<PAGE>   1
                                                        EXHIBIT INDEX ON PAGE 53

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                   For the fiscal year ended December 31, 1997

                         Commission file number: 1-6064

                                ALEXANDER'S, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                               51-0100517
      (State or other jurisdiction of              (I.R.S. Employer
      incorporation or organization)               Identification No.)

Park 80 West, Plaza II, Saddle Brook, New Jersey         07663
 (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:    (201) 587-8541

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
        Title of each class          Name of each exchange on which registered
        -------------------          -----------------------------------------
<S>                                  <C>
Common Stock, $1 par value                      New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:  NONE

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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

The aggregate market value of the common stock held by non-affiliates of the
Registrant (based upon the closing price of the stock on the New York Stock
Exchange on February 27, 1998) was approximately $202,143,000.

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.    Yes / / No / /

5,000,850 shares of the Registrant's common stock, par value $1 per share, were
outstanding as of February 27, 1998.

                      Documents Incorporated by Reference

Part III:  Proxy Statement for Annual Meeting of Shareholders to be held May
27, 1998

                                  Page 1 of 60
<PAGE>   2
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
               Item
               ----
<S>            <C>                                                         <C>
PART I.        1. Business                                                   3

               2. Properties                                                 6

               3. Legal Proceedings                                         10

               4. Submission of Matters to a Vote of Security Holders       10

                  Executive Officers of the Company                         11

PART II.       5. Market for Registrant's Common
                  Equity and Related Stockholder Matters                    12

               6. Selected Financial Data                                   13

               7. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations             14

               8. Financial Statements and Supplementary Data               19

               9. Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure                    19

PART III.     10. Directors and Executive Officers of the Registrant        38 (1)

              11. Executive Compensation                                    38 (1)

              12. Security Ownership of Certain
                  Beneficial Owners and Management                          38 (1)

              13. Certain Relationships and Related Transactions            38 (1)

PART IV.      14. Exhibits, Financial Statement
                  Schedules, and Reports on Form 8-K                        39

SIGNATURES                                                                  40
</TABLE>

(1)   These items are omitted because the Registrant will file a definitive
      Proxy Statement pursuant to Regulation 14A involving the election of
      directors with the Securities and Exchange Commission not later than 120
      days after December 31, 1997, which is incorporated by reference.


                                       -2-
<PAGE>   3
                                    PART I

Item 1. Business

GENERAL

      Alexander's, Inc. (the "Company") is a real estate investment trust
("REIT") engaged in leasing, managing, developing and redeveloping properties,
focusing primarily on the locations where its department stores (which ceased
operations in 1992) formerly operated. The Company believes that its properties,
which are located in New York City and Bergen County, New Jersey, offer
advantageous retail opportunities, principally because of their size and
location in areas where comparable store sites are not readily available.

     Alexander's has nine properties consisting of:

     Operating properties:

   (i)   the Rego Park I property located on Queens Boulevard and 63rd Road in
         Rego Park, Queens, New York, which contains a recently redeveloped
         351,000 square foot building, which is 100% leased to Sears, Circuit
         City, Bed Bath & Beyond, Marshalls and Old Navy;

  (ii)   the Kings Plaza Shopping Center on Flatbush Avenue in Brooklyn, New
         York which consists of 427,000 square feet of mall stores (the "Kings
         Plaza Mall") in which the Company owns a 50% interest;

 (iii)   the Kings Plaza Store, a 339,000 square foot store, which is one of the
         two anchor stores at the Kings Plaza Shopping Center, which is 85%
         leased to Sears;

  (iv)   the Fordham Road property located at Fordham Road and the Grand
         Concourse in the Bronx, New York, which contains a 303,000 square foot
         building currently unoccupied;

   (v)   the Flushing property located at Roosevelt Avenue and Main Street in
         Flushing, New York, which contains a 177,000 square foot building
         sub-leased to Caldor, and

  (vi)   the Third Avenue property located at Third Avenue and 152nd Street in
         the Bronx, New York, which contains a 173,000 square foot building
         leased to an affiliate of Conway.

   Non-operating properties to be redeveloped:

 (vii)   the Lexington Avenue property which comprises the entire square block
         bounded by Lexington Avenue, East 59th Street, Third Avenue and East
         58th Street in Manhattan, New York in which the Company is the general
         partner and has a 92% limited partnership interest;

(viii)   the Paramus property which consists of 30.3 acres of land located at
         the intersection of Routes 4 and 17 in Paramus, New Jersey;

  (ix)   the Rego Park II property, which comprises one and one-half square
         blocks of vacant land adjacent to the Rego Park I property.


                                       -3-
<PAGE>   4
      The following tenants accounted for more than 10% of the Company's
consolidated revenues:

<TABLE>
<CAPTION>
                                 Year Ended  December 31,
                               ---------------------------
                               1997         1996      1995
                               ----         ----      ----
<S>                           <C>           <C>       <C>
            Caldor               22%         36%       56%
            Sears                31%         23%       --
</TABLE>

In September 1995, Caldor filed for relief under Chapter 11 of the United States
Bankruptcy Code. Caldor rejected its Fordham Road lease effective June 6, 1997
and accordingly, no longer pays rent. Alexander's has filed a claim for damages
based on such rejection. The annual base rental under this lease was $3,537,000.
The loss of property rental payments, if any, under the Caldor lease for the
Flushing property, could have a material adverse affect on the Company's
financial condition and results of operations.

      In the aggregate, Alexander's current operating properties (six of its
nine properties) do not generate sufficient cash flow to pay all of its
expenses. The Company's three non-operating properties (Lexington Avenue,
Paramus, and Rego Park II) are in various stages of redevelopment. As rents
commence from a portion of the redevelopment properties, the Company expects
that cash flow will become positive.

      The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital,
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales. Although there can be no assurance,
the Company believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow.

      The Company is a Delaware corporation with its principal executive office
located at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663, telephone
(201) 587-8541.

      Relationship with Vornado Realty Trust ("Vornado")

      Vornado owns 29.3% of the Company's Common Stock. The Company is managed
by and its properties are redeveloped and leased by Vornado, pursuant to
agreements with a one-year term expiring in March of each year which
are automatically renewable.

      The annual management fee payable by the Company to Vornado is $3,000,000,
plus 6% of development costs with minimum guaranteed fees of $750,000 per annum.
The leasing agreement provides for the Company to pay a fee to Vornado equal to
(i) 3% of the gross proceeds, as defined, from the sale of an asset and (ii) in
the event of a lease or sublease of an asset, 3% of lease rent for the first ten
years of a lease term, 2% of lease rent for the eleventh through the twentieth
years of a lease term and 1% of lease rent for the twenty-first through
thirtieth year of a lease term. Subject to the payment of rents by tenants, the
Company owes Vornado $6,244,000 at December 31, 1997. Such amount is payable
annually in an amount not to exceed $2,500,000, until the present value of such
installments (calculated at a discount rate of 9% per annum) equals the amount
that would have been paid had it been paid on September 21, 1993, or at the time
the transactions which gave rise to the Commissions occurred, if later.

      In addition, Vornado lent the Company $45,000,000, the subordinated
tranche of a $75,000,000 loan. The loan which had a three-year term expiring in
March 1998, has been extended for an additional year and the interest rate has
been reset from 15.60% per annum to 13.87% per annum.

      Vornado is a fully integrated REIT with significant experience in the
ownership, development, redevelopment, leasing, operation and management of
retail and office properties.


                                       -4-
<PAGE>   5
      Steven Roth is Chief Executive Officer and a director of the Company, the
Managing General Partner of Interstate Properties ("Interstate") and Chairman of
the Board and Chief Executive Officer of Vornado. Interstate owns 27.1% of the
outstanding common stock of the Company and owns 17.9% of the outstanding common
shares of beneficial interest of Vornado. In addition, Mr. Roth owns 2.2% of the
outstanding common shares of beneficial interest of Vornado. Mr. Roth,
Interstate and the other two general partners of Interstate, David Mandelbaum
and Russell B. Wight, Jr. (who are also directors of the Company and trustees of
Vornado) own, in the aggregate, 21.3% of the outstanding common shares of
beneficial interest of Vornado.

      On December 2, 1996, Michael D. Fascitelli was elected a director of the
Company and received an option for 350,000 shares of the Company's common stock
pursuant to the Company's Omnibus Stock Plan. Mr. Fascitelli is President of
Vornado and a member of its Board of Trustees.

      The agreement with Vornado and Interstate Properties not to own in excess 
of two-thirds of the Company's common stock expired in March 1998.

ENVIRONMENTAL MATTERS

      In June 1997, the Kings Plaza Shopping Center (the "Center"), in which the
Company owns a 50% interest, commissioned an Environmental Study and
Contamination Assessment Site Investigation (the Phase II "Study") to evaluate
and delineate environmental conditions disclosed in a Phase I study. The results
of the Study indicate the presence of petroleum and other hydrocarbons in the
soil and groundwater. The Study recommends a remedial approach, but agreement
has not yet been reached with the New York State Department of Environmental
Conservation ("NYDEC") on the finalization of the approach. The Center has
accrued $1,500,000 for its estimated obligation with respect to the clean up of
the site, which includes costs of (i) remedial investigation, (ii) feasibility
study, (iii) remedial design, (iv) remedial action and (v) professional fees. If
the NYDEC insists on a more extensive remediation approach, the Center could
incur additional obligations.

      Such contamination may have resulted from activities of third parties;
however, the sources of the contamination have not been fully identified.
Although the Center intends to pursue all available remedies against any
potentially responsible third parties, there can be no assurance that such
parties will be identified, or if identified, whether these potentially
responsible third parties will be solvent. In addition, the costs associated
with pursuing any potentially responsible parties may be cost prohibitive. The
Center has not recorded an asset as of December 31, 1997 for potential
recoveries of environmental remediation costs from other parties.

      Compliance with applicable provisions of federal, state and local laws
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment have not had, and, although there can be no
assurance, are not expected to have, a material effect on the Company's
operations, earnings, competitive position or capital expenditures.

COMPETITION

      The Company conducts its real estate operations in the New York
metropolitan area, a highly competitive market. The Company's success depends
upon, among other factors, the trends of the national and local economies, the
financial condition and operating results of current and prospective tenants,
the availability and cost of capital, interest rates, construction and
renovation costs, income tax laws, governmental regulations and legislation,
population trends, the market for real estate properties in the New York
metropolitan area, zoning laws and the ability of the Company to lease, sublease
or sell its properties at profitable levels. The Company competes with a large
number of real estate property owners. In addition, although the Company
believes that it will realize significant value from its properties over time,
the Company anticipates that it may take a number of years before all of its
properties generate cash flow at or near anticipated levels. The Company's
success is also subject to its ability to finance its development and to
refinance its debts as they come due.

EMPLOYEES

      The Company currently employs two people.


                                       -5-
<PAGE>   6
Item 2.     Properties

The following table shows the location, approximate size and leasing status as
of December 31, 1997 of each of the Company's properties.

<TABLE>
<CAPTION>
                                                Approximate             Approximate
                                                   Land                Building Square        Average
                                                  Square                  Footage/          Annualized
                                               Footage ("SF")            Number of           Base Rent         Percent
      Property               Ownership           or Acreage               Floors            Per Sq. Foot        Leased
      --------               ---------           ----------               ------            ------------        ------
<S>                          <C>               <C>                     <C>                  <C>                <C>
OPERATING PROPERTIES
 Rego Park I                   Owned              4.8 acres              351,000/3            $29.61             100%
  Queens Blvd. &                                                          (1)
  63rd Rd.
  Rego Park, New York


 Kings Plaza                     50%             24.3 acres              427,000/2            $32.60              86%
  Shopping Center               Owned                                     (1) (2)
  (Kings Plaza Mall)
  Flatbush Avenue
  Brooklyn, New York

Kings Plaza Store               Owned          Included in               339,000/4            $10.00              85%
 Flatbush Avenue                             Shopping Center
 Brooklyn, New York                            total above

 Fordham Road &                 Owned           92,211 SF                303,000/5                --              --
  Grand Concourse
  Bronx, New York

 Roosevelt Avenue &           Leased (5)        44,975 SF                177,000/4            $16.35             100%
  Main Street                                                             (3)
  Flushing, New York

 Third Avenue &                 Owned           60,451 SF                173,000/4            $ 4.33             100%
  152nd Street
  Bronx, New York
                                                                       1,770,000
                                                                       =========
REDEVELOPMENT PROPERTIES
 Square block at East              92%           84,420 SF               591,000/6
  59th Street &                Owned (4)                                  (5)
  Lexington Avenue
  New York, New York

 Routes 4 & 17                  Owned            30.3 acres                   --
  Paramus, New Jersey                                                     (6)

 Rego Park II                   Owned             6.6 acres                   --
  Queens, New York
</TABLE>


<TABLE>
<CAPTION>

                                                                                        Lease
                                                                Square                Expiration/
                                                                Footage                 Option
      Property                          Tenants                 Leased                 Expiration
      --------                          -------                 ------                 ----------
<S>                                     <C>                     <C>                  <C>
OPERATING PROPERTIES
 Rego Park I                             Sears                  195,000                   2021
  Queens Blvd. &                      Circuit City               50,000                   2021
  63rd Rd.                         Bed Bath & Beyond             46,000                   2013
  Rego Park, New York                  Marshalls                 39,000                 2008/2021
                                       Old Navy                  15,000                 2007/2021

 Kings Plaza                          103 Tenants               357,000                 (See table
  Shopping Center                                                                       on page 8)
  (Kings Plaza Mall)
  Flatbush Avenue
  Brooklyn, New York

Kings Plaza Store                        Sears                  289,000                 2023/2033
 Flatbush Avenue
 Brooklyn, New York

 Fordham Road &                           --
  Grand Concourse
  Bronx, New York

 Roosevelt Avenue &                     Caldor                  177,000                   2027
  Main Street
  Flushing, New York

 Third Avenue &                     An affiliate                173,000                   2023
  152nd Street                        of Conway
  Bronx, New York


REDEVELOPMENT PROPERTIES
 Square block at East
  59th Street &
  Lexington Avenue
  New York, New York

 Routes 4 & 17
  Paramus, New Jersey

 Rego Park II
  Queens, New York
</TABLE>

                                      -6-

<PAGE>   7


(1) Excludes parking garages operated for the benefit of the Company.

(2) Excludes approximately 150,000 square feet of enclosed, common area space.

(3) Leased to the Company through January 2027. The Company is obligated to pay
    rent to the landlord as follows: $331,000 per year from February 1997
    through January 2007, $220,000 per year from February 2007 through January
    2017, and $147,000 per year from February 2017 through January 2027.

(4) The Lexington Avenue property is owned by Seven Thirty One Limited
    Partnership, of which 7.64% is owned by non-affiliated limited partners.

(5) The Company is evaluating redevelopment plans for this site which may
    involve razing the existing buildings and developing a large multi-use
    building.

(6) Governmental approvals have been obtained to develop a shopping center at
    this site containing up to 650,000 square feet (see Item 2 "Paramus
    Property" on page 9).


