<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended JUNE 30, 2004

                                       OR

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

For the transition period from_________________________ to______________________

Commission File Number 001-14525

                            VORNADO OPERATING COMPANY
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                   22-3569068
-------------------------------            -------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

   210 ROUTE 4 EAST, PARAMUS, NEW JERSEY                   07652
-------------------------------------------     --------------------------------
  (Address of principal executive offices)               (Zip Code)

                                 (201) 587-7721
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
--------------------------------------------------------------------------------
      (Former name, former address and former fiscal year, if changed since
                                  last report)

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.

                                 [X] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                [ ] Yes [ X ] No

As of July 23, 2004, there were 4,068,924 shares of the registrant's common
stock, par value $0.01 per share, outstanding.

                                     Page 1

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                   Page Number
                                                                                   -----------
<S>                                                                                <C>
PART I. FINANCIAL INFORMATION

     ITEM 1. Financial Statements:

             Consolidated Balance Sheets as of June 30, 2004 (unaudited) and
                December 31, 2003 ..............................................         3

             Consolidated Statements of Operations (unaudited) for the
                Three and Six Months Ended June 30, 2004 and June 30, 2003 .....         4

             Consolidated Statements of Cash Flows (unaudited) for the
                Six Months Ended June 30, 2004 and June 30, 2003 ...............         5

             Notes to Consolidated Financial Statements (unaudited) ............         6

             Report of Independent Registered Public Accounting Firm ...........        10

     ITEM 2. Management's Discussion and Analysis of Financial Condition and
                Results of Operations ..........................................        11

     ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ........        16

     ITEM 4. Controls and Procedures ...........................................        16

PART II. OTHER INFORMATION

     ITEM 1. Legal Proceedings .................................................        17

     ITEM 4. Submission of Matters to a Vote of Security Holders ...............        17

     ITEM 5. Other Information .................................................        17

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

SIGNATURES .....................................................................        18

EXHIBIT INDEX ..................................................................        19
</TABLE>

                                     Page 2

<PAGE>

PART I. FINANCIAL INFORMATION

      ITEM 1. FINANCIAL STATEMENTS

                            VORNADO OPERATING COMPANY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                   (UNAUDITED)
                                                                                                     JUNE 30,      DECEMBER 31,
                                                                                                       2004            2003
                                                                                                   ------------    ------------
<S>                                                                                                <C>             <C>
ASSETS

Cash and cash equivalents, including U.S. government obligations under repurchase agreements
      of $1,070,000 and $650,000, respectively .................................................   $  1,487,955    $  1,118,189
Investments in and advances to AmeriCold Logistics .............................................             --              --
Interest receivable from AmeriCold Logistics ...................................................         31,289          33,655
Prepaid expenses and other assets ..............................................................         74,782         204,784
                                                                                                   ------------    ------------
Total assets ...................................................................................   $  1,594,026    $  1,356,628
                                                                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Note, interest, and fees payable to Vornado Realty Trust .......................................   $ 26,178,549    $ 25,394,254
Due to Vornado Realty Trust ....................................................................         82,500          77,440
Accounts payable and accrued expenses ..........................................................        280,492         102,484
                                                                                                   ------------    ------------
Total liabilities ..............................................................................     26,541,541      25,574,178
                                                                                                   ------------    ------------
Minority interest ..............................................................................             --              --
                                                                                                   ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT

Common stock: par value $0.01 per share; authorized, 40,000,000 shares; issued and
     outstanding, 4,068,924 shares at each period end ..........................................         40,689          40,689
Additional paid-in capital .....................................................................     22,462,555      22,462,555
Accumulated deficit ............................................................................    (45,114,612)    (44,384,647)
                                                                                                   ------------    ------------
                                                                                                    (22,611,368)    (21,881,403)
Accumulated other comprehensive loss ...........................................................     (2,336,147)     (2,336,147)
                                                                                                   ------------    ------------
Total stockholders' deficit ....................................................................    (24,947,515)    (24,217,550)
                                                                                                   ------------    ------------
Total liabilities and stockholders' deficit ....................................................   $  1,594,026    $  1,356,628
                                                                                                   ============    ============
</TABLE>

                 See notes to consolidated financial statements.

