<PAGE>   1

                                                        EXHIBIT INDEX ON PAGE 44

                       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, 1998

                         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:

  Title of each class                  Name of each exchange on which registered
  -------------------                  -----------------------------------------

Common Stock, $1 par value                         New York Stock Exchange

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 24, 1999) was approximately $150,760,000.

5,000,850 shares of the Registrant's common stock, par value $1 per share, were
outstanding as of February 24, 1999.

                       Documents Incorporated by Reference
                       -----------------------------------

Part III: Proxy  Statement for Annual Meeting of  Shareholders  to be held May
19, 1999


                                 Page 1 of 50
<PAGE>   2

                               TABLE OF CONTENTS



                                                                          
              Item                                                        Page
              ----                                                        ----
                                                                          
PART I.       1.       Business                                             3
                                                                        
              2.       Properties                                           6
                                                                        
              3.       Legal Proceedings                                    9
                                                                        
              4.       Submission of Matters to a Vote of               
                       Security Holders                                     9
                                                                        
                       Executive Officers of the Company                   10
                                                                        
PART II.      5.       Market for Registrant's Common                   
                       Equity and Related Stockholder Matters              11
                                                                        
              6.       Selected Financial Data                             12

              7.       Management's Discussion and Analysis              
                       of Financial Condition and Results of            
                       Operations                                          13
                                                                        
              7.a.     Quantitative and Qualitative  
                       Disclosures about Market Risk                       20

              8.       Financial Statements and                          
                       Supplementary Data                                  20
                                                                        
              9.       Changes in and Disagreements  with                  
                       Accountants on Accounting and Financial
                       Disclosure                                          20
                                                                        
PART III.     10.      Directors and Executive Officers of            
                       the Registrant                                      39(1)
                                                                        
              11.      Executive Compensation                              39(1)
                                                                        
              12.      Security Ownership of Certain                    
                       Beneficial Owners and Management                    39(1)
                                                                        
                                                                        
              13.      Certain Relationships and Related                
                       Transactions                                        39(1)
                                                                        
PART IV       14.      Exhibits, Financial Statement                    
                       Schedules, and Reports on Form 8-K                  40

SIGNATURES                                                                 41

----------
(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, 1998, 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. Alexander's activities are conducted
through its manager, Vornado Realty Trust ("Vornado"). 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 eight 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 Regional Shopping Center on Flatbush Avenue in
            Brooklyn, New York, which contains 1,100,000 square feet is
            comprised of a two-level mall containing 477,000 square feet, a
            289,000 square foot department store leased to Sears and another
            anchor department store owned and operated as a Macy's by Federated
            Department Stores, Inc. ("Federated");

      (iii) 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;

      (iv)  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

      (v)   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:

      (vi)  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;

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

      (viii) 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,
                       -----------------------
                        1998     1997     1996
                        ----     ----     ----
           <S>           <C>      <C>      <C>
           Sears         28%      31%      23%
           Caldor         7%      22%      36%
</TABLE>

      In September 1995, Caldor filed for relief under Chapter 11 of the United
States Bankruptcy Code. In January 1999, Caldor announced that it is closing all
of its stores. Caldor previously sub-leased its Flushing Store from the Company.
Caldor rejected the Flushing lease effective March 29, 1999. The annual base 
rental under the lease was $2,963,000. The loss of property rental payments, if 
any, could have a material adverse affect on the Company's financial condition 
and results of operations. Caldor previously rejected its Fordham Road lease 
effective June 6, 1997 and accordingly, no longer pays rent. The annual base 
rental under this lease was $3,537,000.

      In June, 1998, the Company increased its interest in the Kings Plaza Mall
(the "Mall") to 100% by acquiring Federated's 50% interest. The purchase price 
was approximately $28,000,000, which was paid in cash, plus, the Company 
has agreed to pay Federated $15,000,000 to renovate its Macy's store in the 
Mall and Federated agreed to certain modifications to the Kings Plaza Operating 
Agreement. In connection with the acquisition, the Company completed a 
$90,000,000 three-year mortgage loan with Union Bank of Switzerland. The loan 
is collateralized by the Company's interest in the Kings Plaza Regional 
Shopping Center and bears interest at LIBOR plus 1.25% (currently 6.79%). In 
addition to funding the acquisition, the proceeds from the borrowing were also 
used to repay $34,900,000 of debt ($32,000,000 of which was due in the next 
year). Further, the Company expects to increase this loan by $30,000,000 of 
which approximately $15,000,000 will be used to partially fund a renovation of 
the Mall (estimated to cost $30,000,000 in total) and $15,000,000 will be used 
to pay the liability to Federated noted above.

      In the aggregate, Alexander's current operating properties (five of its
eight 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 equal to
the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza
Mall, plus (iii) 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 $5,145,000 at December 31, 1998. 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 in March 1995, the
subordinated tranche of a loan in the original amount of $75,000,000 which has a
current outstanding balance of $65,000,000. The Vornado loan, which was
scheduled to expire in March 1999, has been extended to March 2000 and the
interest rate has been reset from 13.87% per annum to 14.18% per annum. The loan
is secured by liens 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, except for the Kings Plaza Regional Shopping Center. These liens are
subordinate to first mortgages.

      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 15.2% of the outstanding common
shares of beneficial interest of Vornado. In addition, Mr. Roth owns 1.9% 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 the Company and trustees of
Vornado) own, in the aggregate, 18.1% of the outstanding common shares of
beneficial interest of Vornado.

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

Environmental Matters

      In June 1997, the Kings Plaza Regional Shopping Center (the "Center"),
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, 1998 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
financial position, results of operations and cash flows.

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 has one corporate employee and eighty property
level employees. 


                                      -5-
<PAGE>   6

Item 2. Properties

The following table shows the location, approximate size and leasing status as
of December 31, 1998 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            $ 28.76           100% 
    Queens Blvd. &                                                      (1)                                    
    63rd Rd.                                                                                                   
    Rego Park, New York                                                                                        

   Kings Plaza Regional     Owned                24.3 acres        289,000              $ 10.00           100% 
    Shopping Center                                                477,000              $ 40.63            90%    
    Flatbush Avenue                                                -------                                 94%    
    Brooklyn, New York                                             766,000/4
                                                                      (1)(2)
 
  Fordham Road &           Owned              92,211 SF           303,000/5                --             --  
    Grand Concourse
    Bronx, New York

   Roosevelt Avenue &       Leased             44,975 SF           177,000/4            $ 16.74           100% 
    Main Street                                                         (3)
    Flushing, New York

   Third Avenue &           Owned              60,451 SF           173,000/4            $  5.00           100% 
    152nd Street                                                                                               
    Bronx, New York
                                                                 ---------
                                                                 1,770,000
                                                                 =========

Redevelopment Properties
   Square block at East     Owned              84,420 SF               --
    59th Street &                                                      (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


<CAPTION>
                                                                             
                             Significant                           Lease
                               Tenants            Square        Expiration/
                           (30,000 square         Footage         Option
         Property           feet or more)         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  


   Kings Plaza Regional         Sears             289,000        2023/2033
    Shopping Center        110 mall tenants
    Flatbush Avenue
    Brooklyn, New York

   Fordham Road &                 --                                        
    Grand Concourse
    Bronx, New York

   Roosevelt Avenue &         Caldor(4)           177,000          2027
    Main Street
    Flushing, New York

   Third Avenue &          An affiliate of        173,000          2023     
    152nd Street                Conway
    Bronx, 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
      and the 330,000 square foot Macy's store, owned and operated by Federated.