Operating Properties:

Rego Park I

   The Rego Park I property encompasses the entire block fronting on Queens
Boulevard and bounded by 63rd Road, 62nd Drive, 97th Street and Junction
Boulevard.

   The existing 351,000 square foot building was redeveloped in 1996 and is
fully leased to Sears, Circuit City, Bed Bath & Beyond, Marshalls and Old Navy.
In addition, in conjunction with the redevelopment, a multi-level parking
structure was constructed which provides paid parking spaces for approximately
1,200 vehicles.

Kings Plaza Shopping Center

   The Kings Plaza Shopping Center (the "Center") comprises a two-level mall
(the "Kings Plaza Mall"), and two four-level anchor stores. The Center contains
approximately 1.1 million square feet and occupies a 24.3-acre site at the
intersection of Flatbush Avenue and Avenue U located in Brooklyn, New York.
Among its features are a marina, a five-level parking structure and an energy
plant that generates the shopping center's electrical power. The Company owns
one anchor store in the shopping center of approximately 339,000 square feet
(see "Kings Plaza Store" - Operating Properties), and an undivided one-half
interest in the Kings Plaza Mall. The other anchor store is owned and operated
as a Macy's store by Federated Department Stores, Inc.


                                       -7-
<PAGE>   8
Kings Plaza Mall

   The Mall stores contain approximately 427,000 leasable square feet. As of
December 31, 1997, 86% of the leasable area was leased to approximately 103
tenants.

   The following table shows lease expirations for the tenants in the Mall
stores for the next ten years, assuming none of the tenants exercise renewal
options:

<TABLE>
<CAPTION>
                                                                                            Percent of Total          Percent of
                                Approximate                             Annualized Fixed      Leased Square           1997 Gross
              Number of       Leased Area in       Annualized Fixed        Rent Under           Footage              Annual Rental
                Leases       Square Feet Under       Rent Under          Expiring Leases     Represented by          Represented by
  Year         Expiring       Expiring Leases       Expiring Leases      per Square Foot      Expiring Leases        Expiring Leases
  ----         --------       ---------------       ---------------      ---------------      ---------------        ---------------
<S>           <C>            <C>                   <C>                  <C>                 <C>                      <C>
  1998            6               9,705              $  426,440              $43.94                2.26%                   3.04%
  1999            2               3,291                 155,804               47.34                0.77%                   1.11%
  2000           10              17,761                 827,686               46.60                4.14%                   5.90%
  2001           13              33,430               1,998,669               59.79                7.79%                  14.25%
  2002           15              36,748               1,467,961               39.95                8.57%                  10.47%
  2003            9              17,219                 829,349               48.16                4.01%                   5.91%
  2004            1               6,519                 293,355               45.00                1.52%                   2.09%
  2005            4              27,253                 421,885               15.48                6.35%                   3.01%
  2006           16              87,860               2,249,805               25.61               20.48%                  16.04%
  2007           10              56,594               2,742,690               48.46               13.19%                  19.56%
</TABLE>

The following table shows the occupancy rate and the average annual rent per
square foot as of:

<TABLE>
<CAPTION>
                                                               Average
                                                             Annual Rent
                                    Occupancy Rate         Per Square Foot
                                    --------------         ---------------
<S>                                 <C>                    <C>
           December 31, 1997               86%                  $32.60
           December 31, 1996               84%                   31.19
           December 31, 1995               88%                   27.54
           June 30, 1994                   88%                   24.91
           June 30, 1993                   90%                   24.77
</TABLE>

   Centercorp, Inc. manages the Mall.  Interstate Properties, through Vornado,
is the leasing agent.

   At December 31, 1997, the Company's share of the $6,524,000 mortgage on the
Kings Plaza Mall is $3,262,000. The interest rate is 8.50% and it matures on
December 1, 2001. Since the Kings Plaza Mall is an unconsolidated joint venture,
the mortgage on the Kings Plaza Mall is not reflected on the Company's books and
records.

Kings Plaza Store

   The Company's anchor store in the Center is a four-floor building containing
approximately 339,000 square feet of which 289,000 square feet is leased to
Sears. Access to the store is available from entrances on Flatbush Avenue and
the parking lot and from entrances on both levels of the Mall.

Fordham Road

   The Company owns the Fordham Road property, which is located at the
intersection of Fordham Road and the Grand Concourse in the Bronx, New York. The
property includes a five-floor building containing approximately 303,000 square
feet located in the center of a shopping complex in one of the busiest shopping
areas in the Bronx. This property, which is currently unoccupied, was previously
leased to Caldor. Caldor rejected this lease effective June 6, 1997 and
accordingly, no longer pays rent . The Company is currently in discussions with
several tenants to re-lease all or portions of this space.


                                       -8-
<PAGE>   9
Flushing

   The Flushing property is located on Roosevelt Avenue and Main Street in the
downtown, commercial section of Flushing, Queens. Roosevelt Avenue and Main
Street are active shopping districts with many national retailers located in the
area. A subway entrance is located directly in front of the property with bus
service across the street. It comprises a four-floor building containing 177,000
square feet and a parking garage.

   This property is subleased to Caldor (other than the portion currently being
used as a parking garage).

Third Avenue

   The Company owns the Third Avenue property, a four-floor building and a small
surface parking lot located at the intersection of Third Avenue and 152nd Street
in the Bronx, New York. The store is located in a densely populated
neighborhood. This property is leased to an affiliate of Conway, a New York area
discount retailer.

Redevelopment Properties:

Lexington Avenue

   As of December 31, 1997, the Company owns an approximately 92% interest in
the Seven Thirty One Limited Partnership (the "Partnership"), a limited
partnership which owns the Lexington Avenue property. This property comprises
the entire square block bounded by Lexington Avenue, East 59th Street, Third
Avenue and East 58th Street and is situated in the heart of one of Manhattan's
busiest business and shopping districts with convenient access to several subway
and bus lines. The property is located directly across the street from
Bloomingdale's flagship store and only a few blocks away from both Fifth Avenue
and 57th Street. The Company is evaluating redevelopment plans for this
property, which may involve razing the existing buildings and developing a large
multi-use building requiring capital in excess of $300,000,000 to be expended.
No redevelopment decisions have been finalized.

Paramus

   As of December 31, 1997, the Company owns 30.3 acres of land, including its
former store building, located at the intersection of Routes 4 and 17 in
Paramus, New Jersey. The Company's property is located directly across from the
Garden State Plaza regional shopping mall, within two miles of three other
regional shopping malls and within 10 miles of New York City.

   In October 1997, Alexander's and the New Jersey Department of Transportation
("DOT") entered into an agreement, in lieu of condemnation, pursuant to which
the DOT agreed to buy approximately 9 acres from the Company located on the
periphery of the property for $14,700,000 and granted the Company the right to
develop up to approximately 650,000 square feet on the remaining acreage. The
Company received the proceeds in March 1998. The Company intends to raze the
existing building and develop a shopping center on the site. The estimated cost
of such redevelopment is between $90,000,000 and $100,000,000. The Company has
received municipal approvals on tentative plans to redevelop the site. No
redevelopment plans have been finalized.

Rego Park II

   The Company owns two additional land parcels adjacent to the Rego Park I
property. They are the entire square block bounded by the Long Island
Expressway, 97th Street, 62nd Drive and Junction Boulevard and a smaller parcel
of approximately one-half square block at the intersection of 97th Street and
the Long Island Expressway (the "Z Parcel"). Both parcels are currently zoned
for residential use with the Z parcel having a commercial zoning overlay. Both
parcels are being used for public paid parking. The Company intends to continue
to use these properties for paid parking while it evaluates the feasibility of
having these properties re-zoned for commercial use.


                                       -9-
<PAGE>   10
Insurance

   The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
Management of the Company believes that the Company's insurance coverage
conforms to industry norms.


Item 3. Legal Proceedings


   Neither the Company nor any of its subsidiaries is a party to, nor is their
property the subject of, any material pending legal proceeding other than
routine litigation incidental to their businesses. The Company believes that
these legal actions will not be material to the Company's financial condition or
results of operations.


Item 4. Submission of Matters to a Vote of Security Holders

   No matters were submitted to a vote of security holders during the fourth
 quarter of the year ended December 31, 1997.


                                      -10-
<PAGE>   11
Executive Officers of the Company

   The following is a list of the names, ages, principal occupations and
positions with the Company of the executive officers of the Company and the
positions held by such officers during the past five years.

<TABLE>
<CAPTION>
                              Principal Occupation, Position and Office (current and during the past
    Name         Age          five years with the Company unless otherwise stated)
    ----         ---          ----------------------------------------------------
<S>              <C>          <C>
Stephen Mann      60          Chairman of the Board of Directors since March 2, 1995; Interim Chairman of the
                              Board of Directors from August, 1994 to March 1, 1995; Chairman of the Clifford
                              Companies since 1990; and, prior thereto, counsel to Mudge Rose Guthrie Alexander
                              & Ferdon, attorneys.


Steven Roth      56           Chief Executive Officer of the Company since March 2, 1995; Chairman of the Board
                              and Chief Executive Officer of Vornado since May 1989; Chairman of Vornado's
                              Executive Committee of the Board since April 1988; and the Managing General
                              Partner of Interstate, an owner of shopping centers and an investor in securities 
                              and partnerships.


Joseph Macnow    52           Vice President and Chief Financial Officer of the Company since August 1995;
                              Executive Vice President - Finance and Administration of Vornado since January
                              1998 and Vice President and Chief Financial Officer of Vornado from 1985 to
                              January 1998.


Brian M. Kurtz   49           Executive Vice President and Chief Administrative Officer from July, 1994 to the
                              present; Senior Vice President and Chief Administrative Officer from March 1993 to
                              July 1994; Senior Vice President and Controller from January 1989 to March, 1993;
                              and Vice President-Controller from December 1985 to January 1989.
</TABLE>


                                      -11-
<PAGE>   12
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     Equity and Related Stockholder Matters

     The common stock, par value $1.00 per share, of the Company is traded on
the New York Stock Exchange under the symbol "ALX". Set forth below are the high
and low sales prices for the Company's common stock for each full quarterly
period within the two most recent years:

<TABLE>
<CAPTION>
                                High                    Low
                                ----                    ---
<S>                           <C>                     <C>
      1st Quarter 1997        $ 79 3/8                $ 62 1/2
      2nd Quarter 1997          71 1/4                  65
      3rd Quarter 1997          82 3/4                  70 3/8
      4th Quarter 1997          92 3/8                  81 3/4
</TABLE>

<TABLE>
<CAPTION>
                                High                    Low
                                ----                    ---
<S>                           <C>                     <C>
      1st Quarter 1996        $ 69 5/8                $ 65 1/4
      2nd Quarter 1996          74                      66 1/4
      3rd Quarter 1996          73 1/4                  67 1/2
      4th Quarter 1996          80                      69 1/4
</TABLE>


      As of December 31, 1997, there were approximately 2,000 holders of record
of the Company's common stock. The Company pays dividends only if, as and when
declared by its Board of Directors. No dividends were paid in 1997 and 1996. In
order to qualify as a REIT, the Company generally is required to distribute as a
dividend 95% of its taxable income. At December 31, 1997, the Company had net
operating loss carryovers ("NOL's") of approximately $156,000,000. Under the
Internal Revenue Code of 1986, as amended, the Company's NOL's generally would
be available to offset the amount of the Company's REIT taxable income that
otherwise would be required to be distributed as a dividend to stockholders.


                                      -12-
<PAGE>   13
Item 6.  Selected Financial Data

         Summary of Selected Financial Data
         (Amounts in thousands, except per share data)

<TABLE>
<CAPTION>

                                              Year Ended December 31,                                Five Months      Fiscal Year
                                      -----------------------------------------------------------      Ended (1)         Ended
                                        1997         1996         1995        1994       1993(1)     Dec. 31, 1993  July 31, 1993(2)
                                      --------     --------     ---------   ---------    --------    -------------  ---------------
<S>                                   <C>          <C>          <C>         <C>          <C>         <C>            <C>
Operating data:
   Total revenues                     $ 25,369     $ 21,833     $  14,761   $  13,206    $ 10,150      $  5,596         $   5,948
                                      ========     ========     =========   =========    ========      ========         =========

Income (loss) from continuing
  operations                          $  7,466(3)  $ 13,097(4)  $  (7,696)  $   4,033    $  9,644      $    946         $  27,151

Income (loss) from discontinued
  operations                              --         11,602        10,133        --          (280)         --                (477)

Cumulative effect of change in
  accounting                              --           --            --          --          --            --             (21,449)
                                      --------     --------     ---------   ---------    --------      --------         ---------

Net income (loss)                     $  7,466     $ 24,699     $   2,437   $   4,033    $  9,364      $    946         $   5,225
                                      ========     ========     =========   =========    ========      ========         =========

Income (loss) per common share: (5)
   Continuing operations              $   1.49     $   2.62     $   (1.54)  $     .81    $   1.93      $    .19         $    5.45
   Discontinued operations                --           2.32          2.03        --          (.05)         --                (.09)
   Cumulative effect of change in
     accounting                           --           --            --          --          --            --               (4.31)
                                      --------     --------     ---------   ---------    --------      --------         ---------
   Net income (loss) per share        $   1.49     $   4.94     $     .49   $     .81    $   1.88      $    .19         $    1.05
                                      ========     ========     =========   =========    ========      ========         =========


Balance sheet data:
   Total assets                        $235,074      $211,585      $ 198,541    $ 109,419    $ 92,917    $ 92,917    $ 113,572
   Real estate                          191,733       181,005        150,435       84,658      70,882      70,882       71,325
   Debt                                 208,087       192,347        182,883       52,842      43,520      43,520       44,359
   Stockholders' equity (deficiency)     13,029         5,563        (19,136)     (21,573)    (25,606)    (25,606)     (26,552)
</TABLE>


1. In November 1993, the Company changed to a calendar year from a fiscal year
   ending on the last Saturday in July. The amounts for the year ended December
   31, 1993 are included for comparative purposes only.

2. Includes 53 weeks.

3. Includes a gain of $8,914,000 from the condemnation of a portion of the
   Paramus property net of the write-off of the book value of the building of
   $5,786,000.

4. Includes income from the gain on reversal of the Company's postretirement
   healthcare liability of $14,372,000.

5. The earnings per share amounts presented comply with Statement of Financial
   Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). Earnings
   per share is the same for all years' presented with and without dilution. For
   further discussion of earnings per share and the impact of SFAS No. 128, see
   notes to the consolidated financial statements.

                                      -13-

<PAGE>   14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS

  Continuing Operations - Years Ended December 31, 1997 and December 31, 1996

      The Company's revenues, which consist of property rentals, tenant expense
reimbursements and equity in income of unconsolidated joint venture were
$25,369,000 in 1997, compared to $21,833,000 in 1996, an increase of $3,536,000
or 16.2%.

