by the Company to limit the
extent of such disclosure.

                      (b) All records, files, drawings, documents, models,
equipment, and the like relating to the Company's business, which Employee has
control over shall not be removed from the Company's premises without its
written consent, unless such removal is in the furtherance of the Company's
business or is in connection with

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Employee's carrying out his duties under this Agreement and, if so removed,
shall be returned to the Company promptly after termination of Employee's
employment hereunder, or otherwise promptly after removal if such removal occurs
following termination of employment. Employee's rolodex, telephone directory and
similar type items, and furniture, art work and property owned by Employee or
otherwise not owned by the Company shall not be deemed Company property and
shall not be covered by this Section 8(b). The Company shall be the owner of all
trade secrets and other products relating to the Company's business developed by
Employee alone or in conjunction with others as part of his employment with the
Company.

                  10. Non-Competition.

                      (a) In consideration of the benefits to be provided to
Employee hereunder, Employee covenants that he will not, without the prior
written consent of the Company, during the Employment Period and the twelve (12)
month period following his termination of employment for any reason (the
"Restriction Period") other than pursuant to Section 6(a) or Section 6(c),
engage in any way, directly or indirectly, in the sourcing and execution of
non-real estate investment transactions on behalf of any public or non-public
real estate company, with the exception of such transactions performed for
himself, a member of Employee's family or family investment vehicles which
Employee manages.

                      (b) Employee hereby covenants and agrees that, at all
times during the Employment Period and for a period of two (2) years immediately
following his termination for any reason, Employee shall not employ or seek to
employ any person employed at that time by the Company or any of its
subsidiaries or its Affiliates, or otherwise encourage or entice such person or
entity to leave such employment.

                      (c) Employee acknowledges that the restrictions,
prohibitions and other provisions of this Section 10 are reasonable, fair and
equitable in scope, terms and duration, are necessary to protect the legitimate
business interests of the Company and are a material inducement to the Company
to enter into this Agreement. It is the intention of the parties hereto that the
restrictions contained in this paragraph be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions is
excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.

                      11. Remedy. Should Employee engage in or perform, either
directly or indirectly, any of the acts prohibited by Sections 9 and 10, it is
agreed that the Company shall be entitled to immediately withhold any payments
or benefits to be made to Employee under Section 5 of this Agreement and shall
be entitled to full injunctive relief, to be issued by any competent court of
equity, enjoining and restraining Employee and each and every other person,
firm, organization, association, or corporation concerned therein, from the
continuance of such violative acts. The foregoing remedy available to

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Company shall not be deemed to limit or prevent the exercise by the Company of
any or all further rights and remedies which may be available to the Company
hereunder or at law or in equity.

                  12. Successors; Binding Agreement. This Agreement shall be
binding upon and shall inure to the benefit of Employee, his heirs, executors,
administrators, beneficiaries and assigns and shall be binding upon and shall
inure to the benefit of the Company and its successors.

                  13. Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered either
personally or by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

                  If to Employee:


                  Emanuel Pearlman
                  151 East 79th Street
                  New York, NY  10021


                  If to the Company:


                  Vornado Operating Company
                  Park 80 West, Plaza II
                  Saddle Brook, New Jersey 07663
                  Attention:  (i)   President and
                             (ii)   Chief Financial Officer

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

                  14. Resolution of Differences Over Breaches of Agreement. The
parties shall use good faith efforts to resolve any controversy or claim arising
out of, or relating to this Agreement or the breach thereof, first in accordance
with the Company's internal review procedures, except that this requirement
shall not apply to any claim or dispute under or relating to Sections 9 or 10 of
this Agreement. If despite their good faith efforts, the parties are unable to
resolve such controversy or claim through the Company's internal review
procedures, then such controversy or claim shall be resolved by arbitration in
New Jersey, in accordance with the rules then obtaining of the American
Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof. If any
contest or dispute shall arise between the Company and Employee regarding any
provision of this Agreement, the

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Company shall reimburse Employee for all legal fees and expenses reasonably
incurred by Employee in connection with such contest or dispute, but only if
Employee is successful in respect of substantially all of Employee's claims
brought and pursued in connection with such contest or dispute.

                  15. Governing Law. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of laws. If, under such law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement, and the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof.

                  16. Amendment. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Employee and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.

                  17. Survival. The respective obligations of, and benefits
afforded to, Employee and Company as provided in Sections 5(b), 8, 9 and 10 of
this Agreement shall survive the termination of this Agreement.

                  18. No Conflict of Interest. During the Employment Period,
Employee shall not directly, or indirectly render service, or undertake any
employment or consulting agreement with another entity without the express
written consent of the Board of Directors of the Company.

                  19. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.

                  20. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.

                  21. Section Headings. The section headings in this Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.

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


                                        VORNADO OPERATING COMPANY


                                        By:/s/ Emanuel Pearlman
                                           ---------------------

                                           ---------------------
                                               Emanuel Pearlman


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