                                     Page 3

<PAGE>

                            VORNADO OPERATING COMPANY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                       JUNE 30,                  JUNE 30,
                                                               ----------------------    ----------------------
                                                                 2004          2003        2004          2003
                                                               ---------    ---------    ---------    ---------
<S>                                                            <C>          <C>          <C>          <C>
REVENUES
Interest income ............................................   $   1,605    $   1,004    $   2,757    $   1,866

EXPENSES
General and administrative (including fees to
     Vornado Realty Trust of $82,500 in each three
     month period and $165,000 in each six month period) ...     599,168      256,964      900,642      534,479
                                                               ---------    ---------    ---------    ---------
                                                                (597,563)    (255,960)    (897,885)    (532,613)
Interest and debt expense to Vornado Realty Trust ..........    (394,367)    (392,134)    (784,295)    (780,428)
Income from notes receivable from AmeriCold Logistics ......     477,257      475,180      952,215      935,200
                                                               ---------    ---------    ---------    ---------
Loss before minority interest ..............................    (514,673)    (172,914)    (729,965)    (377,841)

Minority interest ..........................................          --           --           --           --
                                                               ---------    ---------    ---------    ---------

NET LOSS ...................................................   $(514,673)   $(172,914)   $(729,965)   $(377,841)
                                                               =========    =========    =========    =========

Net loss per share -- basic and diluted ....................   $   (0.13)   $   (0.04)   $   (0.18)   $   (0.09)
                                                               =========    =========    =========    =========
</TABLE>

                 See notes to consolidated financial statements.

                                     Page 4

<PAGE>

                            VORNADO OPERATING COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED JUNE 30,
                                                                              ----------------------------
                                                                                  2004            2003
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss .............................................................   $   (729,965)   $   (377,841)
     Adjustments to reconcile net loss to net cash (used in) provided by
       operating activities:
         Recovery from repayments of loans to AmeriCold Logistics
           previously reduced by equity in losses .........................       (504,359)       (427,901)
     Changes in operating assets and liabilities:
         Prepaid expenses and other assets ................................        130,002         119,082
         Interest and fees payable on note from Vornado Realty Trust ......        784,295         780,428
         Interest receivable from AmeriCold Logistics .....................          2,366          17,409
         Accounts payable and accrued expenses ............................        178,008        (107,737)
         Due to Vornado Realty Trust ......................................          5,060           1,356
                                                                              ------------    ------------
Net cash (used in) provided by operating activities .......................       (134,593)          4,796
                                                                              ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Repayments of loans to AmeriCold Logistics ...........................        504,359         427,901
                                                                              ------------    ------------

Net increase in cash and cash equivalents .................................        369,766         432,697
Cash and cash equivalents at beginning of period ..........................      1,118,189         344,686
                                                                              ------------    ------------
Cash and cash equivalents at end of period ................................   $  1,487,955    $    777,383
                                                                              ============    ============
</TABLE>

                 See notes to consolidated financial statements.

                                     Page 5

<PAGE>

                            VORNADO OPERATING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    ORGANIZATION

      Vornado Operating Company, a Delaware corporation, holds its assets and
conducts its business through Vornado Operating L.P., a Delaware limited
partnership ("Company L.P."). The Company is the sole general partner of, and as
of June 30, 2004, owned a 90.1% partnership interest in, Company L.P. All
references to the "Company" refer to Vornado Operating Company and its
subsidiaries, including Company L.P.

2.    ABILITY TO CONTINUE AS A GOING CONCERN

      Substantial doubt exists as to the Company's ability to continue as a
going concern and its ability to discharge its liabilities in the normal course
of business. The Company has incurred losses since its inception and, in the
aggregate, its investments have not generated sufficient cash flow to pay all of
the Company's expenses. The Company estimates that it has adequate borrowing
capacity under its credit facility with Vornado Realty Trust ("Vornado") to meet
its cash needs until December 31, 2004. However, the principal, interest and
fees outstanding under the line of credit come due on such date. The Company
currently has no external sources of financing except this facility.