(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)   Caldor announced that it is closing all of its stores. Caldor rejected
      this lease effective March 29, 1999.

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

(6)   Governmental approvals have been obtained to develop a shopping center at
      this site containing up to 550,000 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 Regional Shopping Center

      The Kings Plaza Regional Shopping Center (the "Center") contains
approximately 1.1 million square feet and is comprised of a two-level mall (the
"Mall") containing 477,000 square feet and two four-level anchor stores. One of
the anchor stores is owned by the Company and leased to Sears, while the other
anchor store is owned and operated as a Macy's store by Federated. In June 1998,
the Company increased its interest in the Mall to 100% by acquiring Federated's
50% interest. The Center occupies a 24.3-acre site at the intersection of
Flatbush Avenue and Avenue U located in Brooklyn, New York. Among the Center's
features are a marina, a five-level parking structure and an energy plant that
generates all of the Center's electrical power. The Company agreed to pay
Federated $15,000,000 to renovate its Macy's store and is evaluating plans to
renovate the Mall, which is expected to cost approximately $30,000,000.


                                      -7-
<PAGE>   8

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

<TABLE>
<CAPTION>
                                                                                 Percent of     Percent of
                                                                                 Total Lease    1998 Gross
                             Approximate       Annualized       Annualized         Square         Annual
                            Leased Area in     Fixed Rent       Fixed Rent         Footage        Rental
               Number of     Square Feet         Under        Under Expiring     Represented    Represented
                Leases      Under Expiring      Expiring        Leases per       by Expiring    by Expiring
      Year     Expiring         Leases           Leases        Square Foot         Leases         Leases
      ----     --------         ------           ------        -----------         ------         ------
      <S>         <C>            <C>            <C>              <C>                <C>            <C>   
      1999         1             1,285          $   64,250       $  50.00             .18%           .32%
      2000        14             29,148          1,487,627          51.04            4.09%          7.40%
      2001        10             26,952          1,735,739          64.40            3.78%          8.63%
      2002        18             38,285          1,553,874          40.59            5.37%          7.73%
      2003         8             16,611            817,073          49.19            2.33%          4.06%
      2004         3             12,197            580,255          47.57            1.71%          2.89%
      2005         3             16,082            450,192          27.99            2.26%          2.24%
      2006        16             96,095          2,228,455          23.81           13.48%         11.38%
      2007        14             72,620          3,239,150          44.60           10.18%         16.11%
      2008         7             16,857            875,666          51.95            2.36%          4.35%
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 Average     
                                                                Annual Rent  
                                             Occupancy Rate   Per Square Foot
                                             --------------   ---------------
                      <S>                          <C>          <C>    
                      December 31, 1998            90%          $ 40.63
                      December 31, 1997            86%            38.17
                      December 31, 1996            84%            37.29
                      December 31, 1995            88%            31.43
                      June 30, 1994                88%            28.43
</TABLE>

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.

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 was sub-leased to Caldor (other than the portion currently
being used as a parking garage). In January 1999, Caldor announced that it is
closing all of its stores. Caldor rejected the lease effective March 29, 1999. 
The annual base rental under the lease was $2,963,000.


                                      -8-
<PAGE>   9

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

      The Company owns the Lexington Avenue property which 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 in the process of razing the existing buildings which is
expected to be completed by April 1999 and is evaluating redevelopment plans for
this site, which may include developing a large multi-use building requiring
capital in excess of $300,000,000 to be expended. No development decisions have
been finalized. In September 1998 the carrying value of the buildings of
$15,096,000 were written-off.

Paramus

      The Company owns 30.3 acres of land 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.

      The Company intends to develop a shopping center of approximately 550,000
square feet on this site. The estimated cost of such redevelopment is
approximately $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. Both parcels are currently zoned for residential
use. 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.

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, 1998.


                                      -9-
<PAGE>   10

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 Occupations, Position and Office (current
                           and during the past five years with the Company 
     Name         Age      unless otherwise stated)
-------------  --------    -----------------------------------------------------
<S>               <C>      <C>
Stephen Mann      61       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       57       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     53       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    50       Secretary and Treasurer from April 1998 to present;
                           Executive Vice President and Chief Administrative
                           Officer from July 1994 to April 1998 and Senior Vice
                           President and Chief Administrative Officer from March
                           1993 to July 1994. Mr. Kurtz has been an employee of
                           Vornado since April 1998.
</TABLE>


                                      -10-
<PAGE>   11

                                     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 1998           $ 95 1/4                         $ 86 1/16
     2nd  Quarter 1998             93 15/16                         85 1/2
     3rd  Quarter 1998             93 1/8                           73 3/16
     4th  Quarter 1998             81 3/16                          72 1/8

<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>

      As of December 31, 1998, there were approximately 1800 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 1998 and 1997. 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, 1998, the Company had net
operating loss carryovers ("NOL's") of approximately $163,000,000. 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.


                                      -11-
<PAGE>   12

Item 6. Selected Financial Data

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

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                              ------------------------------------------------------------------------------
                                                 1998              1997              1996             1995             1994
                                              ------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>              <C>              <C>      
Operating data:                               
    Total revenues                            $   51,663       $  25,369         $   21,833       $  14,761        $  13,206
                                              ==========       =========         ==========       =========        =========

(Loss) income from continuing
  operations                                  $   (6,055)(4)   $   7,466(1)      $   13,097(2)    $  (7,696)       $   4,033

Income from discontinued
  operations                                          --              --             11,602          10,133               --
                                              ----------       ---------         ----------       ---------        ---------

Net (loss) income                             $   (6,055)      $   7,466         $   24,699       $   2,437        $   4,033
                                              ==========       =========         ==========       =========        =========

(Loss) income per common share:(3)
    Continuing operations                     $   (1.21)       $    1.49         $     2.62       $   (1.54)       $     .81
    Discontinued operations                          --               --               2.32            2.03               --
                                              ----------       ---------         ----------       ---------        ---------
    Net (loss) income per share               $   (1.21)       $    1.49         $     4.94       $     .49        $     .81
                                              ==========       =========         ==========       =========        =========

Balance sheet data:
    Total assets                              $  317,043       $ 235,074         $  211,585       $ 198,541        $ 109,419
    Real estate                                  239,157         191,733            181,005         150,435           84,658
    Debt                                         277,113         208,087            192,347         182,883           52,842
    Stockholders' equity (deficiency)              6,974          13,029              5,563         (19,136)         (21,573)
</TABLE>

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

3.    Earnings per share is the same for all years' presented with and without
      dilution. For further discussion of earnings per share see notes to the
      consolidated financial statements.

4.    Includes the write-off of the carrying value of the Lexington Avenue
      buildings of $15,096,000.


                                       12
<PAGE>   13

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

Overview

      The Company had a net loss of $6,055,000 in the year ended December 31,
1998 as compared to net income of $7,466,000 in the prior year. The net loss for
1998 reflects a charge for the write-off of the carrying value of the Company's
Lexington Avenue building of $15,096,000. The net income for 1997 reflects a net
gain from condemnation proceedings of $8,914,000. Operating income, before
depreciation and amortization and the effect of the straight-lining of property
rentals for rent escalations, was $23,790,000 in 1998 as compared to $12,471,000
in 1997, an increase of $11,319,000.