      Property rentals were $18,455,000 in 1997, compared to $15,952,000 in
1996, an increase of $2,503,000 or 15.7%. This increase resulted primarily from
rent from leases commencing at the Rego Park I and Kings Plaza Store properties
in 1997 of $5,143,000, partially offset by the loss of $2,274,000 of rent
resulting from Caldor's rejection of its Fordham Road lease in June 1997.

      Tenant expense reimbursements were $2,668,000 in 1997, compared to
$1,872,000 in 1996, an increase of $796,000 or 42.5%. This increase reflects a
corresponding increase in operating expenses passed through to tenants as a
result of (i) a full year of operations at the Rego Park I property this year
compared to ten months in 1996 and (ii) the commencement of operations at the
Kings Plaza Store property.

      Equity in income of unconsolidated joint venture (the Kings Plaza Mall)
was $4,246,000 in 1997, compared to $4,009,000 in 1996, an increase of $237,000
or 5.9%. This increase resulted primarily from an increase in rent from mall
tenants of $973,000, partially offset by an accrual of $750,000 (the Company's
50% share) for estimated environmental remediation costs at the site.

      Operating expenses were $7,459,000 in 1997, compared to $5,562,000 in
1996, an increase of $1,897,000. This increase resulted primarily from a full
year of operations at the Rego Park I property this year compared to ten months
last year and the commencement of operations at the Kings Plaza Store property.

      General and administrative expenses were $3,933,000 in 1997, compared to
$4,402,000 in 1996, a decrease of $469,000. This decrease resulted primarily
from lower professional fees.

      Depreciation and amortization expense was $2,714,000 in 1997, compared to
$2,128,000 in 1996, an increase of $586,000. This increase resulted primarily
from the commencement of operations at the Rego Park I and Kings Plaza Store
properties.

      Interest and debt expense was $13,430,000 in 1997, compared to $13,934,000
in 1996, a decrease of $504,000. This decrease resulted primarily from more
interest expense being capitalized on redevelopment projects in 1997, offset by
interest on the Rego Park I debt being charged to income for twelve months in
1997 versus ten months in 1996.

      Interest and other income, net was $719,000 in 1997 compared to $2,918,000
in 1996, a decrease of $2,199,000. This decrease resulted primarily from the
amortization of deferred gains in connection with the Company's postretirement
healthcare benefits and refunds in the prior year.

      In October 1997, Alexander's entered into an agreement, in lieu of
condemnation, with the New Jersey Department of Transportation ("DOT") pursuant
to which the DOT agreed to buy approximately 9 acres from the Company located on
the periphery of its Paramus property for $14,700,000. In connection with this
agreement, the Company recorded a gain of $8,914,000 in the fourth quarter of
1997 which reflects the proceeds net of the write-off of the book value of the
building which the Company intends to raze.


                                      -14-
<PAGE>   15
   Continuing Operations - Years Ended December 31, 1996 and December 31, 1995


      The Company's revenues, which consist of property rentals, tenant expense
reimbursements and equity in income of unconsolidated joint venture were
$21,833,000 in 1996, compared to $14,761,000 in 1995, an increase of $7,072,000
or 47.9%.

      Property rentals were $15,952,000 in 1996, compared to $10,239,000 in
1995, an increase of $5,713,000 or 55.8%. This increase resulted primarily from
the commencement of rents and paid parking at the Rego Park I property in March
1996.

      Tenant expense reimbursements were $1,872,000 in 1996, compared to
$1,188,000 in 1995, an increase of $684,000 or 57.6%. This increase reflects a
corresponding increase in operating expenses passed through to tenants and was
largely the result of the commencement of rents and paid parking at the Rego
Park I property in March 1996.

      Equity in income of unconsolidated joint venture (the Kings Plaza Shopping
Center) was $4,009,000 in 1996, compared to $3,334,000 in 1995, an increase of
$675,000 or 20.2%. This increase resulted primarily from an increase in rent
from mall tenants.

      Operating expenses were $5,562,000 in 1996, compared to $3,807,000 in
1995, an increase of $1,755,000. This increase resulted primarily from the
commencement of operations at the Rego Park I property as noted above.

      General and administrative expenses were $4,402,000 in 1996, compared to
$4,820,000 in 1995, a decrease of $418,000. This decrease resulted primarily
from lower professional fees.

      Depreciation and amortization expense was $2,128,000 in 1996, compared to
$1,858,000 in 1995, an increase of $270,000. This increase resulted primarily
from the commencement of operations at the Rego Park I property as noted above.

      Interest and debt expense was $13,934,000 in 1996, compared to $13,156,000
in 1995, an increase of $778,000. This increase resulted primarily from interest
on the Rego Park I debt being charged to income this year (as a result of the
property becoming operational), whereas in the prior year such interest was
capitalized. The increase in interest expense was partially offset by additional
interest capitalized in 1996 on other redevelopment projects.

      Interest and other income, net was $2,918,000 in 1996 compared to
$1,716,000 in 1995, an increase of $1,202,000. This increase resulted primarily
from (i) the amortization of deferred gains of $794,000 in connection with the
Company's postretirement healthcare benefits, (ii) workmen's compensation
insurance and real estate tax refunds aggregating $351,000 and (iii) a
reimbursement of expenses of $764,000 received in 1996 from the Company's
partner in the unconsolidated joint venture, partially offset by (iii) a
decrease in interest income of $745,000 as a result of a lower average cash
invested this year than in the prior year.

      Effective October 1, 1996, the Company made significant changes in the
manner in which it provides healthcare benefits to its retirees. As a result,
the Company has reversed its liability for postretirement healthcare costs
resulting in the recognition of a $14,372,000 gain.

  Discontinued Operations - Years Ended December 31, 1996 and December 31, 1995

      The Company recorded income from discontinued operations of $11,602,000 in
1996 comprised of (i) $9,602,000 from the settlement of a tax certiorari
proceeding against the County of Nassau for overpayment of taxes on its former
Valley Stream Store property and (ii) $2,000,000 from the reduction of other
liabilities of discontinued operations to amounts estimated to be needed to
resolve these liabilities at December 31, 1996.

      In 1995, the Company recorded income from discontinued operations of
$10,133,000 comprised of (i) $6,133,000 from the settlement of a tax certiorari
proceeding with the City of New York regarding the Kings Plaza Shopping Center
and (ii) $4,000,000 resulting from the reduction of other liabilities of
discontinued operations to amounts considered necessary to cover the remaining
estimates of these liabilities at December 31, 1995.


                                      -15-
<PAGE>   16
LIQUIDITY AND CAPITAL RESOURCES

      In the aggregate, Alexander's current operating properties (six of its
nine properties) do not generate sufficient cash flow to pay all of its
expenses. The Company's three non-operating properties (Lexington Avenue,
Paramus, and Rego Park II) are in various stages of redevelopment. As rents
commence from a portion of the redevelopment properties, the Company expects
that cash flow will become positive.

      The Company estimates that its capital expenditure requirements for
redevelopment projects will include: (i) the redevelopment of the Paramus
property, at a cost of approximately $90,000,000 to $100,000,000 and (ii)
improvements to the Kings Plaza Shopping Center at a cost of approximately
$15,000,000. Further, the Company is evaluating redevelopment plans for the
Lexington Avenue site, which may involve razing the existing buildings (in which
case, the carrying cost of approximately $15,000,000 would be written-off) and
developing a large multi-use building requiring capital in excess of
$300,000,000 to be expended. While the Company anticipates that financing will
be available after tenants have been obtained for these redevelopment projects,
there can be no assurance that such financing will be obtained or if obtained,
that such financings will be on terms that are acceptable to the Company. In
addition, it is uncertain as to when these projects will commence.

      Property rentals from Caldor, which filed for relief under Chapter 11 of
the United States Bankruptcy Code in September 1995, represented approximately
22% and 36% of the Company's consolidated revenues for the years ended December
31, 1997 and 1996. Caldor rejected its Fordham Road lease effective June 6, 1997
and accordingly, no longer pays rent. Alexander's has filed a claim for damages
based on such rejection. The annual base rental revenue under this lease was
$3,537,000. The loss of property rental payments, if any, under the Caldor lease
for the Flushing property, could have a material adverse affect on the Company's
financial condition and results of operations.

      The Company's leases with Circuit City, Bed Bath & Beyond and Old Navy for
the remaining 112,000 square feet at its Rego park I property commenced during
the second quarter of 1997. In addition, the Company's lease with Sears for
289,000 square feet at its King Plaza Store property commenced in October 1997.

      A summary of maturities of debt at December 31, 1997 is as follows:

<TABLE>
<CAPTION>
          Year ending December 31,
          ------------------------
<S>                                    <C>
                    1998               $185,974,000   ($75,000,000 of which has
                                                       been extended to 1999 - 
                                                       See below)
                    1999                    628,000                    
                    2000                 21,485,000                      
                                       ------------
                                       $208,087,000
                                       ============
</TABLE>

      The Company's $75,000,000 loan, collateralized by a mortgage on its
Rego Park I property, which was scheduled to mature on March 30, 1998 has been
extended to September 30, 1998. The loan bears interest at LIBOR plus 1.00%
(currently 6.69%) and is guaranteed by the Company. In connection with the loan
extension, the Company paid a fee of 1/8%. The Company expects to complete the
refinancing of the loan through the issuance of rated commercial mortgage
backed securities.
        
      In addition, the Company's $75,000,000 loan from a bank and Vornado, which
was scheduled to mature in March 1998, has been extended to March 1999. The
blended interest rate has been reset from 12.93% to 11.50%, reflecting a
reduction in both the spread and the underlying treasury rate.

      Further, the non-affiliated limited partners of the Seven Thirty One
Limited partnership (the "Partnership"), a limited partnership which owns the
Company's Lexington Avenue property, have the right to put their remaining 7.64%
interest to the Partnership until October 3, 1998, in exchange for a five year
secured note in the principal amount of $15,000,000, bearing annual interest at
Prime plus 1%.

      The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales.


                                      -16-
<PAGE>   17
      In March 1998, the Company received the proceeds from the condemnation of
a portion of its Paramus property of $14,700,000 and repaid $3,591,000 of the
loan collateralized by the property.

      Although there can be no assurance, the Company believes that these cash
sources will be adequate to fund cash requirements until its operations generate
adequate cash flow.

      CASH FLOWS

      Year Ended December 31, 1997

      Cash used in operating activities of $1,454,000 for the year ended
December 31, 1997, was comprised of: (i) a net loss from operations of
$1,448,000 (net income of $7,466,000 less the net gain from the Paramus
condemnation of $8,914,000), (ii) a net change in operating assets and
liabilities of $2,353,000 and (iii) the payment of liabilities of discontinued
operations of $326,000, partially offset by (iv) adjustments for non-cash items
of $2,673,000. The adjustments for non-cash items are comprised of depreciation
and amortization of $4,494,000, partially offset by the effect of straight-
lining of rental income of $1,821,000.

      Net cash used in investing activities of $16,877,000 was comprised of
additions to real estate of $20,625,000, offset by the use of restricted cash of
$3,748,000.

      Net cash provided by financing activities of $15,542,000 was comprised of
proceeds from the issuance of debt (net of deferred debt expense) of
$16,468,000, offset by $926,000 of debt repayments.

      Year Ended December 31, 1996

      Cash provided by operating activities of $8,574,000 was comprised of net
income of $24,699,000 (including income from discontinued operations of
$11,602,000), offset by (i) adjustments for non-cash items of $13,757,000 (ii)
the payment of liabilities of discontinued operations of $1,175,000, and (iii)
the net change in operating assets and liabilities of $1,193,000. The
adjustments for non-cash items are comprised of (i) the reversal of the
Company's postretirement healthcare liability of $14,372,000, (ii) the change in
other liabilities of discontinued operations of $2,000,000, and (iii) the effect
of straight-lining of rental income of $1,756,000, offset by (iv) depreciation
and amortization of $4,105,000.

      Net cash used in investing activities of $21,029,000 was comprised of
capital expenditures of $32,314,000, offset by the release of cash restricted
for both operating liabilities ($9,228,000) and construction financing
($2,057,000).

      Net cash provided by financing activities of $9,464,000 was comprised of
proceeds from the issuance of construction financing of $10,527,000 on the Rego
Park I property, offset by repayments of debt of $1,063,000.

      Year Ended December 31, 1995

      Cash used in operating activities of $33,210,000 was comprised of: (i) the
payment of liabilities of discontinued operations of $29,488,000, (ii) a net 
change in operating assets and liabilities of $5,184,000, and (iii) an
adjustment for non-cash items of $975,000, offset by net income of $2,437,000
(including income from discontinued operations of $10,133,000). The adjustments
for non-cash items are comprised of (i) change in other liabilities of
discontinued operations of $4,322,000, and (ii) the effect of straight-lining 
of rental income of $1,340,000, offset by depreciation and amortization of 
$4,687,000.

      Net cash used in investing activities of $62,838,000 was comprised of (i)
capital expenditures of $45,933,000 and (ii) cash restricted for both operating
liabilities ($10,724,000) and construction financing ($6,181,000).

      Net cash provided by financing activities of $102,156,000 was comprised of
proceeds from the issuance of debt of $142,034,000 (net of deferred debt
expense), offset by repayments of debt of $39,878,000.


                                      -17-
<PAGE>   18
CERTAIN INDEBTEDNESS

      As of December 31, 1997, debt consists of:

      (1)   First mortgage loans are comprised of:

            (a)   A $22,684,000 five year loan maturing February 24, 2000,
                  secured principally by a mortgage on the Company's Fordham
                  Road property. The loan bears annual interest at 10.22%.
                  Beginning in 1998, all cash flow of the property (presently
                  zero) after debt service, will further amortize the loan. The
                  loan is prepayable without penalty.

            (b)   A $13,591,000 loan maturing December 31, 1998, secured
                  principally by a mortgage on the Company's Paramus property.
                  The loan bears interest at 8.19%. The loan is prepayable
                  without penalty. In March 1998, the Company prepaid $3,591,000
                  of the loan with a portion of the proceeds from the
                  condemnation of a portion of the property, reducing the
                  principal balance of the loan to $10,000,000.

      (2)   A $75,000,000 loan, scheduled to mature in March 1998, was extended
            one year to March 1999. The loan is secured by mortgages on all of
            the Company's assets and/or pledges of the stock of subsidiaries
            owning the assets and/or guarantees of such subsidiaries and the
            parent. The loan bears interest at a blended rate of 12.93% per
            annum at December 31, 1997 and is comprised of two separate notes of
            $45,000,000 to Vornado and $30,000,000 to a bank. On March 15, 1998,
            the interest rate on the loan was reset to a blended rate of 11.50%,
            reflecting a reduction in both the spread and the underlying
            treasury rate. The loan is prepayable quarterly without penalty. 
            No dividends can be paid unless required to maintain Real Estate 
            Investment Trust ("REIT") status.

      (3)   The Company's $75,000,000 loan, collateralized by a mortgage on
            its Rego Park I property, which was scheduled to mature on 
            March 30, 1998 has been extended to September 30, 1998. The loan 
            bears interest at LIBOR plus 1.00% (currently 6.69%) and is
            guaranteed by the Company. In connection with the loan extension,
            the Company paid a fee of 1/8%. The Company expects to complete
            the refinancing of the loan through the issuance of rated
            commercial mortgage backed securities.