      The Company's other potential source of cash is its investment in
AmeriCold Logistics. However, AmeriCold Logistics has also reported losses since
inception and, at June 30, 2004, the Company's 60% share of AmeriCold Logistics'
partners' deficit was $63,163,000, which includes $65,552,000 of deferred rent
(rent recognized as expense but not paid in cash) to its landlord, the Vornado
REIT/Crescent REIT Partnership (the "Landlord"). AmeriCold Logistics anticipates
that in 2004 additional cash flow will be provided from a lease restructuring or
some other option. There can be no assurance that AmeriCold Logistics will be
successful in obtaining additional cash flow. Further, the Landlord is under no
obligation to restructure the leases and there can be no assurance that it will
do so. In the absence of obtaining additional cash flow, AmeriCold Logistics
will not have the ability to distribute funds to the Company and, in turn, the
Company will not have resources sufficient to repay its $26,179,000 loan from
Vornado or the ability to continue as a going concern.

3.    BASIS OF PRESENTATION

      The consolidated balance sheet as of June 30, 2004, the consolidated
statements of operations for the three and six months ended June 30, 2004 and
2003 and the consolidated statements of cash flows for the six months ended June
30, 2004 and 2003 are unaudited. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted in accordance
with Article 10 of Regulation S-X and the instructions to Form 10-Q. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 as filed with
the Securities and Exchange Commission. The results of operations for the three
and six months ended June 30, 2004 are not necessarily indicative of the
operating results for the full year.

      The accompanying consolidated financial statements include the accounts of
the Company and Company L.P. All significant intercompany amounts have been
eliminated. The Company's 60% interest in AmeriCold Logistics is currently
accounted for under the equity method of accounting as Crescent Operating, Inc.,
the Company's partner in AmeriCold Logistics, has substantive participating
rights. The investments in and advances to AmeriCold Logistics are recorded
initially at cost and subsequently adjusted for the Company's share of
comprehensive income or loss and cash distributions or principal repayments from
AmeriCold Logistics. The interest earned on the advances to AmeriCold Logistics
is recorded as a component of income or loss from AmeriCold Logistics. The
Company does not record comprehensive losses in excess of the cost of its
investments in and advances to AmeriCold Logistics, as the Company is not liable
for the obligations of, or otherwise committed to provide additional financial
support to, AmeriCold Logistics. The Company did not record its 60% share of
AmeriCold Logistics' net losses for the year ended December 31, 2003 and the six
months ended June 30, 2004 as the Company's investments in and advances to
AmeriCold Logistics were fully absorbed by the Company's share of the
comprehensive losses of AmeriCold Logistics at December 31, 2002. In addition,
the Company's cumulative share of other comprehensive losses of AmeriCold
Logistics not recorded at June 30, 2004 was $6,882,000. The Company will record
its share of future comprehensive income from AmeriCold Logistics only for the
portion of such income that exceeds its share of comprehensive losses not
previously recorded. The Company's exposure to losses from AmeriCold Logistics
is limited to its investments in and advances to AmeriCold Logistics. The
Company's method of accounting for AmeriCold Logistics will change in the fourth
quarter of 2004 (see Note 7).

                                     Page 6

<PAGE>

                            VORNADO OPERATING COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make 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.

4.    INVESTMENTS IN AND ADVANCES TO AMERICOLD LOGISTICS

      At June 30, 2004, $6,969,000 was outstanding under the Company's secured
loans to AmeriCold Logistics, which mature on December 31, 2004. These loans are
carried at zero in the accompanying consolidated balance sheets of the Company
as they have been fully absorbed by the Company's share of comprehensive losses
of AmeriCold Logistics. AmeriCold Logistics is required to make loan payments
approximating $159,000 per month. The portions of the loan payments that
represented the repayment of principal during the reporting periods covered
herein are reflected as income from AmeriCold Logistics as this principal was
previously reduced to zero by equity in losses of AmeriCold Logistics.

      The following condensed balance sheet data represents 100% of AmeriCold
Logistics, in which the Company holds a 60% interest.