      Details of the changes in the components of net income are discussed in
the comparison of the years ended December 31, 1998 and December 31, 1997 below.

Results of Operations

   Continuing Operations - Years Ended December 31, 1998 and December 31, 1997

      The Company's revenues, which consist of property rentals, tenant expense
reimbursements and equity in income of unconsolidated joint venture were
$51,663,000 in 1998, compared to $25,369,000 in 1997, an increase of
$26,294,000.

      Property rentals were $35,151,000 in 1998, compared to $18,455,000 in
1997, an increase of $16,696,000. This increase resulted from:

<TABLE>
<CAPTION>
                                                   Effective     
                                                      Date
                                                      ----
<S>                                               <C>             <C>
     Rent from new tenants:                  
         Kings Plaza Regional Shopping Center     October 1997    $  4,440,000
         Rego Park I                              March and          1,391,000
                                                  May 1997
     Acquisition of the remaining 50%
         interest in the Mall                     June 1998          4,564,000
     Consolidation of Mall                
         operations previously recorded on      
         the equity method                        June 1998          4,564,000
     Caldor's rejection of its Fordham
         Road lease                               June 1997         (1,609,000)
     Parking lot revenue                                             2,749,000
     Other                                                             597,000
                                                                  ------------
                                                                  $ 16,696,000
                                                                  ============
</TABLE>

      Tenant expense reimbursements were $13,993,000 in 1998, compared to
$2,668,000 in 1997, an increase of $11,325,000. This increase reflects (i)
corresponding increases in operating expenses passed through to tenants as a
result of leases commencing subsequent to March 31, 1997 at the Rego Park I
property, (ii) the commencement of operations of the Sears department store at
the Kings Plaza Regional Shopping Center and (iii) the acquisition of the
remaining 50% interest in the Mall and the resulting consolidation of its
operations after June 18, 1998.

      The decreases in equity in income of unconsolidated joint venture resulted
from the consolidation of the Mall's operations as noted above.


                                      -13-
<PAGE>   14

      Operating expenses were $20,132,000 in 1998, compared to $7,459,000 in
1997, an increase of $12,673,000. This increase resulted primarily from (i) real
estate taxes which previously had been capitalized, being charged to income due
to the commencement of operations of the Sears department store at the Kings
Plaza Regional Shopping Center and (ii) the acquisition of the remaining 50%
interest in the Mall and the resulting consolidation of the Mall's operations
after June 18, 1998, partially offset by (iii) a $667,000 charge to bad debt
expense in the prior year in connection with Caldor's rejection of its Fordham
Road lease.

      General and administrative expenses were $4,079,000 in 1998, compared to
$3,933,000 in 1997, an increase of $146,000.

      Depreciation and amortization expense increased in 1998, compared to 1997
as a result of the Kings Plaza Mall acquisition in June 1998 and the
commencement of operations at the Kings Plaza Regional Shopping Center in
October 1997.

      In September 1998, the Company commenced the process of razing the
buildings at its Lexington Avenue property and accordingly, the carrying value
of the buildings and related predevelopment costs of $15,096,000 were
written-off.

      Interest and debt expense was $15,115,000 in 1998, compared to $13,430,000
in 1997, an increase of $1,685,000. Of this increase $1,215,000 resulted from
less interest capitalized in 1998 and $470,000 resulted from higher average
borrowings.

      Interest and other income was $993,000 in 1998, compared to $719,000 in
1997, an increase of $274,000. This increase resulted primarily from an increase
in interest income this year due to higher average investments.

      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.

   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.

      Property rentals were $18,455,000 in 1997, compared to $15,952,000 in
1996, an increase of $2,503,000. This increase resulted primarily from rent from
leases commencing at the Rego Park I and Kings Plaza Regional Shopping Center
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. 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 of the
Sears department store at the Kings Plaza Regional Shopping Center.

      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.
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 of the Sears department store at
the Kings Plaza Regional Shopping Center.


                                      -14-
<PAGE>   15

      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 the Kings Plaza
Regional Shopping Center 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.


                                      -15-
<PAGE>   16

Liquidity and Capital Resources

      In the aggregate, Alexander's current operating properties (five of its
eight 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.

      In June, 1998, the Company increased its interest in the Kings Plaza Mall
(the "Mall") to 100% by acquiring Federated Department Store's ("Federated") 50%
interest. The purchase price was approximately $28,000,000, which was paid in
cash, plus, the Company has agreed to pay Federated $15,000,000 to renovate its
Macy's store in the Mall and Federated agreed to certain modifications to the
Kings Plaza Operating Agreement.

      In connection with the acquisition, the Company completed a $90,000,000
three-year mortgage loan with Union Bank of Switzerland. The loan is
collateralized by the Company's interest in the Kings Plaza Regional Shopping
Center and bears interest at LIBOR plus 1.25% (currently 6.79%). In addition to
funding the acquisition, the proceeds from the borrowing were also used to repay
$34,900,000 of debt ($32,000,000 of which was due in the next year). Further,
the Company expects to increase this loan by $30,000,000 of which approximately
$15,000,000 will be used to partially fund a renovation of the Mall (estimated
to cost $30,000,000 in total) and $15,000,000 will be used to pay the liability
to Federated noted above.

      The Company estimates that capital expenditure requirements for the
redevelopment of its Paramus property, will approximate $100,000,000. The
Company is evaluating development plans for the Lexington Avenue site, which may
include 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
7% and 22% of the Company's consolidated revenues for the years ended December
31, 1998 and 1997. In January 1999, Caldor announced that it is closing all of
its stores. Caldor previously sub-leased its Flushing Store from the Company. 
Caldor rejected the Flushing lease effective March 29, 1999. The annual base 
rental under the lease was $2,963,000. The loss of property rental payments, if
any, could have a material adverse effect on the Company's financial condition
and results of operations. Caldor previously rejected its Fordham Road lease
effective June 6, 1997 and accordingly, no longer pays rent. The annual base
rental under this lease was $3,537,000.

      A summary of maturities of debt at December 31, 1998 is as follows:

<TABLE>
<CAPTION>
            Year ended December 31,
            -----------------------
                     <S>                <C>
                     1999               $ 85,628,000
                     2000                 86,485,000
                     2001                 90,000,000
                     2002                         --
                     2003                 15,000,000
                                        ------------
                                        $277,113,000
                                        ============
</TABLE>

      The Company's $75,000,000 loan, collateralized by a mortgage on its Rego
Park I property, which was scheduled to mature on September 30, 1998, has been
extended to April 30, 1999. The loan bears interest at LIBOR plus 1.00%
(currently 6.03%) and is guaranteed by the Company. In connection with the loan
extension, the Company paid a fee of 1/8%. The Company is in the final stages of
refinancing this loan through the placement of long-term debt and expects to
complete the refinancing by April 30, 1999.

      In addition, the Company's $65,000,000 loan from a bank and Vornado, which
was scheduled to mature in March 1999, has been extended to March 2000. The
blended interest rate has been reset from 11.50% to 12.00%.

      The Company's $10,000,000 loan, collateralized by a mortgage on its
Paramus property, which was scheduled to mature on December 31, 1998 has been
extended to June 30, 1999. The Company expects to repay this


                                      -16-
<PAGE>   17

loan with $2,318,000 of Restricted cash reflected in the balance sheet and
proceeds from a construction loan in connection with the redevelopment of the
property.