      (4)   In January 1995, the Seven Thirty One Limited Partnership ("the
            Partnership"), redeemed the first portion of the non-affiliated
            limited partners' interest by giving such limited partners a
            promissory note due on August 21, 1998 in the amount of $21,812,000
            (the "Note"). The Note bears annual interest at Prime plus 1% (9.50%
            at December 31, 1997) and is secured by a third mortgage on the
            Lexington Avenue property. The loan is prepayable without penalty.


                                      -18-
<PAGE>   19
Item 8.   Financial Statements and Supplementary Data


                          Index to Financial Statements

<TABLE>
<CAPTION>
                                                                            Page
                                                                            Number
                                                                            ------
<S>                                                                         <C>
   Independent Auditors' Report                                               20

   Consolidated Balance Sheets at December 31, 1997 and 1996                  21

   Consolidated Statements of Operations for the
      Years Ended December 31, 1997, 1996 and 1995                            23

   Consolidated Statements of Stockholders' Equity (Deficiency) for the
      Years Ended December 31, 1997, 1996 and 1995                            24

   Consolidated Statements of Cash Flows for the
      Years Ended December 31, 1997, 1996 and 1995                            25

   Notes to Consolidated Financial Statements                                 26
</TABLE>


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

   Not applicable.


                                      -19-
<PAGE>   20
INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
  of Alexander's, Inc.
Saddle Brook, New Jersey

We have audited the accompanying consolidated balance sheets of Alexander's,
Inc. and Subsidiaries (the "Company") as of December 31, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended 
December 31, 1997. Our audits also included the financial statement schedules 
listed in the index at Item 14(a)(2). These financial statements and financial 
statement schedules are the responsibility of the Company's management. Our 
responsibility is to express an opinion on these financial statements and 
financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997, and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.





DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 17, 1998


                                      -20-
<PAGE>   21
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   (amounts in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                      --------------------------
                                                                        1997             1996
                                                                      ---------        ---------
<S>                                                                   <C>              <C>
ASSETS:
Real estate, at cost:
  Land                                                                $  45,571        $  45,999
  Buildings, leaseholds and leasehold improvements                      123,612          114,280
  Capitalized expenses and predevelopment costs                          47,163           47,488
                                                                      ---------        ---------
   Total                                                                216,346          207,767
  Less accumulated depreciation and amortization                        (35,224)         (39,375)
                                                                      ---------        ---------
                                                                        181,122          168,392
  Investment in unconsolidated joint venture                             10,611           12,613
                                                                      ---------        ---------
Real estate, net                                                        191,733          181,005

Cash and cash equivalents                                                 2,691            5,480
Restricted cash                                                           1,872            5,620
Receivable arising from condemnation proceedings                         14,700               --
Accounts receivable, net of allowance for doubtful accounts
  of $147 in 1997 and 1996                                                1,064              201
Receivable arising from the straight-lining of rents, net                 7,805            5,984
Deferred lease and other expenses                                        12,443            9,966
Deferred debt expense                                                       783            2,364
Other assets                                                              1,983              965
                                                                      ---------        ---------


TOTAL ASSETS                                                          $ 235,074        $ 211,585
                                                                      =========        =========
</TABLE>


                 See notes to consolidated financial statements


                                      -21-
<PAGE>   22
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (continued)
                   (amounts in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                               --------------------------
                                                                                 1997             1996
                                                                               ---------        ---------
<S>                                                                            <C>              <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Continuing Operations:
Debt                                                                           $ 208,087        $ 192,347
Amounts due to Vornado Realty Trust and its affiliate                              6,888            6,207
Accounts payable and accrued liabilities                                           4,174            4,246
Minority interest                                                                    600              600
                                                                               ---------        ---------
Total continuing operations                                                      219,749          203,400
                                                                               ---------        ---------

Discontinued Retail Operations:
Accounts payable and accrued liabilities                                             976              976
Liabilities subject to settlement under reorganization proceedings                 1,320            1,646
                                                                               ---------        ---------
Total discontinued retail operations                                               2,296            2,622
                                                                               ---------        ---------
  TOTAL LIABILITIES                                                              222,045          206,022
                                                                               ---------        ---------

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:
Preferred stock:  no par value; authorized, 3,000,000 shares;
  issued, none
Common stock:  $1.00 par value per share; authorized, 10,000,000 shares;
  issued, 5,173,450 shares                                                         5,174            5,174
Additional capital                                                                24,843           24,843
Deficiency                                                                       (16,028)         (23,494)
                                                                               ---------        ---------
                                                                                  13,989            6,523
Less treasury shares, 172,600 shares at cost                                        (960)            (960)
                                                                               ---------        ---------
Total stockholders' equity                                                        13,029            5,563
                                                                               ---------        ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $ 235,074        $ 211,585
                                                                               =========        =========
</TABLE>


                 See notes to consolidated financial statements


                                      -22-
<PAGE>   23
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                              ----------------------------------------
                                                                1997            1996            1995
                                                              --------        --------        --------
<S>                                                           <C>             <C>             <C>
Revenues:
  Property rentals                                            $ 18,455        $ 15,952        $ 10,239
  Expense reimbursements                                         2,668           1,872           1,188
  Equity in income of unconsolidated joint venture               4,246           4,009           3,334
                                                              --------        --------        --------
Total revenues                                                  25,369          21,833          14,761
                                                              --------        --------        --------

Expenses:
  Operating (including management fee of $840, $840 and
    $700 to Vornado)                                             7,459           5,562           3,807
  General and administrative (including management
    fee of $2,160, $2,160 and $1,800 to Vornado)                 3,933           4,402           4,820
  Depreciation and amortization                                  2,714           2,128           1,858
  Reorganization costs                                            --              --             1,938
                                                              --------        --------        --------
Total expenses                                                  14,106          12,092          12,423
                                                              --------        --------        --------

Operating income                                                11,263           9,741           2,338

Interest and debt expense (including interest on loan
  from Vornado)                                                (13,430)        (13,934)        (13,156)
Interest and other income, net                                     719           2,918           1,716
Net gain from condemnation proceedings                           8,914            --              --
Gain on reversal of liability for post-retirement
  healthcare benefits                                             --            14,372            --
                                                              --------        --------        --------

Income (loss) before reversal of deferred taxes                  7,466          13,097          (9,102)

Reversal of deferred taxes                                        --              --             1,406
                                                              --------        --------        --------
Income (loss) from continuing operations                         7,466          13,097          (7,696)
Income from discontinued operations                               --            11,602          10,133
                                                              --------        --------        --------

NET INCOME                                                    $  7,466        $ 24,699        $  2,437
                                                              ========        ========        ========

Net Income (Loss) Per Share (basic and diluted):
  Continuing operations                                       $   1.49        $   2.62        $  (1.54)
  Discontinued operations                                         --              2.32            2.03
                                                              --------        --------        --------
  Net income                                                  $   1.49        $   4.94        $    .49
                                                              ========        ========        ========
</TABLE>


                 See notes to consolidated financial statements.


                                      -23-
<PAGE>   24
                       ALEXANDER'S, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                        Stockholders'
                                 Common     Additional                   Treasury          Equity
                                  Stock      Capital       Deficiency      Stock        (Deficiency)
                                  -----      -------       ----------      -----        ------------
<S>                              <C>        <C>            <C>           <C>            <C>
Balance, January 1, 1995         $5,174       $24,843       $(50,630)       $(960)       $(21,573)

Net income                         --            --            2,437         --             2,437
                                 ------       -------       --------        -----        --------
Balance, December 31, 1995        5,174        24,843        (48,193)        (960)        (19,136)

Net income                         --            --           24,699         --            24,699
                                 ------       -------       --------        -----        --------
Balance, December 31, 1996        5,174        24,843        (23,494)        (960)          5,563

Net income                         --            --            7,466         --             7,466
                                 ------       -------       --------        -----        --------
Balance, December 31, 1997       $5,174       $24,843       $(16,028)       $(960)       $ 13,029
                                 ======       =======       ========        =====        ========
</TABLE>


                   See notes to consolidated financial statements.


                                      -24-
<PAGE>   25
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                         -----------------------------------------
                                                                           1997            1996             1995
                                                                         --------        --------        ---------
<S>                                                                      <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss) from continuing operations                            $  7,466        $ 13,097        $  (7,696)
   Adjustments to reconcile net income (loss) to
      net cash (used in) provided by continuing
      operating activities:
     Depreciation and amortization (including debt
      issuance costs)                                                       4,494           4,105            4,687
     Gain on reversal of postretirement healthcare liability                   --         (14,372)              --
     Straight-lining of rental income, net                                 (1,821)         (1,756)          (1,340)
     Net gain from  condemnation proceedings                               (8,914)             --               --
   Change in assets and liabilities:
      Accounts receivable                                                    (863)            (21)            (137)
      Note receivable                                                          --              --            4,550
      Distributions (investment) in excess of equity in income 
      of unconsolidated joint venture                                       2,002             133           (4,285) 
      Amounts due to Vornado Realty Trust and its affiliate                (1,905)         (2,094)          (2,001)
      Liability for postretirement healthcare benefits                         --          (1,154)            (356)
      Accounts payable and accrued liabilities                                (73)           (143)            (502)
      Other                                                                (1,514)          2,352           (2,453)
                                                                         --------        --------        ---------
Net cash (used in) provided by operating activities
   of continuing operations                                                (1,128)            147           (9,533)
                                                                         --------        --------        ---------

Income from discontinued operations                                            --          11,602           10,133
Payment of liabilities of discontinued operations                            (326)         (1,175)         (29,488)
Change in other liabilities of discontinued operations                         --          (2,000)          (4,322)
                                                                         --------        --------        ---------
Net cash (used in) provided by discontinued operations                       (326)          8,427          (23,677)
                                                                         --------        --------        ---------

Net cash (used in) provided by operating activities                        (1,454)          8,574          (33,210)
                                                                         --------        --------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to real estate                                               (20,625)        (32,314)         (45,933)
   Cash restricted for construction financing                               3,203           2,057           (6,181)
   Cash restricted for operating liabilities                                  545           9,228          (10,724)
                                                                         --------        --------        ---------
Net cash used in investing activities                                     (16,877)        (21,029)         (62,838)
                                                                         --------        --------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of debt                                                        16,667          10,527          147,806
   Debt repayments                                                           (926)         (1,063)         (39,878)
   Deferred debt expense                                                     (199)             --           (5,772)
                                                                         --------        --------        ---------
Net cash provided by financing activities                                  15,542           9,464          102,156
                                                                         --------        --------        ---------

Net (decrease) increase in cash and cash equivalents                       (2,789)         (2,991)           6,108
Cash and cash equivalents at the beginning of the
   period                                                                   5,480           8,471            2,363
                                                                         --------        --------        ---------
Cash and cash equivalents at the end of the period                       $  2,691        $  5,480        $   8,471
                                                                         ========        ========        =========

SUPPLEMENTAL INFORMATION
   Cash payments for interest                                            $ 20,729        $ 20,140        $  16,352
                                                                         ========        ========        =========

   Capitalized interest                                                  $  9,079        $  8,552        $   6,575
                                                                         ========        ========        =========
</TABLE>

The 1995 amounts exclude an increase in real estate of $20,838 and debt of
$21,812 and a reduction in minority interest of $974 as a result of the Company
acquiring a partnership interest.

                 See notes to consolidated financial statements.


                                      -25-
<PAGE>   26
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION AND BUSINESS

  Alexander's is a real estate investment trust engaged in the business of
leasing, managing, developing and redeveloping real estate properties, focusing
on the properties where its department stores (which ceased operations in 1992)
formerly operated. The Company's properties are located in mature, densely
populated areas in New York City and Paramus, New Jersey.

  In May 1992, at a time when the Company's business consisted of retail store
operations, the Company and sixteen of its subsidiaries filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). In September 1993, the Bankruptcy Court confirmed the Joint Plan of
Reorganization (the "Plan"), pursuant to which the Company and its subsidiaries
reorganized their business as a real estate company.

  In March 1995, the Company paid holders of allowed general unsecured claims in
full, together with accrued interest in respect of their claims. Such payments
aggregated approximately $24,000,000. The Official Committee of Unsecured
Creditors has been dissolved and all secured and unsecured creditors having
allowed claims in the Bankruptcy Court cases have received the cash payments or
debt instruments contemplated to be delivered to them under the Plan.

  In the aggregate, Alexander's current operating properties (six of its nine
properties) do not generate sufficient cash flow to pay all of its expenses. The
Company's three non-operating properties (Lexington Avenue, Paramus, and Rego
Park II) are in various stages of redevelopment. As rents commence from a
portion of the development properties, the Company expects that cash flow will
become positive.

  The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost, and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital,
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales. Although there can be no assurance,
the Company believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, and a partnership in
which the Company held a majority interest at December 31, 1997. Investments in
real estate and other property which are 50% owned joint ventures are accounted
for under the equity method. All intercompany accounts and transactions have
been eliminated.

  The consolidated financial statements are prepared in conformity with
generally accepted accounting principles. Management has made estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.


                                      -26-
<PAGE>   27
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  Cash and Cash Equivalents -- The Company includes in cash and cash equivalents
both cash and short-term highly liquid investments purchased with original
maturities of three months or less. Cash and cash equivalents does not include
cash restricted for construction financing and operating liabilities which is
disclosed separately.

  Fair Value of Financial Instruments - All financial instruments of the Company
are reflected in the accompanying Consolidated Balance Sheets at amounts which,
in management's estimation, based upon an interpretation of available market
information and valuation methodologies (including discounted cash flow analyses
with regard to fixed rate debt) are considered appropriate, and reasonably
approximate their fair values. Such fair value estimates are not necessarily
indicative of the amounts that would be realized upon disposition of the
Company's financial instruments.

  Real Estate and Other Property -- Real estate and other property is carried at
cost, net of accumulated depreciation. Depreciation is provided on buildings and
improvements on a straight-line basis over their estimated useful lives. When
real estate and other property is undergoing development activities, all
property operating expenses, including interest expense, are capitalized to the
cost of the real property to the extent that management believes such costs are
recoverable through the value of the property.

  The Company's policy is to annually assess any impairment in value by making a
comparison of the current and projected operating cash flows of each of its
properties over its remaining useful life on an undiscounted basis, to the
carrying amount of such property. Such carrying amount would be adjusted, if
necessary, to reflect an impairment in the value of the asset.

  Deferred Lease Expense -- The Company capitalizes the costs incurred in
connection with obtaining long-term leases. Deferred lease expense is amortized
on the straight-line method over the initial terms of the leases.

  Deferred Finance and Debt Expense -- The Company capitalizes the costs
incurred in connection with obtaining short-term or long-term debt or
refinancing existing debt. These costs are amortized on the straight-line method
over the initial terms of the debt, which approximates the interest method.

  Leases -- All leases are operating leases whereby rents and reimbursements of
operating expenses are recorded as real estate operating revenue. The
straight-line basis is used to recognize rents under leases entered into which
provide for varying rents over the lease terms.