<TABLE>
<CAPTION>
  (amounts in thousands)     June 30, 2004   December 31, 2003
                             -------------   -----------------
<S>                          <C>             <C>
Current assets ............    $  122,375        $  118,560
Non-current assets ........        46,013            47,478
                               ----------        ----------
                               $  168,388        $  166,038
                               ==========        ==========

Current liabilities .......    $  121,745        $  115,556
Non-current liabilities ...       151,915           126,554
                               ----------        ----------
                               $  273,660        $  242,110
                               ==========        ==========

Partners' deficit .........    $ (105,272)       $  (76,072)
                               ==========        ==========
</TABLE>

      The following condensed operating and cash flow data represents 100% of
AmeriCold Logistics, in which the Company holds a 60% interest.

<TABLE>
<CAPTION>
                                                      Three Months                 Six Months
                                                     Ended June 30,               Ended June 30,
                                                ------------------------    ------------------------
              (amounts in thousands)               2004          2003          2004          2003
                                                ----------    ----------    ----------    ----------
<S>                                             <C>           <C>           <C>           <C>
Revenues ....................................   $  165,674    $  154,158    $  335,911    $  313,880
Costs applicable to revenues ................     (127,900)     (113,773)     (257,262)     (229,978)
                                                ----------    ----------    ----------    ----------
Gross margin ................................       37,774        40,385        78,649        83,902
Depreciation and amortization ...............       (2,747)       (2,456)       (5,578)       (4,858)
Rent ........................................      (41,708)      (41,799)      (82,268)      (81,304)
Other expenses, net .........................      (10,275)       (8,032)      (20,003)      (16,492)
                                                ----------    ----------    ----------    ----------
Net loss (1) ................................   $  (16,956)   $  (11,902)   $  (29,200)   $  (18,752)
                                                ==========    ==========    ==========    ==========

Cash flows (used in) provided by operating
    activities ..............................   $   (4,824)   $    4,178    $   (1,882)   $    6,717
                                                ==========    ==========    ==========    ==========
</TABLE>

------------------
(1)   The Company did not record its 60% share of AmeriCold Logistics' net
      losses in any of the reporting periods covered herein as the Company's
      investments in and advances to AmeriCold Logistics were fully absorbed by
      the Company's share of the comprehensive losses of AmeriCold Logistics at
      December 31, 2002.

                                     Page 7

<PAGE>

                            VORNADO OPERATING COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

      The following represents the components of the Company's income from
notes receivable from AmeriCold Logistics.

<TABLE>
<CAPTION>
                                                     Three Months           Six Months
                                                    Ended June 30,        Ended June 30,
                                                 -------------------   -------------------
           (amounts in thousands)                  2004       2003       2004       2003
                                                 --------   --------   --------   --------
<S>                                              <C>        <C>        <C>        <C>
Interest on loans ............................   $    220   $    252   $    448   $    507
Recovery from repayments of loans previously
  reduced by equity in losses ................        257        223        504        428
                                                 --------   --------   --------   --------
                                                 $    477   $    475   $    952   $    935
                                                 ========   ========   ========   ========
</TABLE>

      During the six months ended June 30, 2004, AmeriCold Logistics exercised
its right, pursuant to the terms of its leases with the Landlord, to defer the
payment of rent. AmeriCold Logistics' deferred rent liability at June 30, 2004
is as follows:

<TABLE>
<CAPTION>
                   (amounts in thousands)                           Total
                                                               --------------
<S>                                                            <C>
Deferred during the three months ended June 30, 2004.........  $       16,085
Deferred during the three months ended March 31, 2004........          10,775
Aggregate deferral at December 31, 2003......................          82,394
                                                               --------------
                                                               $      109,254
                                                               ==============
</TABLE>

      On January 20, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $6,120,000 to a joint venture (the "Quarry Company") owned by
Vornado (44%) and Crescent Real Estate Equities Company (56%), the owners of the
Landlord, for $6,000,000 in cash. AmeriCold Logistics recognized a loss of
$120,000 on the sale. The accounts receivable have been collected in full.

      On March 29, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $4,080,000 to the Quarry Company for $4,000,000 in cash. AmeriCold
Logistics recognized a loss of $80,000 on the sale. The accounts receivable have
been collected in full.

      On July 2, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $6,120,000 to the Quarry Company for $6,000,000 in cash. AmeriCold
Logistics will recognize a loss of $120,000 on the sale in the three months
ended September 30, 2004. AmeriCold Logistics also agreed to act as agent to
collect the accounts receivable. The Company does not believe that any
significant servicing asset or liability exists.