      In October 1998, the limited partners, other than Alexander's, of the
Seven Thirty One Limited Partnership (the "Partnership"), which owns the
Company's Lexington Avenue property, exercised the right to put their remaining
7.64% interest to the Partnership in exchange for a five year $15,000,000 note.
The note bears interest at Prime plus 1% (currently 8.75%) and is prepayable
without penalty. Alexander's now owns 100% of this Partnership.

      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.

      Cash Flows

      Year Ended December 31, 1998

      Cash provided by operating activities of $5,461,000 was comprised of
income after adjustments for non-cash items of $10,327,000, net of the change in
operating assets and liabilities of $4,866,000. The adjustments for non-cash
items are comprised of (i) the write-off of the carrying value of the Lexington
Avenue building and related predevelopment costs of $15,096,000 and (ii)
depreciation and amortization of $5,715,000, offset by (iii) the effect of
straight-lining of rental income of $4,429,000.

      Net cash used in investing activities of $40,217,000 was primarily
comprised of (i) $28,000,000 for the acquisition of the remaining 50% interest
in the Kings Plaza Mall, (ii) the escrowing of cash from the condemnation of a
portion of the Paramus property ($2,318,000) and cash from the proceeds from the
Kings Plaza Regional Shopping Center loan ($5,212,000) which is restricted as to
its use and (iii) capital expenditures of $19,387,000, partially offset by (iv)
proceeds from the condemnation of a portion of the Paramus property of
$14,700,000.

      Net cash provided by financing activities of $47,428,000 was comprised of
(i) proceeds from the issuance of debt on the Kings Plaza Regional Center of
$90,000,000, offset by (ii) repayments of debt of $39,236,000 and (iii) debt
issuance costs of $3,336,000.

      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 $14,023,000 (ii)
the payment of liabilities of discontinued operations of $1,175,000, and (iii)
the net change in operating assets and liabilities of $927,000. 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


                                      -17-
<PAGE>   18

$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.

Funds from Operations for the Years Ended December 31, 1998 and 1997

      Funds from operations were $7,674,000 in the year ended December 31, 1998,
an increase of $8,641,000 over the prior year. The following table reconciles
funds from operations and net (loss) income:

<TABLE>
<CAPTION>
                                                      1998              1997
                                                  ------------     ------------
<S>                                               <C>              <C>         
     Net (loss) income                            $ (6,055,000)    $  7,466,000

     Depreciation and amortization of
           real property                             4,289,000        2,714,000

     Straight-lining of property rentals
           for rent escalations                     (4,102,000)      (1,821,000)

     Leasing fees paid in excess        
           of expense recognized                    (1,994,000)      (2,144,000)

     Write-off of the carrying value of the
           Lexington Avenue buildings
           and related predevelopment costs         15,096,000               --

     Proportionate share of adjustments     
           to equity in income of previously
           unconsolidated joint venture to
           arrive at funds from operations             440,000        1,732,000

     Net gain from condemnation proceedings                --        (8,914,000)
                                                  ------------     ------------
                                                  $  7,674,000     $   (967,000)
                                                  ============     ============
</TABLE>

      Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs, which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use of
funds from operations. Funds from operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. Management
considers funds from operations a relevant supplemental measure of operating
performance because it provides a basis for comparison among REITs; however,
funds from operations may not be comparable to similarly titled measures
reported by other REITs since the Company's method of calculating funds from
operations is different from that used by NAREIT. Funds from operations, as
defined by NAREIT, represents net income before depreciation and amortization,
extraordinary items and gains or losses on sales of real estate. Funds from
operations as disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing fee
expenses. Below are the cash flows provided by (used in) operating, investing
and financing activities:

<TABLE>
<CAPTION>
                                            1998                1997
                                     --------------      --------------
     <S>                             <C>                 <C>            
     Operating activities            $    5,461,000      $   (1,454,000)
     Investing activities            $  (40,217,000)     $  (16,877,000)
     Financing activities            $   47,428,000      $   15,542,000
</TABLE>


                                      -18-
<PAGE>   19

      Year 2000 Issues

      The Company is managed by Vornado Realty Trust. Vornado has advised the
Company that Vornado initiated its Year 2000 compliance programs and information
systems modifications in early 1998 to ensure that its systems and key processes
will remain functional. Vornado expects this objective to be achieved either by
modifying present systems using existing internal and external programming
resources or by installing new systems, and by monitoring supplier and other
third-party interfaces. In certain cases, Vornado will be relying on statements
from outside vendors as to the Year 2000 readiness of its systems.

      The Company is not aware of any operational systems within its control
that are not Year 2000 compliant. In the event that a third-party service is
interrupted due to a Year 2000 issue, the Company will seek to obtain such
service from another third-party provider.

      Recently Issued Accounting Standards

      In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income". This statement establishes standards
for reporting and display of comprehensive income and its components. The
Company does not have any other components of income which need to be presented
in a reconciliation to Comprehensive Income.

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Because the
Company does not currently utilize derivatives or engage in hedging activities,
management does not anticipate that implementation of this statement will have a
material effect on the Company's financial statements.


                                      -19-
<PAGE>   20

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

      The Company has no material exposure to market risk sensitive instruments.

Item 8. Financial Statements and Supplementary Data

                           Index to Financial Statements
                                                                          Page
                                                                         Number
                                                                         ------
                                                                     
     Independent Auditors' Report                                          21
                                                                     
     Consolidated Balance Sheets at December 31, 1998 and 1997             22
                                                                     
     Consolidated Statements of Operations for the                   
        Years Ended December 31, 1998, 1997 and 1996                       24
                                                                     
     Consolidated  Statements of Stockholders' Equity (Deficiency)   
     for the                                                         
        Years Ended December 31, 1998, 1997 and 1996                       25
                                                                     
     Consolidated Statements of Cash Flows for the                   
        Years Ended December 31, 1998, 1997 and 1996                       26
                                                                     
     Notes to Consolidated Financial Statements                            27
                                                                  

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

      Not applicable.


                                      -20-
<PAGE>   21

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, 1998 and 1997 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,
1998. 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, 1998, and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 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 29, 1999


                                      -21-
<PAGE>   22

                       ALEXANDER'S, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                    December 31,
                                                              ----------------------
                                                                   1998       1997
                                                              ----------------------
<S>                                                           <C>          <C>      
ASSETS:
Real estate, at cost:
  Land                                                        $  83,957    $  45,571
  Buildings, leaseholds and leasehold improvements              149,054      123,612
  Capitalized expenses and predevelopment costs                  57,675       47,163
                                                              ---------    ---------
   Total                                                        290,686      216,346
  Less accumulated depreciation and amortization                (51,529)     (35,224)
                                                              ---------    ---------
                                                                239,157      181,122
  Investment in unconsolidated joint venture                         --       10,611
                                                              ---------    ---------
Real estate, net                                                239,157      191,733

Cash and cash equivalents                                        15,363        2,691
Restricted cash                                                   9,402        1,872
Receivable arising from condemnation proceedings                     --       14,700
Accounts receivable, net of allowance for doubtful accounts
  of $841 and $147 in 1998 and 1997                               3,303        1,064
Receivable arising from the straight-lining of rents, net        13,036        7,805
Deferred lease and other property costs                          27,921       12,443
Deferred debt expense                                             2,693          783
Other assets                                                      6,168        1,983
                                                              ---------    ---------