  Income Taxes -- The Company elected, with its federal income tax return for
1995, to be taxed as a real estate investment trust ("REIT") under sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify for taxation as a REIT, the Company must meet various federal income tax
law requirements. In general, a REIT that distributes to its stockholders at
least 95% of its taxable income as a dividend for a taxable year and that meets
certain other conditions will not be taxed on income distributed that year.

  The net basis in the Company's assets and liabilities for tax purposes is
approximately $74,000,000 lower than the amount reported for financial statement
purposes.

  Amounts Per Share - In 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. No restatement of prior periods were required because the amounts
did not change.


                                      -27-
<PAGE>   28
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3. INVESTMENT IN UNCONSOLIDATED 50% OWNED JOINT VENTURE (KINGS PLAZA MALL)

  The Kings Plaza Shopping Center (the "Center") comprises a two-level mall (the
"Kings Plaza Mall"), and two four-level anchor stores. The Company owns one
anchor store in the Center (leased to Sears for use as a full-line department
store which opened in October 1997) and an undivided one-half interest in the
Kings Plaza Mall. The other anchor store is owned and operated as a Macy's store
by Federated Department Stores, Inc. ("Federated").

Summary financial information for the Kings Plaza Mall is as follows:

<TABLE>
<CAPTION>

                                       Year Ended December 31,          Six Months          Fiscal
                                    -----------------------------         Ended           Year Ended
                                       1997              1996          Dec. 31, 1995     June 30, 1995
                                    -----------       -----------      -------------     -------------
<S>                                 <C>               <C>              <C>               <C>
Operating revenue                   $30,203,000       $26,530,000       $14,571,000       $24,828,000
                                    -----------       -----------       -----------       -----------
Operating costs                      19,040,000        16,511,000         9,035,000        18,176,000
Depreciation and amortization         1,418,000         1,269,000           593,000         1,101,000
Interest expense                        710,000           838,000           465,000         1,204,000
                                    -----------       -----------       -----------       -----------
                                     21,168,000        18,618,000        10,093,000        20,481,000
                                    -----------       -----------       -----------       -----------
Income before taxes                 $ 9,035,000       $ 7,912,000       $ 4,478,000       $ 4,347,000
                                    ===========       ===========       ===========       ===========

Assets                              $33,400,000       $35,400,000       $40,700,000       $28,100,000
                                    ===========       ===========       ===========       ===========

Liabilities                         $15,200,000       $16,300,000       $20,100,000       $14,900,000
                                    ===========       ===========       ===========       ===========
</TABLE>

      In June 1997, the Kings Plaza Shopping Center (the "Center"), in which the
Company owns a 50% interest, commissioned an Environmental Study and
Contamination Assessment Site Investigation (the Phase II "Study") to evaluate
and delineate environmental conditions disclosed in a Phase I study. The results
of the Study indicate the presence of petroleum and other hydrocarbons in the
soil and groundwater. The Study recommends a remedial approach, but agreement
has not yet been reached with the New York State Department of Environmental
Conservation ("NYDEC") on the finalization of the approach. The Center has
accrued $1,500,000 for its estimated obligation with respect to the clean up of
the site, which includes costs of (i) remedial investigation, (ii) feasibility
study, (iii) remedial design, (iv) remedial action and (v) professional fees. If
the NYDEC insists on a more extensive remediation approach, the Center could
incur additional obligations.

      Such contamination may have resulted from activities of third parties;
however, the sources of the contamination have not been fully identified.
Although the Center intends to pursue all available remedies against any
potentially responsible third parties, there can be no assurance that such
parties will be identified, or if identified, whether these potentially
responsible third parties will be solvent. In addition, the costs associated
with pursuing any potentially responsible parties may be cost prohibitive. The
Center has not recorded an asset as of December 31, 1997 for potential
recoveries of environmental remediation costs from other parties.


                                      -28-
<PAGE>   29
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4. DISCONTINUED OPERATIONS

   The Company recorded income from discontinued operations of $11,602,000 in
1996, and $10,133,000 in 1995 of which $9,602,000 and $6,133,000 resulted from
the settlement of tax certiorari proceedings and $2,000,000 and $4,000,000
resulted from the reduction of other liabilities of discontinued operations to
amounts considered necessary to cover the remaining estimates of these
liabilities. Management periodically evaluates the reserves and adjusts them
accordingly. A reconciliation of the liabilities from the discontinued retail
operations is as follows:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                      --------------------------------------------------
                                          1997               1996                1995
                                      -----------        -----------        ------------
<S>                                   <C>                <C>                <C>
Balance at beginning of period        $ 2,622,000        $ 5,797,000        $ 43,160,000
  Adjustments during period                    --         (2,000,000)         (4,000,000)
  Utilized during period                 (326,000)        (1,175,000)        (33,363,000)
                                      -----------        -----------        ------------
Balance at end of period              $ 2,296,000        $ 2,622,000        $  5,797,000
                                      ===========        ===========        ============
</TABLE>

5.  DEBT

    Debt comprises:

<TABLE>
<CAPTION>
                                                     December 31,
                                            -------------------------------
                                                1997               1996
                                            ------------       ------------
<S>                                         <C>                <C>
First mortgage loan, secured by the
  Company's Fordham Road property (1)       $ 22,684,000       $ 23,611,000

First mortgage loan, secured by
  Company's Paramus property (2)              13,591,000         13,591,000

Term loans (3)                                75,000,000         75,000,000

Construction loan, secured by the
  Company's Rego Park I property (4)          75,000,000         58,333,000

Secured note (5)                              21,812,000         21,812,000
                                            ------------       ------------
                                            $208,087,000       $192,347,000
                                            ============       ============
</TABLE>


    (1) A five year loan which matures in February 2000. The loan bears annual
        interest at LIBOR plus 4.25% (10.22% at December 31, 1997). Beginning in
        1998, all cash flow of the property (presently zero) after debt service,
        will further amortize the loan. The loan is prepayable without penalty.


                                      -29-
<PAGE>   30
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    (2) The loan matures on December 31, 1998. The loan bears interest at 2.50%
        above the one-year U.S. Treasury bill rate (8.19% at December 31, 1997).
        The loan is prepayable at any time. In March 1998, the Company prepaid
        $3,591,000 of the loan with a portion of the proceeds from the
        condemnation of a portion of the property, reducing the principal
        balance of the loan to $10,000,000.

    (3) The term loan, scheduled to mature in March 1998, was extended one year
        to March 1999. The loan is secured by mortgages on all of the Company's
        assets and/or pledges of the stock of subsidiaries owning the assets
        and/or guarantees of such subsidiaries and the parent. The loan bears
        interest at a blended rate of 12.93% per annum at December 31, 1997 and
        is comprised of two separate notes of $45,000,000 to Vornado and
        $30,000,000 to a bank. On March 15, 1998, the interest rate on the loan
        was reset to a blended rate of 11.50%, reflecting a reduction in both 
        the spread and the underlying treasury rate. The loan is prepayable 
        quarterly without penalty. No dividends can be paid unless required to 
        maintain Real Estate Investment Trust ("REIT") status.

    (4) The Company's $75,000,000 loan, collateralized by a mortgage on its
        Rego Park I property, which was scheduled to mature on March 30, 1998 
        has been extended to September 30, 1998. The loan bears interest at 
        LIBOR plus 1.00% (currently 6.69%) and is guaranteed by the Company. 
        In connection with the loan extension, the Company paid a fee of 1/8%. 
        The Company expects to complete the refinancing of the loan through 
        the issuance of rated commercial mortgage backed securities.

    (5) The note matures on August 21, 1998 and is secured by a third mortgage
        on the Lexington Avenue property. The note bears annual interest at
        Prime plus 1% (9.50% at December 31, 1997).

    A summary of maturities of debt at December 31, 1997, is as follows:

<TABLE>
<CAPTION>
          Year ended December 31,
          -----------------------
<S>                                           <C>
                   1998                       $185,974,000  ($75,000,000 of which has been
                                                              extended to 1999--see below)                   
                   1999                            628,000   
                   2000                         21,485,000
                                              ------------
                                              $208,087,000
                                              ============
</TABLE>

   All of the Company's debt is secured by mortgages and/or pledges of the stock
of subsidiaries holding the properties. The net carrying value of real estate
collateralizing the debt amounted to $181,122,000 at December 31, 1997.


                                      -30-
<PAGE>   31
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6. LEASES

As Lessor

    The Company leases properties to tenants. The rental terms for the
properties leased range from 10 years to approximately 34 years. The leases
provide for the payment of fixed base rentals payable monthly in advance and for
the payment by the lessees of additional rents based on a percentage of the
tenants' sales as well as reimbursements of real estate taxes, insurance and
maintenance.

    Future base rental revenue under these noncancellable operating leases is as
follows:

<TABLE>
<CAPTION>
             Year Ending                          Total
            December 31,                         Amounts
            ------------                       ----------
<S>                                           <C>
                1997                         $ 16,333,000
                1998                           16,717,000
                1999                           16,740,000
                2000                           17,164,000
                2001                           17,479,000
             Thereafter                       406,222,000
</TABLE>

    The following tenants accounted for more than 10% of the Company's
consolidated revenues:

<TABLE>
<CAPTION>
                                 Years Ended December 31,
                               ----------------------------
                               1997         1996       1995
                               ----         ----       ----
<S>                            <C>          <C>        <C>
            Caldor              22%          36%        56%
            Sears               31%          23%        --
</TABLE>

    In September 1995, Caldor filed for relief under Chapter 11 of the United
States Bankruptcy Code. Caldor rejected its Fordham Road lease effective June 6,
1997 and accordingly, no longer pays rent; Alexander's has filed a claim for
damages based on such rejection. The annual base rental under this lease was
$3,537,000. The loss of property rental payments, if any, under the Caldor lease
for the Flushing property, could have a material adverse affect on the Company's
financial condition and results of operations.


                                      -31-
<PAGE>   32
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


As Lessee

    The Company is a tenant under a long-term lease for the Flushing property
which expires on January 31, 2027. Future minimum lease payments under the
operating lease are as follows:

<TABLE>
<CAPTION>
             Year Ending                           Total
            December 31,                          Amounts
            ------------                       ----------
<S>                                           <C>
                1998                          $   331,000
                1999                              331,000
                2000                              331,000
                2001                              331,000
                2002                              331,000
             Thereafter                         5,024,000
</TABLE>

      Rent expense was $331,000, $496,000 and $496,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.

7. INTEREST AND OTHER INCOME, NET

       Interest and other income, net is comprised of:

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                    --------------------------------------------
                                      1997             1996             1995
                                   ----------       ----------       ----------
<S>                                <C>              <C>              <C>
Interest income                    $  522,000       $1,009,000       $1,601,000
Reimbursement of expenses
  from joint venture partner          197,000          764,000               --
Refund of previously
  paid taxes                               --          199,000          115,000
Amortization of deferred
  gain on post retirement
  benefit                                  --          794,000               --
Workers compensation
  insurance refund                         --          152,000               --
                                   ----------       ----------       ----------
                                   $  719,000       $2,918,000       $1,716,000
                                   ==========       ==========       ==========
</TABLE>

8.  INCOME TAXES

    The Company operates in a manner intended to enable it to continue to
qualify as a real estate investment trust ("REIT") under sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the
Code, the Company's net operating loss ("NOL") carryovers generally would be
available to offset the amount of the Company's REIT taxable income that
otherwise would be required to be distributed as a dividend to its stockholders.
In addition, the Company had a deferred tax liability of approximately
$1,406,000 at December 31, 1994, which amount was reversed in 1995 when the
Company elected to be taxed as a REIT.


                                      -32-
<PAGE>   33


                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     The Company has reported NOL carryovers for federal tax purposes of
approximately $156,000,000 at December 31, 1997, expiring from 2005 to 2012. The
Company also had investment tax and targeted jobs tax credits of approximately
$3,000,000 expiring in 2002 through 2005.

9.   RELATED PARTY TRANSACTIONS

     Steven Roth is Chief Executive Officer and a Director of the Company, the
Managing General Partner of Interstate Properties ("Interstate") and Chairman of
the Board and Chief Executive Officer of Vornado Realty Trust ("Vornado").
Interstate owns 27.1% of the outstanding common stock of the Company and owns
17.9% of the outstanding common shares of beneficial interest of Vornado. In
addition, Mr. Roth owns 2.2% of the outstanding common shares of beneficial
interest of Vornado. Mr. Roth, Interstate and the other two general partners of
Interstate, David Mandelbaum and Russell B. Wight, Jr. (who are also directors
of the Company and trustees of Vornado) own, in the aggregate, 21.3% of the
outstanding common shares of beneficial interest of Vornado. Vornado owns 29.3%
of the outstanding common stock of the Company.

     The Company is managed by and its properties are redeveloped and leased by
Vornado, pursuant to agreements with a one-year term expiring in March of each
year which are automatically renewable.

      The annual management fee payable by the Company to Vornado is $3,000,000,
plus 6% of development costs with minimum guaranteed fees of $750,000 per annum.
The leasing agreement provides for the Company to pay a fee to Vornado equal to
(i) 3% of the gross proceeds, as defined, from the sale of an asset, and (ii) in
the event of a lease or sublease of an asset, 3% of lease rent for the first ten
years of a lease term, 2% of lease rent for the eleventh through the twentieth
years of a lease term and 1% of lease rent for the twenty-first through
thirtieth year of a lease term. Subject to the payment of rents by tenants, the
Company owes Vornado $6,244,000 at December 31, 1997. Such amount is payable
annually in an amount not to exceed $2,500,000, until the present value of such
installments (calculated at a discount rate of 9% per annum) equals the amount
that would have been paid had it been paid on September 21, 1993, or at the time
the transactions which gave rise to the Commissions occurred, if later.

     In March 1995, the Company borrowed $45,000,000 from Vornado, the
subordinated tranche of a $75,000,000 secured financing. The Company incurred
interest on the loan of $7,214,000 and $7,517,000 for the years ended December
31, 1997 and 1996, of which $4,815,000 and $3,989,000 was capitalized.

     The agreement with Vornado and Interstate not to own in excess of
two-thirds of the Company's common stock expired in March 1998.

     During the years ended December 31, 1997, 1996 and 1995, Vornado through
Interstate was paid $398,000, $1,007,000, and $463,000, respectively, by the
Kings Plaza Shopping Center for performing leasing services. The Company owns
50% of the Kings Plaza Shopping Center.


10.  COMMITMENTS AND CONTINGENCIES

     Lexington Avenue

     The Company is evaluating redevelopment plans for this site, which may
involve razing the existing buildings (in which case, the carrying cost of
approximately $15,000,000 would be written-off) and developing a large multi-use
building requiring capital in excess of $300,000,000 to be expended. No
development decisions have been finalized.



                                      -33-
<PAGE>   34
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     Letters of Credit

     Approximately $3,900,000 in standby letters of credit were issued at
December 31, 1997.