      At December 31, 2002, the Company's investments in and advances to
AmeriCold Logistics were fully absorbed by the Company's share of comprehensive
losses of AmeriCold Logistics. AmeriCold Logistics has reported losses since its
inception and, at June 30, 2004, the Company's share of AmeriCold Logistics'
partners' deficit was $63,163,000, which includes $65,552,000 of deferred rent
(rent recognized as expense but not paid in cash) to the Landlord. On March 2,
2004, AmeriCold Logistics and the Landlord extended the deferred rent period to
December 31, 2005 from December 31, 2004. Based on the right to defer rent, the
management of AmeriCold Logistics anticipates it will have sufficient cash flows
to operate at least through June 30, 2005. AmeriCold Logistics anticipates that
in 2004 additional cash flow will be provided from a lease restructuring or some
other option. There can be no assurance that AmeriCold Logistics will be
successful in obtaining additional cash flow. Further, the Landlord is under no
obligation to restructure the leases and there can be no assurance that it will
do so. In the absence of obtaining additional cash flow, AmeriCold Logistics
will not have the ability to distribute funds to the Company and, in turn, the
Company will not have resources sufficient to repay its $26,179,000 loan from
Vornado or the ability to continue as a going concern.

5.    COMMITMENTS AND CONTINGENCIES

      The Company is from time to time involved in legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the outcome of such matters will not have a material effect
on the Company's financial condition, results of operations or cash flows.

                                     Page 8

<PAGE>

                            VORNADO OPERATING COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

6.    LOSS PER SHARE

      The following table sets forth the computation of basic and diluted loss
per share.

<TABLE>
<CAPTION>
                                                  Three Months                 Six Months
                                                 Ended June 30,               Ended June 30,
       (amounts in thousands, except         ------------------------    ------------------------
       share and per share amounts)           2004          2003          2004          2003
                                             ----------    ----------    ----------    ----------
<S>                                          <C>           <C>           <C>           <C>
Numerator:
     Net loss .............................  $     (515)   $     (173)   $     (730)   $     (378)
                                             ==========    ==========    ==========    ==========

Denominator:
     Weighted average shares outstanding ..   4,068,924     4,068,924     4,068,924     4,068,924
                                             ==========    ==========    ==========    ==========

Net loss per share -- basic and diluted ...  $    (0.13)   $    (0.04)   $    (0.18)   $    (0.09)
                                             ==========    ==========    ==========    ==========
</TABLE>

      The Company's stock options (355,554 outstanding and exercisable at June
30, 2004) were not dilutive in the reporting periods as the average market
prices of the Company's common stock did not exceed the exercise prices. The
rights issued pursuant to the Company's Stockholder Protection Rights Plan were
not dilutive in the reporting periods as the rights were not exercisable. The
limited partnership units of Company L.P. not owned by the Company (447,017 at
June 30, 2004) were not dilutive in the reporting periods as the Company
reported net losses.

7.    RECENTLY ISSUED ACCOUNTING STANDARDS

      In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities,
an interpretation of ARB No. 51. FIN No. 46 required the consolidation of an
entity by an enterprise if (i) that enterprise, known as a "primary
beneficiary," has an interest that will absorb a majority of the entity's
expected losses if they occur, receive a majority of the entity's expected
residual returns if they occur, or both and (ii) the entity is a variable
interest entity. An entity is a variable interest entity if (a) the total equity
investment at risk in the entity is not sufficient to permit the entity to
finance its activities without additional subordinated financial support from
other parties or (b) the equity investors do not have the characteristics of a
controlling financial interest in the entity. The initial determination of
whether an entity is a variable interest entity shall be made as of the date at
which an enterprise became involved with the entity and reconsidered as of the
date that certain triggering events described in FIN No. 46 occur.