TOTAL ASSETS                                                  $ 317,043    $ 235,074
                                                              =========    =========
</TABLE>

                 See notes to consolidated financial statements


                                      -22-
<PAGE>   23

                       ALEXANDER'S, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                    December 31,
                                                              ----------------------
                                                                   1998       1997
                                                              ----------------------
<S>                                                           <C>          <C>      
LIABILITIES AND STOCKHOLDERS' EQUITY:
Debt (including $45,000 due to Vornado Realty Trust)          $ 277,113    $ 208,087
Amounts due to Vornado Realty Trust and its affiliate             5,840        6,888
Accounts payable and accrued liabilities                         10,113        4,174
Minority interest                                                    --          600
Other liabilities                                                17,003        2,296
                                                              ---------    ---------
   TOTAL LIABILITIES                                            310,069      222,045
                                                              ---------    ---------

COMMITMENTS AND CONTINGENCIES (Note 9)

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                                                      (22,083)     (16,028)
                                                              ---------    ---------
                                                                  7,934       13,989
Less treasury shares, 172,600 shares at cost                       (960)        (960)
                                                              ---------    ---------
Total stockholders' equity                                        6,974       13,029
                                                              ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $ 317,043    $ 235,074
                                                              =========    =========
</TABLE>

                 See notes to consolidated financial statements


                                      -23-
<PAGE>   24

                       ALEXANDER'S, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                             --------------------------------
                                                                1998        1997        1996
                                                             --------------------------------
<S>                                                          <C>         <C>         <C>     
Revenues:
Property rentals                                             $ 35,151    $ 18,455    $ 15,952
Expense reimbursements                                         13,993       2,668       1,872
Equity in income of unconsolidated joint venture                2,519       4,246       4,009
                                                             --------    --------    --------
Total revenues                                                 51,663      25,369      21,833
                                                             --------    --------    --------

Expenses:
   Operating (including management fee of $1,060, $840 and
    $840 to Vornado)                                           20,132       7,459       5,562

   General and administrative (including management
    fee of $2,160 to Vornado in each year)                      4,079       3,933       4,402
   Depreciation and amortization                                4,289       2,714       2,128
                                                             --------    --------    --------
Total expenses                                                 28,500      14,106      12,092
                                                             --------    --------    --------

Operating income                                               23,163      11,263       9,741

Interest and debt expense (including interest on loan
   from Vornado)                                              (15,115)    (13,430)    (13,934)
Interest and other income, net                                    993         719       2,918
Write-off of the carrying value of the               
   Lexington Avenue buildings and related
   predevelopment costs                                       (15,096)         --          --
Net gain from condemnation proceedings                             --       8,914          --
Gain on reversal of liability for post-retirement            
   healthcare benefits                                             --          --      14,372
                                                             --------    --------    --------

(Loss) income from continuing operations                       (6,055)      7,466      13,097
Income from discontinued operations                                --          --      11,602
                                                             --------    --------    --------

NET (LOSS) INCOME                                            $ (6,055)   $  7,466    $ 24,699
                                                             ========    ========    ========

Net (loss) income per share (basic and diluted):
   Continuing operations                                     $  (1.21)   $   1.49    $   2.62
   Discontinued operation                                          --          --        2.32
                                                             --------    --------    --------
   Net (loss) income                                         $  (1.21)   $   1.49    $   4.94
                                                             ========    ========    ========
</TABLE>

                 See notes to consolidated financial statements.


                                      -24-
<PAGE>   25

                       ALEXANDER'S, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                         Stockholders'
                                                Additional                   Treasury       Equity
                                 Common Stock     Capital      Deficiency     Stock      (Deficiency)
                                 ------------     -------      ----------     -----      ------------
<S>                               <C>            <C>          <C>            <C>          <C>       
Balance, January 1, 1996          $  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

Net loss                                --             --         (6,055)          --        (6,055)
                                  --------       --------     -----------    --------     ----------
Balance, December 31, 1998        $  5,174       $ 24,843     $  (22,083)    $   (960)    $   6,974
                                  ========       ========     ===========    =========    =========
</TABLE>

                 See notes to consolidated financial statements.


                                      -25-
<PAGE>   26

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)
================================================================================

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                             --------------------------------
                                                                1998        1997        1996
                                                             ---------  ---------  ----------
<S>                                                          <C>         <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income from continuing operations                 $ (6,055)   $  7,466    $ 13,097
Adjustments to reconcile net (loss) income to
  net cash provided by (used in) continuing
  operating activities:                      
  Depreciation and amortization (including debt
      issuance costs)                                           5,715       4,494       4,105
  Gain on reversal of postretirement healthcare liability          --          --     (14,372)
  Straight-lining of rental income, net                        (4,429)     (1,821)     (1,756)
  Write-off of the carrying value of the Lexington   
    Avenue building and related predevelopment costs           15,096          --          --
  Net gain from condemnation proceedings                           --      (8,914)         --
Change in assets and liabilities:
  Accounts receivable                                          (1,935)       (863)        (21)
  Distributions (less than) in excess of equity in income         
  of unconsolidated joint venture                                (386)      2,002         133
  Amounts due to Vornado Realty Trust and its affiliate        (1,048)     (1,905)     (2,094)
  Liability for postretirement healthcare benefits                 --          --      (1,154)
  Accounts payable and accrued liabilities                      1,313         (73)       (143)
  Other                                                        (2,810)     (1,514)      2,352
                                                             --------    --------    --------
Net cash provided by (used in) operating activities          
  of continuing operations                                      5,461      (1,128)        147
                                                             --------    --------    --------

Income from discontinued operations                                --          --      11,602
Payment of liabilities of discontinued operations                  --        (326)     (1,175)
Change in other liabilities of discontinued operations             --          --      (2,000)
                                                             --------    --------    --------
Net cash (used in) provided by discontinued operations             --        (326)      8,427
                                                             --------    --------    --------

Net cash provided by (used in) operating activities             5,461      (1,454)      8,574
                                                             --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition  of Kings Plaza Mall,  net of  liabilities of
  $1,905                                                      (28,000)         --          --
Additions to real estate                                      (19,387)    (20,625)    (32,314)
Collection of condemnation proceeds                            14,700          --          --
Cash restricted for construction financing                     (5,212)      3,203       2,057
Cash restricted for operating liabilities                      (2,318)        545       9,228
                                                             --------    --------    --------
Net cash used in investing activities                         (40,217)    (16,877)    (21,029)
                                                             --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt                                               90,000      16,667      10,527
Debt repayments                                               (39,236)       (926)     (1,063)
Deferred debt expense                                          (3,336)       (199)         --
                                                             --------    --------    --------
Net cash provided by financing activities                      47,428      15,542       9,464
                                                             --------    --------    --------

Net increase (decrease) in cash and cash equivalents           12,672      (2,789)     (2,991)
Cash and cash equivalents at the beginning of the period        2,691       5,480       8,471
                                                             --------    --------    --------
Cash and cash equivalents at the end of the period           $ 15,363    $  2,691    $  5,480
                                                             ========    ========    ========

SUPPLEMENTAL INFORMATION
Cash payments for interest                                   $ 21,553    $ 20,729    $ 20,140
                                                             ========    ========    ========
Capitalized interest                                         $  7,864    $  9,079    $  8,552
                                                             ========    ========    ========
</TABLE>

      1998 amounts exclude an increase in real estate of $14,400 and debt of
$15,000 and a reduction in minority interest of $600 as a result of the Company
acquiring a partnership interest.