11.  STOCK OPTION PLAN

     Under the Omnibus Stock Plan (the "Plan"), approved by the Company's
stockholders on May 22, 1996, directors, officers, key employees, employees of
Vornado Realty Trust and any other person or entity as designated by the Omnibus
Stock Plan Committee are eligible to be granted incentive share options and
non-qualified options to purchase common shares. Options granted are at prices
equal to 100% of the market price of the Company's shares at the date of grant,
vest on a graduated basis, becoming fully vested 60 months after grant and
expire ten years after grant. The Plan also provides for the award of Stock
Appreciation Rights, Performance Shares and Restricted Stock, as defined, none
of which have been awarded as of December 31, 1997.

     If compensation cost for Plan awards had been determined based on fair
value at the grant dates, net income and income per share would have been
reduced to the pro forma amounts below, for the years ended December 31, 1997
and 1996:

<TABLE>
<CAPTION>
                                                1997                    1996
                                          --------------          --------------
<S>                                       <C>                     <C>
Net income:
       As reported                        $    7,466,000          $   24,699,000
       Pro-forma                          $    5,512,000          $   24,495,000

Net income per share
applicable to common
shareholders:
       As reported                        $         1.49          $         4.94
       Pro-forma                          $         1.10          $         4.90
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Binomial option-pricing model with the following weighted-average
assumptions used for grants in the period ended December 31, 1996 (no options
were granted in the year ended December 31, 1997):

<TABLE>
<S>                                                <C>
              Expected volatility                  19%
              Expected life                   10 years
              Risk-free interest rate             5.9%
              Expected dividend yield               0%
</TABLE>



                                      -34-
<PAGE>   35
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





     A summary of the Plan's status, and changes during the years ended December
31, 1997 and 1996, are presented below:

<TABLE>
<CAPTION>
                                                         December 31, 1997                  December 31, 1996
                                                  -----------------------------      -----------------------------
                                                               Weighted-Average                   Weighted-Average
                                                  Shares        Exercise Price       Shares        Exercise Price
                                                  ------        ---------------      ------        ---------------

<S>                                             <C>                    <C>         <C>             <C>
           Outstanding at January 1              350,000                $73.88            --                   --
           Granted                                    --                    --       350,000               $73.88
           Exercised            --                    --                    --            --
                                                 -------                ------       -------               ------

           Outstanding at December 31            350,000                $73.88       350,000               $73.88
                                                 =======                ======       =======               ======

           Options exercised at December 31          --                                 --

           Weighted-average fair value of
             options granted during the year
             ended December 31 (per option)          --                              $35.04
</TABLE>

     The following table summarizes information about options outstanding under
the Plan at December 31, 1997:

<TABLE>
<S>                                                                  <C>
Exercise price                                                       $     73.88
Options outstanding:
     Number outstanding at December 31, 1997                             350,000
     Weighted-average remaining contractual life                       8.9 Years
     Weighted-average exercise price                                 $     73.88
Options exercisable:
     Number exercisable at December 31, 1997                              70,000
     Weighted-average exercise price                                 $     73.88
</TABLE>

     Shares available for future grant at December 31, 1997 were 700,000.


                                      -35-
<PAGE>   36
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




12.  EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share:


<TABLE>
<CAPTION>
                                                                      December 31,
                                                         1997              1996            1995
                                                      ----------       -----------       ---------
<S>                                                   <C>              <C>               <C>
Numerator:
     Income (loss) from continuing operations         $7,466,000       $13,097,000      $(7,696,000)
                                                      ==========       ===========       ==========

Denominator:
     Denominator for basic earnings per share -
          weighted average shares                      5,000,850         5,000,850        5,000,850
     Effect of dilutive securities:
          Employee stock options                           8,302                --               --
                                                      ----------       -----------       ----------

     Denominator for diluted earnings per share -
          adjusted weighted average shares and
          assumed conversions                          5,009,152         5,000,850        5,000,850
                                                      ==========       ===========       ==========


Basic and diluted earnings (loss) per share           $     1.49       $      2.62       $    (1.54)
                                                      ==========       ===========       ========== 
</TABLE>



                                      -36-
<PAGE>   37
                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




13. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
         (amounts in thousands except per share amounts)



<TABLE>
<CAPTION>
                                                            Year Ended                                Year Ended
                                                        December 31, 1997                          December 31, 1996
                                             -------------------------------------       ----------------------------------------
                                                           Quarter Ended                              Quarter Ended
                                             -------------------------------------       ----------------------------------------

                                             Mar. 31   June 30  Sept. 30   Dec. 31       Mar. 31    June 30     Sept. 30  Dec. 31
                                             -------   -------  -------    -------       -------    -------     -------   -------
<S>                                          <C>       <C>       <C>       <C>           <C>        <C>          <C>      <C>
Total Revenues                               $ 5,998   $ 6,761  $ 6,016    $ 6,594       $ 4,684    $ 5,686     $ 5,379   $ 6,084
                                             -------   -------  -------    -------       -------    -------     -------   -------
  Income (loss) from continuing operations      (208)      183     (135)     7,626(1)       (462)        53        (630)   14,136(2)
Income from discontinued
  operations                                      --        --       --         --            --     11,602(3)       --        --
                                             -------   -------  -------    -------       -------    -------     -------   -------
Net income (loss)                            $  (208)  $   183  $  (135)   $ 7,626       $  (462)   $11,655     $  (630)  $14,136
                                             =======   =======  =======    =======       =======    =======     =======   =======

Income (loss) per common share
 (basic and diluted):
  Continuing operations                      $  (.04)  $   .04  $  (.03)   $  1.52       $  (.09)   $   .01     $  (.13)  $  2.83
  Discontinued operations (3)                     --        --       --         --            --       2.32          --        --
                                             -------   -------  -------    -------       -------    -------     -------   -------
Net income (loss)                            $  (.04)  $   .04  $  (.03)   $  1.52       $  (.09)   $  2.33     $  (.13)  $  2.83
                                             =======   =======  =======    =======       =======    =======     =======   =======
</TABLE>


(1)    Includes gain of $8,914,000 from the condemnation of a portion of the
       Paramus property net of the write-off of the carrying value of the
       building of $5,786,000.

(2)    Includes gain on reversal of postretirement healthcare liability in
       the amount of $14,372,000.

(3)    Comprised of (i) $9,602,000 upon completion of a tax certiorari
       proceeding and (ii) $2,000,000 from the reduction of other
       liabilities of discontinued operations to amounts considered
       necessary to cover the remaining estimates of these liabilities.


                                      -37-
<PAGE>   38
                                    PART III



Item 10.    Directors and Executive Officers of the Registrant


      Information relating to directors and executive officers of the Company
will be contained in a definitive Proxy Statement involving the election of
directors which the Company will file with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, not later than 120 days after December 31, 1997, and such
information is incorporated herein by reference. Information relating to
Executive Officers of the Registrant appears on page 11 of this Annual Report on
Form 10-K.

Item 11.    Executive Compensation

      Information relating to executive compensation will be contained in the
Proxy Statement referred to above in Item 10, "Directors and Executive Officers
of the Registrant", and such information is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management

      Information relating to security ownership of certain beneficial owners
and management will be contained in the Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant", and such information is
incorporated herein by reference.


Item 13.    Certain Relationships and Related Transactions

      Information relating to certain relationships and related transactions
will be contained in the Proxy Statement referred to in Item 10, "Directors and
Executive Officers of the Registrant", and such information is incorporated
herein by reference.



                                      -38-
<PAGE>   39
                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)   Documents filed as part of this Report

            1.    The consolidated financial statements are set forth in Item 8
                  of this Annual Report on Form 10-K.

            2.    Financial Statement Schedules.

            The following financial statement schedules should be read in
conjunction with the financial statements included in item 8 of this Annual
Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                                     Pages in this
                                                                                     Annual Report
                                                                                      on Form 10-K

<S>                                                                               <C>
         Schedule III - Real Estate and Accumulated Depreciation                            41

         Kings Plaza Shopping Center and Marina (a Joint Venture):

               Independent Auditors' Report                                                 43

               Balance Sheets at December 31, 1997 and 1996                                 44

               Statements of Earnings for the Years Ended December 31, 1997 and
               1996, the Six Months Ended December 31, 1995 and the Year Ended June
               30, 1995                                                                     45

               Statements of Equity of the Co-Venturers for the Years Ended
               December 31, 1997 and 1996, the Six Months Ended December 31, 1995
               and the Year Ended June 30, 1995                                             46

               Statements of Cash Flows for the Years Ended December 31, 1997 and
               1996, the Six Months Ended December 31, 1995 and the Year Ended June
               30, 1995                                                                     47

               Notes to Financial Statements                                                48
</TABLE>

            All other consolidated financial schedules are omitted because they
are inapplicable, not required, or the information is included elsewhere in the
consolidated financial statements or the notes thereto.

            3.    Exhibits

                  See Exhibit Index on page 53

      (b)   Reports on Form 8-K

            During the last quarter of the period covered by this Annual Report
on Form 10-K, no reports on Form 8-K were filed.


                                      -39-
<PAGE>   40
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

                                            ALEXANDER'S, INC.


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

                                            Date: March 17, 1998
                                                  ------------------------------



         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
           Signature                                   Title                                  Date
           ---------                                   -----                                  ----
<S>                                     <C>                                             <C>
/s/ Steven Roth                         Chief Executive Officer and Director            March 17, 1998
-------------------------               (Principal Executive Officer)
Steven Roth


/s/ Thomas R. DiBenedetto               Director                                        March 17, 1998
-------------------------
Thomas R. DiBenedetto


/s/ Michael D. Fascitelli               Director                                        March 17, 1998
-------------------------
Michael D. Fascitelli


/s/ David Mandelbaum                    Director                                        March 17, 1998
-------------------------
David Mandelbaum


/s/  Stephen Mann                       Director                                        March 17, 1998
-------------------------
Stephen Mann


/s/ Arthur I. Sonnenblick               Director                                        March 17, 1998
-------------------------
Arthur I. Sonnenblick


/s/ Neil Underberg                      Director                                        March 17, 1998
-------------------------
Neil Underberg


/s/ Richard West                        Director                                        March 17, 1998
-------------------------
Richard West


/s/ Russell B. Wight, Jr.               Director                                        March 17, 1998
-------------------------
Russell B. Wight, Jr.
</TABLE>


                                      -40-
<PAGE>   41
                       ALEXANDER'S, INC. AND SUBSIDIARIES
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1997
                             (amounts in thousands)



<TABLE>
<CAPTION>
                         Column A      Column B   Column C       Column D                Column E         Column F     Column G



                                                                                        Gross Amount
                                                    Initial                               at Which
                                                    Cost to                              Carried at
                                                  Company (2)                          Close of Period-  Capitalized
                                                   Building,        Cost                  Buildings,     Expenses
                                                  Leaseholds     Capitalized              Leasehold      and Pre-
                                                 and Leasehold  Subsequent to           and Leasehold    development
Description             Encumbrances      Land   Improvements  Acquisition(3)   Land     Improvements     Costs        Total(3)
----------------------  ------------     ------  ------------- --------------  -------  --------------   -----------   --------
<S>                     <C>             <C>      <C>           <C>             <C>     <C>               <C>          <C>
Commercial Property:
  New York City,
    New York:
     Fordham Rd.         $ 22,684       $ 2,301     $9,258              --     $ 2,301    $  9,258             --      $ 11,559
     Third Avenue               -         1,201      4,437              --       1,201       4,437             --         5,638
     Rego Park I           75,000         1,647      8,953        $ 56,713       1,647      65,666             --        67,313
     Rego Park II               -         3,906      1,467             411       3,906       1,566        $   312         5,784
     Flushing                   -             -      1,660              --          --       1,660             --         1,660
     Lexington Ave.        21,812        14,432     12,355          61,576      33,979      13,647         40,737        88,363
     Flatbush Ave.
      and Avenue U                          497      9,542          16,032         497      25,574             --        26,071
                                        -------    -------        --------     -------    --------        -------      --------

  Total New York                         23,984     47,672         134,732      43,531     121,808         41,049       206,388


  New Jersey - Paramus     13,591         1,441         --           3,990       1,441          --          3,990         5,431

Other Properties                            599      1,804           2,124         599       1,804          2,124         4,527
                                        -------    -------        --------     -------    --------        -------      --------

Other secured debt         75,000 (1)
                         --------

TOTAL                    $208,087       $26,024    $49,476        $140,846     $45,571    $123,612        $47,163      $216,346
                         ========       =======    =======        ========     =======    ========        =======      ========
</TABLE>


<TABLE>
<CAPTION>
                            Column H        Column I       Column J


                                                                        Life on Which
                           Accumulated                                  Depreciation in
                           Depreciation                                 Latest Income
                               and          Date of         Date        Statement is
Description                Amortization    Construction   Acquired (2)    Computed
----------------------    -------------    ------------   ------------  -----------
<S>                        <C>             <C>            <C>           <C>
Commercial Property:
  New York City,
    New York:
     Fordham Rd.              $ 6,795         1933           1992        4-40 years
     Third Avenue               3,068         1928           1992        13 years
     Rego Park I               10,472         1959           1992        6-40 years
     Rego Park II               1,445         1965           1992        5-39 years
     Flushing                   1,620         1975(4)        1992        10-22 years
     Lexington Ave.             3,754         1965           1992        29 years
     Flatbush Ave.
      and Avenue U              6,267         1970           1992        20-40 years
                             --------

  Total New York               33,421


  New Jersey - Paramus             --         1962           1992        5-40 years

Other Properties                1,803         Various        1992        7-25 years
                             --------

Other secured debt


TOTAL                        $ 35,224
                             ========
</TABLE>

(1)   The loan, scheduled to mature in March 1998, was extended one year to
      March 1999. The loan is secured by mortgages on all of the Company's
      assets and/or pledges of the stock of subsidiaries owning the assets
      and/or guarantees of such subsidiaries and the parent.

(2)   Initial cost is as of May 15, 1992 (the date on which the Company
      commenced real estate operations) unless acquired subsequent to that date.
      See Column J.

(3)   The net basis in the Company's assets and liabilities for tax purposes is
      approximately $74,000,000 lower than the amount reported for financial
      statement purposes.

(4)   Date represents lease acquisition date.