                 See notes to consolidated financial statements.


                                      -26-
<PAGE>   27

                       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. Alexander's activities are conducted through its manager,
Vornado. The Company's properties are located in mature, densely populated areas
in New York City and Paramus, New Jersey.

      In the aggregate, Alexander's current operating properties (five of its
eight 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. 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.


                                      -27-
<PAGE>   28

                       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 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 $72,000,000 lower than the amount reported for financial statement
purposes.

      Amounts Per Share -Basic earnings per share excludes any dilutive effects
of options, warrants and convertible securities. Options outstanding were not
dilutive in any period.


                                      -28-
<PAGE>   29

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

3. ACQUISITION OF KINGS PLAZA MALL AND RELATED FINANCING TRANSACTIONS

      On June 18, 1998, the Company increased its interest in the Kings Plaza
Mall (the "Mall") to 100% by acquiring Federated Department Store's
("Federated") 50% interest. The purchase price was approximately $28,000,000,
which was paid in cash, plus, the Company has agreed to pay Federated
$15,000,000 to renovate its Macy's store in the Mall and Federated agreed to
certain modifications to the Kings Plaza Operating Agreement. The Company has
accrued this liability as part of "Other liabilities" and the consideration as
part of "Deferred lease and other property costs" on the Consolidated Balance
Sheet. Prior to June 18, 1998, the Company owned a 50% interest in the Mall
(since it was built in 1970) and had accounted for this investment under the
equity method. This acquisition was recorded under the purchase method of
accounting. The purchase cost was allocated to the acquired assets and assumed
liabilities based on the fair value as of the closing date, based on valuations
and other studies which are not yet complete. Accordingly, the initial valuation
is subject to change as such information is finalized. The Company believes that
any such change will not be significant since the allocation was principally to
real estate.

      In connection with the acquisition, the Company completed a $90,000,000
three-year mortgage loan with Union Bank of Switzerland. The loan is
collateralized by the Company's interest in the Kings Plaza Regional Shopping
Center and bears interest at LIBOR plus 1.25% (currently 6.79%). In addition to
funding the acquisition, the proceeds from the borrowings were also used to
repay $34,900,000 of debt ($32,000,000 of which was due in the next year).
Further, the Company expects to increase this loan by $30,000,000 of which
approximately $15,000,000 will be used to partially fund a renovation of the
Mall and $15,000,000 will be used to pay the liability to Federated noted above.

      Set forth below is the unaudited pro forma condensed consolidated
statements of operations data for the Company for the years ended December 31,
1998 and 1997 as if the acquisition of the Kings Plaza Mall and the related
financing transactions had occurred on January 1, 1997.

(Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                      Pro Forma For The Year Ended December 31
                                      ----------------------------------------
                                                1998            1997
                                              --------        --------
     <S>                                      <C>              <C>    
     Revenues                                 $ 63,309         $51,476
                                              ========         =======
                                            
     Net (loss) income                        $ (2,859)        $10,157
                                              =========        =======
                                            
     Net  (loss)  income  per share -         $   (.57)        $  2.03
     basic and diluted                        ========         =======
</TABLE>

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

<TABLE>
<CAPTION>
                                          
                                      For The Period From   Year Ended December 31,
                                        January 1, 1998     -----------------------
                                       to June 17, 1998      1997             1996
                                      -------------------    ----             ----
     <S>                                 <C>             <C>              <C>        
     Operating revenue                   $14,085,000     $30,203,000      $26,530,000
                                         -----------     -----------      -----------
     Operating costs                       8,481,000      19,040,000        6,511,000
     Depreciation and amortization           715,000       1,418,000        1,269,000
     Interest expense                        283,000         710,000          838,000
                                         -----------     -----------      -----------
                                           9,479,000      21,168,000       18,618,000
                                         -----------     -----------      -----------
     Operating income                    $ 4,606,000     $ 9,035,000      $ 7,912,000
                                         ===========     ===========      ===========
     Assets                              $31,000,000     $33,400,000      $35,400,000
                                         ===========     ===========      ===========
                                                                         
     Liabilities                         $12,300,000     $15,200,000      $16,300,000
                                         ===========     ===========      ===========
</TABLE>


                                      -29-
<PAGE>   30

                       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, of which $9,602,000 resulted from the settlement of tax certiorari
proceedings and $2,000,000 resulted from the reduction of other liabilities of
discontinued operations to amounts considered necessary to cover the remaining
estimates of these liabilities.

5. DEBT

      Debt comprises:

<TABLE>
<CAPTION>
                                                         December 31,
                                                 ---------------------------
                                                      1998           1997
                                                 ------------  -------------
     <S>                                         <C>            <C>         
     First mortgage loan, secured by the
       Company's Fordham Road property (1)       $ 22,113,000   $ 22,684,000
     
     First mortgage loan, secured by
       Company's Paramus property (2)              10,000,000     13,591,000
     
     Term loans (3)                                65,000,000     75,000,000
     
     Construction loan, secured by the
       Company's Rego Park I property (4)          75,000,000     75,000,000
     
     Secured note (5)                              15,000,000     21,812,000
     
     First mortgage loan, secured by
       the Company's Kings Plaza
       Regional Shopping Center (6)                90,000,000             --
                                                 ------------   ------------
     
                                                 $277,113,000   $208,087,000
                                                 ============   ============
</TABLE>

      (1)   The loan bears interest at LIBOR plus 4.25% (9.87% at December 31,
            1998) and matures in February 2000. 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.


                                      -30-
<PAGE>   31

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

      (2)   The loan which was scheduled to mature on December 31, 1998 has been
            extended to June 30, 1999. The loan bears interest at 2.50% above
            the one-year U.S. Treasury bill rate (7.65% at December 31, 1998).
            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 which was scheduled to mature in March 1999, has been
            extended to March 2000. The blended interest rate has been reset
            from 11.50% to 12.00%. The loan is secured by liens 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,
            except for the Kings Plaza Regional Shopping Center. These liens are
            subordinate to first mortgages. The loan is comprised of two
            separate notes of $45,000,000 to Vornado and $20,000,000 to a bank.
            During 1998 the Company reduced the principal balance due the bank
            by $10,000,000. The loan is prepayable quarterly without penalty.
            Under the terms of the loan, 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 September 30,
            1998, has been extended to April 30, 1999. The loan bears interest
            at LIBOR plus 1.00% (currently 6.03%) and is guaranteed by the
            Company. In connection with the loan extension, the Company paid a
            fee of 1/8%. The Company is in the final stages of refinancing this
            loan through the placement of long-term debt and expects to 
            complete the refinancing by April 30, 1999.

      (5)   The $21,812,000 note to the former Alexander's partners in the
            Lexington Avenue property matured and was repaid during 1998. The
            note of $15,000,000 as of December 31, 1998 is secured by a third
            mortgage on the Lexington Avenue property. The note bears annual
            interest at Prime plus 1% (currently 8.75%) and is prepayable
            without penalty.

      (6)   The Company's mortgage loan matures on June 1, 2001 and is secured
            by a mortgage on the Kings Plaza Regional Shopping Center and
            guaranteed by the Company. The loan bears interests at LIBOR plus
            1.25% (currently 6.79%).

      A summary of maturities of debt at December 31, 1998, is as follows:

<TABLE>
<CAPTION>
            Year ended December 31,
            -----------------------
                     <S>                <C>
                     1999               $ 85,628,000
                     2000                 86,485,000
                     2001                 90,000,000
                     2002                         --
                     2003                 15,000,000
                                        ------------
                                        $277,113,000
                                        ============
</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 $239,157,000 at December 31, 1998.


                                      -31-
<PAGE>   32

                       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>
                1999                            $  34,163,000
                2000                               33,521,000
                2001                               32,398,000
                2002                               31,335,000
                2003                               30,973,000
             Thereafter                           424,993,000
</TABLE>

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

<TABLE>
<CAPTION>
                               Years Ended December 31,
                              --------------------------
                              1998       1997       1996
                              -----  ----------  -------
     <S>                      <C>        <C>        <C>
     Sears                    28%        31%        23%
     Caldor                    7%        22%        36%
</TABLE>

      In September 1995, Caldor filed for relief under Chapter 11 of the United
States Bankruptcy Code. In January 1999, Caldor announced that it is closing all
of its stores. Caldor previously sub-leased its Flushing Store from the Company.
Caldor rejected the Flushing lease effective March 29, 1999. The annual base 
rental under the lease was $2,963,000. The loss of property rental payments, if 
any, could have a material adverse affect on the Company's financial condition 
and results of operations. Caldor previously rejected its Fordham Road lease 
effective June 6, 1997 and accordingly, no longer pays rent. The annual base 
rental under this lease was $3,537,000.


                                      -32-
<PAGE>   33

                       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>
                1999                            $     331,000
                2000                                  331,000
                2001                                  331,000
                2002                                  331,000
                2003                                  331,000
             Thereafter                             4,693,000
</TABLE>

      Rent expense was $331,000, $331,000 and $496,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.

7. 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.


                                      -33-
<PAGE>   34

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

      The Company has reported NOL carryovers for federal tax purposes of
approximately $163,000,000 at December 31, 1998, 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.

8. 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
15.2% of the outstanding common shares of beneficial interest of Vornado. In
addition, Mr. Roth owns 1.9% 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 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 equal to
the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza
Mall, plus (iii) 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 $5,145,000 at December 31, 1998. 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.

      The Company owes Vornado $45,000,000, the subordinated tranche of a
$65,000,000 secured financing. The Company incurred interest on the loan of
$6,486,000, $7,214,000 and $7,517,000 for the years ended December 31, 1998,
1997 and 1996, of which $4,008,000, $4,851,000 and $3,989,000 was capitalized.
The loan to Vornado Currently bears interest at 14.18%.

9. COMMITMENTS AND CONTINGENCIES

      Lexington Avenue

      The Company is in the process of razing the existing buildings which is
expected to be completed by April 1999 and is evaluating redevelopment plans for
this site, which may include developing a large multi-use building requiring
capital in excess of $300,000,000 to be expended. No development decisions have
been finalized. In September 1998, the carrying value of the buildings and
related predevelopment costs of $15,096,000 were written-off.


                                      -34-
<PAGE>   35

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

      In June 1997, the Kings Plaza Regional Shopping Center (the "Center"),
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, 1998 for potential
recoveries of environmental remediation costs from other parties.

      Letters of Credit

      Approximately $3,900,000 in standby letters of credit were issued at
December 31, 1998. Of this amount $3,000,000 was cancelled in February 1999.

10. 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, 1998.

      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, 1998,
1997 and 1996:

<TABLE>
<CAPTION>
                                         1998           1997            1996
                                         ----           ----            ----
     <S>                              <C>            <C>             <C>        
     Net (loss) income:             
           As reported                $(6,055,000)   $7,466,000      $24,699,000
           Pro-forma                  $(8,009,000)   $5,512,000      $24,495,000

     Net (loss) income per share      
      applicable to common          
      shareholders:                 
           As reported                $   (1.21)     $    1.49       $      4.94
           Pro-forma                  $   (1.60)     $    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 years ended December 31, 1998 and 1997):

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


                                      -35-
<PAGE>   36

                       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, 1998 and 1997, are presented below:

<TABLE>
<CAPTION>
                                   December 31, 1998             December 31, 1997
                                -------------------------    --------------------------
                                         Weighted-Average              Weighted-Average
                                Shares    Exercise Price     Shares      Exercise Price
                                -------  ----------------  ----------  ----------------
<S>                             <C>         <C>              <C>          <C>  
Outstanding at January 1        350,000     $  73.88         350,000          73.88
Granted                              --           --             --       $      --
Exercised                            --           --             --              --
                                -------     --------         -------      ---------
                                                                              
Outstanding at December 31      350,000     $  73.88         350,000      $   73.88
                                =======     ========         =======      =========
</TABLE>

      The following table summarizes information about options outstanding under
the Plan at December 31, 1998:

<TABLE>
     <S>                                                           <C>       
     Exercise price                                                $    73.88
     Options outstanding:
          Number outstanding at December 31, 1998                     350,000
          Weighted-average remaining contractual life               7.9 Years
          Weighted-average exercise price                          $    73.88
     Options exercisable:
          Number exercisable at December 31, 1998                     140,000
          Weighted-average exercise price                          $    73.88

     Shares available for future grant at December 31, 1998 were 
          700,000.
</TABLE>


                                      -36-
<PAGE>   37

                       ALEXANDER'S, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

11. EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                         December 31,
                                                          ------------------------------------------
                                                             1998             1997            1996
                                                          -----------      -----------    ----------
<S>                                                       <C>              <C>             <C>      
Numerator:
     (Loss) income from continuing operations             $(6,055,000)     $ 7,466,000    $13,097,000
                                                          ===========      ===========    ===========

Denominator:
     Denominator for basic (loss) 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                                 5,000,850        5,009,152      5,000,850
                                                          ===========      ===========    ===========

Basic and diluted (loss) earnings per share               $     (1.21)     $      1.49    $      2.62
                                                          ===========      ===========    ===========
</TABLE>


                                      -37-
<PAGE>   38

                       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, 1998                                     December 31, 1997
                                   --------------------------------------------        ---------------------------------------------
                                                   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                     $ 8,007    $ 9,473    $ 16,201      $ 17,982        $ 5,998    $  6,761     $ 6,016    $ 6,594
                                   =======    =======    ========      ========        =======    ========     =======    =======
Net (loss) income                  $   922    $ 1,116    $(11,942)(2)  $  3,849        $  (208)   $    183     $  (135)   $ 7,626(3)
                                   =======    =======    ========      ========        ========   ========     =======    =======
                                
(Loss) income per common share     
  (basic and diluted) (1)          $   .18    $   .22     $(2.39)      $    .77        $  (.04)   $    .04     $  (.03)   $  1.52
                                   =======    =======     =======      ========        ========   ========     =======    =======
</TABLE>


(1)   The total for the year may differ from the sum of the quarters as a result
      of weighting.

(2)   Includes the write-off of the carrying value of the Lexington Avenue
      buildings of $15,096,000.

(3)   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
      buildings of $5,786,000.


                                      -38-
<PAGE>   39

                                    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, 1998, 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.