                                      -41-
<PAGE>   42
                       ALEXANDER'S, INC. AND SUBSIDIARIES

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                             (amounts in thousands)



<TABLE>
<CAPTION>
                                                                  December 31,
                                                           --------------------------
                                                              1997             1996
                                                           ---------        ---------
<S>                                                        <C>              <C>
    REAL ESTATE:
    ACCUMULATED DEPRECIATION:

    Balance at beginning of period                         $ 207,767        $ 175,485
    Additions during the period:
       Land                                                       --               --
       Buildings, leaseholds and
         leasehold improvements (including $242
         of construction in progress at
         December 31, 1996 )                                  16,569           18,136
       Capitalized expenses and predevelopment costs           4,056           14,322
                                                           ---------        ---------
                                                             228,392          207,943
       Less: Write-off of the Paramus property               (12,046)              --
                   Disposition of property                        --             (176)
                                                           ---------        ---------

    Balance at end of period                               $ 216,346        $ 207,767
                                                           =========        =========

Balance at beginning of period                             $  39,375        $  37,794
    Additions charged to operating
       expenses                                                2,109            1,611
                                                           ---------        ---------
                                                              41,484           39,405
    Less: Write-off of the Paramus property                   (6,260)              --
                 Disposition of property                          --              (30)
                                                           ---------        ---------
    Balance at end of period                               $  35,224        $  39,375
                                                           =========        =========
</TABLE>




                                      -42-
<PAGE>   43
INDEPENDENT AUDITORS' REPORT


To the Co-Venturers
Kings Plaza Shopping Center and Marina
Brooklyn, New York

We have audited the accompanying balance sheets of Kings Plaza Shopping Center
and Marina (a joint venture) as of December 31, 1997 and 1996, and the related
statements of earnings, equity of the co-venturers and cash flows for the years
ended December 31, 1997 and 1996, the six months ended December 31, 1995 and for
the year ended June 30, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Kings Plaza Shopping Center and Marina at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1996, the six months ended December
31, 1995 and the year ended June 30, 1995 in conformity with generally accepted
accounting principles.



February 6, 1998


Deloitte & Touche LLP
Parsippany, New Jersey


                                      -43-
<PAGE>   44
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                          -----------------------------
ASSETS:                                                                       1997              1996
                                                                          -----------       -----------

<S>                                                                       <C>               <C>
Cash                                                                      $ 3,531,861       $ 1,398,813

Amounts due from tenants, less allowance for doubtful
accounts of $211,000 and $230,000                                             608,057         1,243,437

Receivable arising from the straight-lining of rental income, net           1,604,869           815,622

Notes receivable                                                                   --             8,855

Prepaid expenses and other assets                                             574,780           516,332

Prepaid real estate tax expense-tax certiorari proceedings                    820,198         5,633,679

Property and equipment, at cost:
  Land                                                                      4,219,795         4,219,795
  Land improvements                                                         1,503,417         1,503,417
  Buildings and building equipment                                         48,571,692        46,690,716
  Fixtures and equipment                                                       62,856            62,856
  Parking lot toll equipment                                                2,555,957         2,555,957
                                                                          -----------       -----------
                                                                           56,913,717        55,032,741
  Less accumulated depreciation                                            33,124,443        31,773,904
                                                                          -----------       -----------
                                                                           23,789,274        23,258,837
Deferred charges, less accumulated amortization
  of $3,970,000 and $3,357,000                                              2,510,606         2,561,783
                                                                          -----------       -----------
TOTAL ASSETS                                                              $33,439,645       $35,437,358
                                                                          ===========       ===========
LIABILITIES AND EQUITY:

LIABILITIES:
  Accounts payable                                                        $   788,350       $   506,788
  Accrued expenses                                                            806,738           487,916
  Estimated environmental remediation costs                                 1,500,000                --
  Mortgage notes payable                                                    6,523,772         7,890,836
  Accrued interest payable                                                     53,060            64,179
  Amounts due tenants - tax certiorari proceedings                          5,518,351         7,000,180
  Liabilities subject to settlement under reorganization proceeding                --           346,669
                                                                          -----------       -----------
           Total liabilities                                               15,190,271        16,296,568

COMMITMENTS AND CONTINGENCIES

Equity of the co-venturers                                                 18,249,374        19,140,790
                                                                          -----------       -----------
TOTAL LIABILITIES AND EQUITY                                              $33,439,645       $35,437,358
                                                                          ===========       ===========
</TABLE>


See notes to financial statements.


                                      -44-
<PAGE>   45
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)

STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                                  Six Months
                                                     Year Ended                      Ended             Year Ended
                                                    December 31,                  December 31,          June 30,
                                              1997                1996                1995                1995
                                          ------------        ------------        ------------        ------------
<S>                                       <C>                 <C>                 <C>                 <C>
Revenues:
  Rent                                    $ 14,940,482        $ 12,994,912        $  7,062,404        $ 11,995,203
  Expense reimbursements:
    Central heating, cooling, air
      handling and electricity               2,525,417           2,459,496           1,247,501           2,435,660
    Real estate taxes                        1,782,060           1,599,985             904,312           2,968,046
    Common area                              6,467,201           5,833,560           2,682,261           3,841,110
  Parking lot                                2,078,697           1,938,748           1,085,073           2,094,210
  Miscellaneous income                       2,408,590           1,703,209           1,589,618           1,493,760
                                          ------------        ------------        ------------        ------------
                                            30,202,447          26,529,910          14,571,169          24,827,989
                                          ------------        ------------        ------------        ------------
Expenses:
  Central heating, cooling, air
    handling and electricity                 4,638,159           4,736,774           2,215,391           4,779,409
  Real estate taxes                          1,958,117           1,845,382             915,749           3,152,717
  Common area                                4,002,653           4,039,642           2,065,609           3,993,106
  Parking lot                                3,454,875           3,009,643           1,553,262           3,180,002
  Insurance and other expenses               1,083,267           1,092,931           1,140,610           1,206,884
  Rent                                          71,156              71,156              35,578              71,156
  Management, leasing and publicity          2,331,672           1,714,950           1,108,901           1,792,368
  Environmental remediation                  1,500,000                  --                  --                  --
  Depreciation                               1,350,539           1,226,630             565,482           1,056,038
  Amortization                                  67,723              42,609              27,590              44,727
                                          ------------        ------------        ------------        ------------
                                            20,458,161          17,779,717           9,628,172          19,276,407
                                          ------------        ------------        ------------        ------------
Operating income                             9,744,286           8,750,193           4,942,997           5,551,582

Interest expense                              (709,716)           (838,247)           (464,607)         (1,204,658)
                                          ------------        ------------        ------------        ------------

NET EARNINGS                              $  9,034,570        $  7,911,946        $  4,478,390        $  4,346,924
                                          ============        ============        ============        ============
</TABLE>


See notes to financial statements.


                                      -45-
<PAGE>   46

KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)

STATEMENTS OF EQUITY OF THE CO-VENTURERS

<TABLE>
<CAPTION>

                                                 Year Ended                    Six Months
                                                 December 31,                    Ended              Year Ended
                                       --------------------------------        December 31,          June 30,
                                           1997                1996                1995                1995
                                       ------------        ------------        ------------        ------------
<S>                                    <C>                 <C>                 <C>                 <C>
BALANCE, BEGINNING OF
  PERIOD                               $ 19,140,790        $ 20,524,510        $ 13,185,266        $ 14,297,104

  Payments to the co-venturers           (9,925,986)         (9,295,666)         (1,442,833)         (6,743,226)

  Advances from the co-venturers                 --                  --           1,442,833           1,284,464

  Reversal of previously accrued
    real estate taxes                            --                  --           2,860,854                  --

  Net earnings                            9,034,570           7,911,946           4,478,390           4,346,924
                                       ------------        ------------        ------------        ------------
BALANCE, END OF PERIOD                 $ 18,249,374        $ 19,140,790        $ 20,524,510        $ 13,185,266
                                       ============        ============        ============        ============
</TABLE>


See notes to financial statements.

                                      -46-
<PAGE>   47
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       Year Ended                   Six Months
                                                                      December 31,                    Ended            Years Ended
                                                            --------------------------------        December 31,        June 30,
                                                                1997                1996               1995               1995
                                                            ------------        ------------        -----------        -----------
<S>                                                         <C>                 <C>                 <C>                <C>
Cash flows from operating activities
  Net earnings                                              $  9,034,570        $  7,911,946        $ 4,478,390        $ 4,346,924
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
     Depreciation                                              1,350,539           1,226,630            565,482          1,056,038
     Amortization (including deferred charges)                   613,039             247,459            171,749            287,752
  Change in assets and liabilities:
     Decrease (increase) in amounts due from tenants             635,381             547,948           (948,459)            (2,226)
      Increase in straight-lining of rental income              (789,247)           (150,492)          (571,672)           (93,458)
      Increase in deferred charges                              (561,862)           (465,826)          (515,423)          (465,535)
      Increase (decrease) in accounts payable and
        accrued expenses (including accrued real
        estate taxes)                                            203,714          (1,153,930)        (2,458,065)         1,514,948
      Estimated  environmental remediation costs               1,500,000                  --                 --                 --
      Decrease in accrued interest payable                       (11,119)            (10,373)            (4,923)        (2,944,727)
      (Decrease) increase in amounts due to tenants           (1,431,830)         (1,391,774)         8,263,888                 --
      Decrease (increase) in prepaid expenses and
        other assets                                           4,755,035           3,711,977         (6,000,925)           290,550
                                                            ------------        ------------        -----------        -----------

            Net cash provided by operating activities         15,298,220          10,473,565          2,980,042          3,990,266
                                                            ------------        ------------        -----------        -----------

Cash flows from investing activities:
   Additions to buildings and building equipment              (1,880,977)         (2,509,501)        (1,135,025)        (1,078,664)
   Decrease in note receivable                                     8,855                  --              2,132             12,145
                                                            ------------        ------------        -----------        -----------

            Net cash used in investing activities             (1,872,122)         (2,509,501)        (1,132,893)        (1,066,519)
                                                            ------------        ------------        -----------        -----------

Cash flows from financing activities:
     Payments to co-venturers                                 (9,925,986)         (9,295,666)        (1,442,833)        (6,743,226)
     Advances from co-venturers                                       --                  --          1,442,833          1,284,464
     Repayments of mortgage note                              (1,367,064)         (1,275,414)          (605,275)        (3,105,031)
                                                            ------------        ------------        -----------        -----------

             Net cash used in financing activities           (11,293,050)        (10,571,080)          (605,275)        (8,563,793)
                                                            ------------        ------------        -----------        -----------

Net increase (decrease) in cash                                2,133,048          (2,607,016)         1,241,874         (5,640,046)

Cash, beginning of period                                      1,398,813           4,005,829          2,763,955          8,404,001
                                                            ------------        ------------        -----------        -----------

Cash, end of period                                         $  3,531,861        $  1,398,813        $ 4,005,829        $ 2,763,955
                                                            ============        ============        ===========        ===========



Supplemental disclosure of cash flow information:
    Interest paid                                           $    720,834        $    848,621        $   469,531        $ 4,111,697
                                                            ============        ============        ===========        ===========
</TABLE>


 Supplemental disclosure of noncash financing activities - see Note 9.


See notes to financial statements.

                                      -47-

<PAGE>   48


KINGS PLAZA SHOPPING CENTER AND MARINA
(A Joint Venture)

NOTES TO FINANCIAL STATEMENTS


1.    ORGANIZATION AND BUSINESS

      Kings Plaza Shopping Center of Avenue U, Inc. (a wholly-owned subsidiary
      of Federated Department Stores, Inc. (formerly R.H. Macy & Co. Inc.
      ("Macy's")) and Alexander's Department Stores of Brooklyn, Inc.
      (wholly-owned by Alexander's, Inc. ("Alexander's")), formed a joint
      venture for the purpose of owning and operating the Kings Plaza Shopping
      Center and Marina ("Center"), including the energy plant servicing the
      entire shopping center, but exclusive of the Macy's and Alexander's stores
      and land thereunder located in the Center. The co-venturers each have an
      undivided 50% interest as tenants in common in the property and equipment.

2.    SIGNIFICANT ACCOUNTING POLICIES

      a.    Basis of Presentation - The financial statements are prepared in
            conformity with generally accepted accounting principles. Management
            has made estimates and assumptions that affect the reported amounts
            of assets and liabilities and disclosure of contingent assets and
            liabilities at the date of the financial statements and the reported
            amounts of revenues and expenses during the reporting periods.
            Actual results could differ from those estimates.

            Certain amounts have been reclassified for prior years to conform to
            1997 presentation.

      b.    Property and Equipment - Property and equipment is stated at cost.
            Depreciation of property and equipment is provided on a
            straight-line basis over the following periods:

            Land improvements                                        10-50 years
            Buildings and building equipment                         20-50 years
            Fixtures and equipment                                      10 years
            Parking lot toll equipment                                  10 years

            Additions and improvements to property and equipment are capitalized
            and depreciated over their estimated remaining lives. Maintenance
            and repairs are charged to operations as incurred.

            Management of the Center assesses any impairment in value by making
            a comparison of the current and projected operating cash flow of the
            Center into the foreseeable future on an undiscounted basis, to the
            carrying amount of such property. Such carrying amount would be
            adjusted, if necessary, to reflect an impairment in the value of an
            asset.

      c.    Deferred Charges - Deferred charges include lease commissions and
            other costs paid to tenants to acquire the rights to their leased
            space. Lease commissions are amortized on a straight-line basis over
            the life of the applicable leases. Other lease acquisition costs are
            amortized over the life of the respective leases.


                                      -48-
<PAGE>   49
       d.   Revenue Recognition - Base rents, additional rent based on tenant's
            sales volume and reimbursement of the tenant's share of certain
            operating expenses are generally recognized when due from tenants.
            The straight-line basis is used to recognize base rents on the
            leases which provide for varying rents over the lease terms.

       e.   Environmental Remediation Costs - The Center accrues for losses
            associated with environmental remediation obligations when such
            losses are probable and reasonably determinable. Accruals for
            estimated losses from environmental remediation obligations
            generally are recognized no later than completion of the remedial
            feasibility study. Such accruals are adjusted as further information
            develops or circumstances change. Costs of future expenditures for
            environmental remediation obligations are not discounted to their
            present value. Recoveries of environmental remediation costs from
            other parties are recorded as assets when their receipt is deemed
            probable.

3.    MORTGAGE NOTES PAYABLE

      The mortgage notes payable were issued by the co-venturers. The notes are
      collateralized by a mortgage on all property and equipment, and by
      assignment of leases and charges due thereunder. Mortgage notes payable
      consists of the following:


<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                              ---------------------------
                                                                                 1997             1996
                                                                              ----------       ----------
<S>                                                                           <C>              <C>       
        Alexander's note payable in quarterly
         installments of $235,507 (including interest at
         7%) plus additional interest at 1.5% on the outstanding
          balance, due through December 2001                                  $3,261,886       $3,945,418
        
        Macy's note payable in quarterly installments
         of $235,507 (including interest at 7%) plus additional
         interest at 4.02% on the outstanding balance,
          due through December 2001                                            3,261,886        3,945,418
                                                                              ----------       ----------
        
                                                                              $6,523,772       $7,890,836
                                                                              ==========       ==========
</TABLE>


                                      -49-
<PAGE>   50
      4. COMMITMENTS

      a.    Joint Venture as Lessor - The joint venture leases space to tenants
            in its shopping center for which the Center charges fixed minimum
            rents. The terms of the leases are generally ten years and provide
            for fixed minimum rents as follows:

<TABLE>
<CAPTION>
                               Year Ending                   Total
                              December 31,                  Amounts
                         ---------------------         ---------------

<S>                                                    <C>         
                                  1998                    $ 14,072,871
                                  1999                      13,427,332
                                  2000                      12,824,664
                                  2001                      11,268,632
                                  2002                       9,559,418
                           Subsequent to 2002               46,843,584
                                                         -------------

                                                         $ 107,996,501
                                                         =============
</TABLE>


            In addition to minimum rents, most of the leases provide for
            percentage rents when the tenants' sales volumes exceed stated
            amounts per lease agreements and reimbursements for certain of the
            Center's operating expenses. During the six months ended December
            31, 1995, the Center adjusted its billings to tenants for certain
            reimbursable expenses in accordance with the lease agreements. This
            adjustment gave rise to an increase of approximately $600,000 in
            other income attributable to the portion of the tenants' lease year
            included in the Center's year ended June 30, 1995.


                                      -50-
<PAGE>   51
      b.    Joint Venture as Lessee - The joint venture leases certain real
            property from the City of New York. The lease extends to January
            2020 at annual rentals (payable quarterly in advance) in future
            periods as follows:

<TABLE>
<CAPTION>
                       Year Ending                                 Rental
                       December 31,                               Commitment
                 ------------------------                     ------------------

<S>                                                           <C>     
                          1998                                      $ 78,272
                          1999                                        85,387
                          2000                                        85,387
                          2001                                        85,387
                          2002                                        85,387
                    Subsequent to 2002                             1,494,268
                                                                 -----------

                                                                 $ 1,914,088
                                                                 ===========
</TABLE>



      The lessee may extend the lease for a total of another forty-nine years,
      with individual renewal options and annual rentals of $122,957, $147,548,
      $177,058, $212,470 and $254,964, for each succeeding ten-year period and
      the final nine-year period.

5.    FEDERAL INCOME TAX

      The Center is not subject to Federal income tax. The income or loss of the
      joint venture is reportable by the co-venturers in proportion to their
      respective investment in the joint venture. Similar circumstances apply to
      state and city income taxes. Further, any investment credit realized by
      the joint venture is passed on to the co-venturers. Accordingly, no
      provision or liabilities for Federal, state or city income taxes are
      required to be reflected on the books of the Center.

6.    RELATED PARTY TRANSACTIONS

       Steven Roth is Chief Executive Officer and a Director of Alexander's, the
       Managing General Partner of Interstate Properties ("Interstate") and
       Chairman of the Board and Chief Executive Officer of Vornado Realty Trust
       ("Vornado"). Interstate owns 27.1% of the outstanding common stock of
       Alexander's and owns 17.9% of the outstanding common shares of beneficial
       interest of Vornado. Mr. Roth, Interstate and the other two general
       partners of Interstate, David Mandelbaum and Russell B. Wight, Jr. (who
       are also directors of Alexander's and trustees of Vornado) own, in the
       aggregate, 21.3% of the outstanding common shares of beneficial interest
       of Vornado. Vornado owns 29.3% of the outstanding common stock of
       Alexander's. During the year ended December 31, 1997 and 1996, for the
       six months ended December 31, 1995 and for the year in the period ended
       June 30, 1995, Vornado, through Interstate, was paid $398,000, $846,000,
       $389,000 and $165,000, respectively, by the Center for performing leasing
       services for space located in the Center.

7.    FAIR VALUE OF FINANCIAL INSTRUMENTS

      The estimated fair value of cash, accounts receivable, notes receivable,
      accounts payable, accrued expenses and mortgage notes payable are
      reflected in the balance sheet. The fair value estimates are based on
      information available as of December 31, 1997. Although management is not
      aware of any factors that would significantly affect the estimated fair
      value amounts, a comprehensive revaluation has not been performed for
      purposes of this financial statement disclosure and current estimates of
      fair value may differ significantly from those amounts reflected in the
      balance sheet.


                                      -51-
<PAGE>   52
8.    ENVIRONMENTAL INVESTIGATION

      In June 1997, the Kings Plaza Shopping Center (the "Center"), in which the
      Company owns a 50% interest, commissioned an Environmental Study and
      Contamination Assessment Site Investigation (the Phase II "Study") to
      evaluate and delineate environmental conditions disclosed in a Phase I
      study. The results of the Study indicate the presence of petroleum and
      other hydrocarbons in the soil and groundwater. The Study recommends a
      remedial approach, but agreement has not yet been reached with the New
      York State Department of Environmental Conservation ("NYDEC") on the
      finalization of the approach. The Center has accrued $1,500,000 for its
      estimated obligation with respect to the clean up of the site, which
      includes costs of (i) remedial investigation, (ii) feasibility study,
      (iii) remedial design, (iv) remedial action and (v) professional fees. If
      the NYDEC insists on a more extensive remediation approach, the Center
      could incur additional obligations.

      Such contamination may have resulted from activities of third parties;
      however, the sources of the contamination have not been fully identified.
      Although the Center intends to pursue all available remedies against any
      potentially responsible third parties, there can be no assurance that such
      parties will be identified, or if identified, whether these potentially
      responsible third parties will be solvent. In addition, the costs
      associated with pursuing any potentially responsible parties may be cost
      prohibitive. The Center has not recorded an asset as of December 31, 1997
      for potential recoveries of environmental remediation costs from other
      parties.

9.    TAX CERTIORARI PROCEEDINGS

      In December 1995, the Center completed a tax certiorari proceeding with
      the City of New York. Each of the co-venturers has agreed with the City of
      New York to a reduction in the assessed values covering the tax years
      1988/1989 through 1995/1996, generating tax credits of $28,350,000, of
      which $18,836,000 relates to the co-venturer's stores. As a result, real
      estate taxes previously accrued for each of the co-venturers were
      reversed. The estimated amounts due to tenants resulting from the tax
      certiorari proceedings was $5,518,351 and $7,000,180 at December 31, 1997
      and 1996, respectively.



                                     ******




                                      -52-
<PAGE>   53
                                Index to Exhibits


           The following is a list of all exhibits filed as part of this Report:

<TABLE>
<CAPTION>
 Exhibit No.                                          Document                                           Page
 -----------                                          --------                                           ----

<S>                <C>                                                                                   <C>
 3(i)              Certificate of Incorporation, as amended. Incorporated herein                            *
                   by reference from Exhibit 3.0 to the Registrant's Current
                   Report on Form 8-K dated September 21, 1993.

 3(ii)             By-laws, as amended.  Incorporated herein by reference from                              * 
                   Exhibit 3.1 to the Registrants Form 10-Q for the quarter ended
                   September 30, 1996.

10(i)(A)(1)        Agreement, dated as of December 4, 1985, among Seven Thirty One                          *
                   Limited Partnership ("731 Limited Partnership"), Alexander's Department
                   Stores of Lexington Avenue, Inc., the Company, Emanuel Gruss, Riane
                   Gruss and Elizabeth Goldberg (collectively, the "Partners").
                   Incorporated herein by reference from Exhibit 10(i)(F)(1) to the
                   Registrant's Form 10-K for the fiscal year ended July 26, 1986.

10(i)(A)(2)        Amended and Restated Agreement of Limited Partnership in the 731                         *
                   Limited Partnership, dated as of August 21, 1986, among the Partners.
                   Incorporated herein by reference from Exhibit 1 to the Registrant's
                   Current Report on Form 8-K, dated August 21, 1986.

10(i)(A)(3)        Third Amendment to Amended and Restated Agreement of Limited                             *
                   Partnership dated December 30, 1994, among the Partners.
                   Incorporated herein by reference from Exhibit 10(i)(A)(3) to the
                   Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.

10(i)(B)(1)        Promissory Note Modification Agreement, dated October 4, 1993, between                   *
                   Alexander's Department Stores of New Jersey, Inc. and New York Life
                   Insurance Company ("New York Life").  Incorporated herein by reference
                   from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K for the Transition
                   Period August 1, 1993 to December 31, 1993.

10(i)(B)(2)        Mortgage Modification Agreement, dated October 4, 1993, by Alexander's                   *
                   Department Stores of New Jersey, Inc. and New York Life Incorporated
                   herein by reference from Exhibit 10(i)(E)(3)(a) to the Registrant's
                   Form 10-K for the Transition Period August 1, 1993 to December 31, 1993.

10(i)(C)           Credit Agreement, dated March 15, 1995, among the Company and Vornado                    *
                   Lending Corp.  Incorporated herein by reference from Exhibit 10(i)(C)
                   to the Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.
</TABLE>


* Incorporated by reference


                                      -53-
<PAGE>   54
<TABLE>
<CAPTION>
 Exhibit No.                                          Document                                           Page
 -----------                                          --------                                           ----


<S>                <C>                                                                                   <C>
10(i)(D)           Credit Agreement, dated March 15, 1995, among the Company and First                      *
                   Union Bank, National Association.  Incorporated herein by reference
                   from Exhibit 10(i)(D) to the Registrant's Form 10-K for the fiscal
                   year ended December 31, 1994.

10(i)(E)           Building Loan Agreement, dated as of March 29, 1995, among the                           *
                   Company, Union Bank of Switzerland ("UBS") (New York Branch),
                   as Lender, and UBS (New York Branch), as Agent.  Incorporated
                   by reference from Exhibit 10(i)(E) to the Registrant's Form 10-K for
                   the fiscal year ended December 31, 1994.

10(i)(F)           Project Loan Agreement, dated as of March 29,1995, among the Company,                    *
                   UBS (New York Branch), as Lender, and UBS (New York Branch), as
                   Agent.  Incorporated herein by reference from Exhibit 10(i)(F) to the
                   Registrant's Form 10-K for the fiscal year ended December 31, 1994.

10(i)(G)(1)        Real Estate Retention Agreement dated as of July 20, 1992, between                       *
                   Vornado Realty Trust and Keen Realty Consultants, Inc., each as special
                   real estate consultants, and the Company.  Incorporated herein by
                   reference from Exhibit 10(i)(O) to the Registrant's Form 10-K for the
                   fiscal year ended July 25, 1992.

10(i)(G)(2)        Extension Agreement to the Real Estate Retention Agreement, dated                        *
                   as of February 6, 1995, between the Company and Vornado Realty
                   Trust.  Incorporated herein by reference from Exhibit 10(i)(G)(2)
                   to the Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.

10(i)(H)           Management and Development Agreement, dated as of February 6, 1995,                      *
                   between Vornado Realty Trust and the Company, on behalf of itself and
                   each subsidiary listed therein.  Incorporated herein by reference from
                   Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
                   February 6, 1995.

10(i)(I)           Commitment letter, dated as of February 6, 1995, between Vornado                         *
                   Realty Trust and the Company.  Incorporated herein by reference from
                   Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated
                   February 6, 1995.

10(ii)(A)(1)       Agreement of Lease, dated April 22, 1966, between S&E Realty                             *
                   Company and Alexander's Department Stores of Valley Stream, Inc.
                   Incorporated herein by reference from Exhibit 13N to the Registrant's
                   Registration Statement on Form S-1 (Registration No. 2-29780).
</TABLE>



* Incorporated by reference


                                      -54-
<PAGE>   55
<TABLE>
<CAPTION>
 Exhibit No.                                          Document                                           Page
 -----------                                          --------                                           ----

<S>                <C>                                                                                   <C>
10(ii)(A)(2)       Guarantee, dated April 22, 1966, of the Lease described as                               *
                   Exhibit 10(ii)(A)(1) above by Alexander's Department Stores, Inc.
                   Incorporated herein by reference from Exhibit 13N(1) to the Registrant's
                   Registration Statement on Form S-1 (Registration No. 2-29780).

10(ii)(A)(3)       Agreement of Lease for Rego Park, Queens, New York, between                              *
                   Alexander's, Inc. and Sears Roebuck & Co.  Incorporated herein by
                   reference from Exhibit 10.1 to the Registrant's Quarterly Report on
                   Form 10-Q for the fiscal quarter ended March 31, 1994.

10(ii)(A)(4)(a)    Lease for Roosevelt Avenue, Flushing, New York, dated as of                              *
                   December 1, 1992, between the Company, as landlord, and Caldor, as
                   tenant.  Incorporated herein by reference from Exhibit 10(ii)(E)(7)
                   to the Registrant's Form 10-K for the fiscal year ended July 25, 1992.

10(ii)(A)(4)(b)    First Amendment to Sublease for Roosevelt Avenue, Flushing, New York,                    *
                   dated as of February 22, 1995 between the Company, as sublandlord,
                   and Caldor, as tenant.  Incorporated herein by reference from Exhibit
                   10(ii)(A)(8)(b) to the Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.

10(ii)(A)(5)       Lease Agreement, dated March 1, 1993 by and between the Company and                      *
                   Alex Third Avenue Acquisition Associates. Incorporated by
                   reference from Exhibit 10(ii)(F) to the Registrant's Form
                   10-K for the fiscal year ended July 31, 1993.

10(ii)(A)(6)       Agreement of Lease for Rego Park, Queens, New York, between the                          *
                   Company and Marshalls of Richfield, MN., Inc., dated as of March 1, 1995.
                   Incorporated herein by reference from Exhibit 10(ii)(A)(12)(a) to the
                   Registrant's Form 10-K for the fiscal year ended December 31, 1994.

10(ii)(A)(7)       Guaranty, dated March 1, 1995, of the Lease described in Exhibit                         *
                   10(ii)(A)(12)(a) above by the Company.  Incorporated herein by
                   reference from Exhibit 10(ii)(A)(12)(b) to the Registrant's
                   Form 10-K for the fiscal year ended December 31, 1994.
</TABLE>



* Incorporated by reference


                                      -55-
<PAGE>   56
<TABLE>
<CAPTION>
 Exhibit No.                                          Document                                           Page
 -----------                                          --------                                           ----




<S>                <C>                                                                                   <C>
10(iii)(A) **      Employment Agreement, dated March 29, 1995, between Brian M. Kurtz                    *
                   and the Company.  Incorporated herein by reference from Exhibit
                   10(iii)(A) to the Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.

10(iii)(A)(1) **   Amendment to Employment Agreement, dated December 11, 1996, between                    *
                   Brian M. Kurtz and the Company. Incorporated herein by reference 
                   from Exhibit 10(iii)(A)(1) to the Registrant's Form 10-K for the
                   fiscal year ended December 31, 1996.

10(iii)(B) **      Employment Agreement, dated February 9, 1995, between the Company                      *
                   and Stephen Mann.  Incorporated herein by reference from Exhibit
                   10(iii)(B) to the Registrant's Form 10-K for the fiscal year ended
                   December 31, 1994.


10(iv)(A)          Registrant's Omnibus Stock Plan, as amended, dated May 28, 1997,
                   Incorporated herein by reference from Exhibit 10 to the Registrant's
                   Form 10-Q for the fiscal quarter ended June 30, 1997.                                   *

11                 Not applicable.

12                 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
                   Charges and Preferred Stock Dividend Requirements.                                      57

13                 Not applicable.

16                 Not applicable.

18                 Not applicable.

19                 Not applicable.

21                 Subsidiaries of Registrant.                                                             58

22                 Not applicable.

23                 Consent by independent auditors to incorporation by reference.                          59

25                 Not applicable.

27                 Financial Data Schedule.                                                                60

29                 Not applicable.
</TABLE>










*        Incorporated by reference

**       Management contract or compensatory plan


                                      -56-