                                      -39-
<PAGE>   40

                                     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                42
</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 44

      (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.


                                      -40-
<PAGE>   41

                                   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 29, 1999
                                               ---------------------------------

      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.

  Signature                                    Title                   Date
  ---------                                    -----                   ----

/s/ Steven Roth                   Chief Executive Officer         March 29, 1999
---------------------------       and Director                 
Steven Roth                       (Principal Executive Officer)


/s/ Thomas R. DiBenedetto         Director                        March 29, 1999
---------------------------
Thomas R. DiBenedetto


/s/ Michael D. Fascitelli         Director                        March 29, 1999
---------------------------


/s/ David Mandelbaum              Director                        March 29, 1999
---------------------------
David Mandelbaum


/s/  Stephen Mann                 Director                        March 29, 1999
---------------------------
Stephen Mann


/s/ Arthur I. Sonnenblick         Director                        March 29, 1999
---------------------------
Arthur I. Sonnenblick


/s/ Neil Underberg                Director                        March 29, 1999
---------------------------
Neil Underberg


/s/ Richard West                  Director                        March 29, 1999
---------------------------
Richard West


/s/ Russell B. Wight, Jr.         Director                        March 29, 1999
---------------------------
Russell B. Wight, Jr.


                                      -41-
<PAGE>   42

                       ALEXANDER'S, INC. AND SUBSIDIARIES
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1998
                             (amounts in thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                        Column A      Column B      Column C        Column D               Column E        Column F      Column G   
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Gross Amount  
                                                                                            at which    
                                                     Initial                               Carried at   
                                                     Cost to                                Close of    
                                                   Company (2)        Cost                   Period-       Capitalized              
                                                    Building,      Capitalized              Buildings,      Expenses                
                                                    Leaseholds     Subsequent               Leasehold       and Pre-                
                                                  and Leasehold        to                 and Leaseholds   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.             $ 22,113      $ 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         $56,794         1,647      65,747            --       67,394    
Rego Park II                  --        3,906         1,467             428         3,906       1,566       $   329        5,801    
Flushing                      --           --         1,660              --            --       1,660            --        1,660    
Lexington Ave.            15,000       14,432        12,355          67,536        48,379          --        45,944       94,323    
Flatbush Ave.                                                                                                                       
 and Avenue U             90,000          497         9,542          79,026        24,483      64,582            --       89,065    
                         -------       ------       -------         -------       -------     -------       -------      -------    
                                                                                                                                    
Total New York           202,113       23,984        47,672         203,784        81,917     147,250        46,273      275,440   
                                                                                                                                    
                                                                                                                                    
New Jersey
 - Paramus                10,000        1,441            --           8,528         1,441          --         8,528        9,969    
                                                                                                                                    
Other Properties              --          599         1,804           2,874           599       1,804         2,874        5,277    
                                       ------       -------         -------       -------     -------       -------      -------    
                                                                                                                                    
Other secured debt         65,000(1)  
                         --------             
TOTAL                    $277,113      $26,024      $49,476         $215,186      $ 83,957    $149,054      $57,675     $290,686    
                         ========      =======      =======         ========      ========    ========      =======     ========  

<CAPTION>
--------------------------------------------------------------------------------
                       Column H       Column I     Column J
--------------------------------------------------------------------------------

                                                                   Life on Which
                       Accumulated                                  Depreciation
                      Depreciation                               in 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.             $ 6,878          1933          1992         4-40 years
Third Avenue              3,112          1928          1992           13 years
Rego Park I              12,199          1959          1992         6-40 years
Rego Park II              1,450          1965          1992         5-39 years
Flushing                  1,660          1975(4)       1992        10-22 years
Lexington Ave.               --            --          1992          --
Flatbush Ave.                                                     
 and Avenue U            24,424          1970          1992        20-40 years
                        -------
                                                                  
Total New York           49,723                                   
                                                                  
                                                                  
New Jersey
 - Paramus                   --            --          1992           --
                                                                  
Other Properties          1,806          Various       1992         7-25 years
                        -------                                   
                                                                  
Other secured debt                                                
                                                                  
TOTAL                   $51,529                                   
                        =======                                  
</TABLE>

(1)   The loan, which was scheduled to mature in March 1999, has been extended
      to March 2000. The loan is secured by liens 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, except for the Kings Plaza
      Regional Shopping Center. These liens are subordinate to first mortgages.

(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 $72,000,000 lower than the amount reported for financial
      statement purposes.

(4)   Date represents lease acquisition date.


                                      -42-
<PAGE>   43

                       ALEXANDER'S, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                    December 31,
                                                              ----------------------
                                                                   1998       1997
                                                              ----------  ----------
<S>                                                           <C>          <C>      
REAL ESTATE:
Balance at beginning of period                                $ 216,346    $ 207,767
Additions during the period:
    Buildings, leaseholds and
    leasehold improvements                                       16,117       16,569
Acquisition of remaining 50% interest in the
    Kings Plaza Mall (the "Acquisition")                         29,905
Reclassification of 50% investment of joint venture 
    due to the Acquisition                                       31,453           --

Capitalized expenses and predevelopment costs                    15,715        4,056
                                                             ----------   ----------
                                                                309,536      228,392
Less:  Write-off of the Paramus property                             --      (12,046)
       Write-off Lexington Avenue buildings                     (18,850)          --
                                                            -----------   ----------

Balance at end of period                                      $ 290,686    $ 216,346
                                                             ==========   ==========

ACCUMULATED DEPRECIATION:

Balance at beginning of period                                $  35,224    $  39,375

Reclassification of 50% investment of joint venture
    due to the Acquisition                                       16,955           --

    Additions charged to operating                           
     expenses                                                     3,104        2,109
                                                             ----------   ----------
                                                                 55,283       41,484
Less:  Write-off of the Paramus property                             --       (6,260)
       Write-off of the Lexington Avenue buildings               (3,754)          --
                                                            -----------   ----------

Balance at end of period                                      $  51,529    $  35,224
                                                             ==========   ==========
</TABLE>


                                      -43-
<PAGE>   44

                                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.
                 
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.
</TABLE>

----------
*     Incorporated by reference


                                      -44-
<PAGE>   45

<TABLE>
<CAPTION>
Exhibit No.      Document                                                                      Page
-----------      --------                                                                      ----
<S>              <C>                                                                            <C>
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).
                 
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.
</TABLE>

----------
*     Incorporated by reference


                                      -45-
<PAGE>   46

<TABLE>
<CAPTION>
Exhibit No.      Document                                                                      Page
-----------      --------                                                                      ----
<S>              <C>                                                                            <C>
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.
                 
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.
                 
12               Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed            48
                 Charges and Preferred Stock Dividend Requirements.
                 
13               Not applicable.
                 
16               Not applicable.
                 
18               Not applicable.
                 
19               Not applicable.
                 
21               Subsidiaries of Registrant.                                                    49
                 
22               Not applicable.
                 
23               Consent by independent auditors to incorporation by reference.                 50
</TABLE>

----------
*     Incorporated by reference


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<PAGE>   47

<TABLE>
<CAPTION>
Exhibit No.      Document                                                                      Page
-----------      --------                                                                      ----
<S>              <C>                                                                            <C>
25               Not applicable.
                 
27               Financial Data Schedule.                                                       51
                 
29               Not applicable.
</TABLE>


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