      The Company previously disclosed that its investment in AmeriCold
Logistics met the criteria for consolidation under FIN No. 46 and it would
consolidate AmeriCold Logistics beginning July 1, 2003 by restating its prior
period consolidated financial statements. However, in October 2003, FASB issued
FASB Staff Position No. FIN 46-6, Effective Date of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities. This position allowed public
entities to defer the date for implementing FIN No. 46, except certain required
disclosures, until the end of the first interim or annual period ending after
December 15, 2003 if certain conditions apply. The Company concluded that it
qualified for deferral and elected to implement FIN No. 46 on December 31, 2003.
However, on December 24, 2003, FASB issued a revision to FIN No. 46 to, among
other things, clarify some of the provisions of FIN No. 46. The revision allows
a public entity which is a small business issuer, as defined in Regulation S-B,
that has not previously applied FIN No. 46 to implement the revision no later
than the end of the first interim or annual period ending after December 15,
2004. The Company meets the criteria of the small business issuer definition and
has elected to implement the revision on December 31, 2004. The Company is
evaluating its implementation alternatives (i.e., restatement of its previously
issued consolidated financial statements or a cumulative effect adjustment). Had
AmeriCold Logistics been consolidated as of June 30, 2004, the Company's
accumulated deficit and accumulated other comprehensive loss would have
increased to $130,391,000 and $15,363,000, respectively.

                                     Page 9

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors
Vornado Operating Company
Paramus, New Jersey

      We have reviewed the accompanying condensed consolidated balance sheet of
Vornado Operating Company and subsidiaries (the "Company") as of June 30, 2004,
and the related condensed consolidated statements of operations for the three
and six month periods ended June 30, 2004 and 2003, and of cash flows for the
six month periods ended June 30, 2004 and 2003. These interim financial
statements are the responsibility of the Company's management.

      We conducted our reviews in accordance with standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

      Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated interim financial statements for
them to be in conformity with accounting principles generally accepted in the
United States of America.

      The accompanying condensed consolidated interim financial statements have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the condensed consolidated interim financial statements,
certain conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in such note.

      We have previously audited, in accordance with standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of Vornado Operating Company and subsidiaries as of December 31, 2003, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the year then ended (not presented herein); and in our report
dated March 2, 2004, we expressed an unqualified opinion on those consolidated
financial statements and included an explanatory paragraph concerning matters
that raise substantial doubt about the Company's ability to continue as a going
concern. In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2003 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
August 4, 2004

                                     Page 10

<PAGE>

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

      Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are not guarantees of performance. The Company's
future results, financial condition and business may differ materially from
those expressed in these forward-looking statements. You can find many of these
statements by looking for words such as "believes," "expects," "anticipates,"
"intends," "plans" or similar expressions in this Quarterly Report on Form 10-Q.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Many of the factors that will determine these items are beyond
the Company's ability to control or predict. Factors that might cause such a
material difference include, but are not limited to: (a) the substantial doubt
about the Company's ability to continue as a going concern and its limited
financial resources; (b) restrictions on the Company's business and future
opportunities; (c) dependence upon Vornado Realty Trust ("Vornado"); (d) the
substantial influence of the Company's controlling stockholders and conflicts of
interest; (e) the bankruptcy of the Company's joint venture partner in AmeriCold
Logistics, Crescent Operating, Inc. ("COPI"); (f) risks associated with
potential investments and the ability to manage those investments; (g)
competition; (h) dependence on key personnel; (i) potential anti-takeover
effects of the Company's charter documents and Stockholder Protection Rights
Plan and applicable law; (j) dependence on distributions from subsidiaries; (k)
potential costs of compliance with environmental laws; (l) changes in the
general economic climate; and (m) government regulations. See "Item 1. Business
- Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.

      For these forward-looking statements, the Company claims the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the date of
this Quarterly Report on Form 10-Q or the date of any document incorporated by
reference. All subsequent written and oral forward-looking statements
attributable to the Company or any person acting on the Company's behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this paragraph. The Company does not undertake any obligation to
release publicly any revisions to the forward-looking statements to reflect
events or circumstances after the date of this Quarterly Report on Form 10-Q.

OVERVIEW

      Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with our Annual Report on Form 10-K (as
amended by Amendment No. 1 to Form 10-K) for the year ended December 31, 2003.

ABILITY TO CONTINUE AS A GOING CONCERN

      Substantial doubt exists as to the Company's ability to continue as a
going concern and its ability to discharge its liabilities in the normal course
of business. The Company has incurred losses since its inception and, in the
aggregate, its investments have not generated sufficient cash flow to pay all of
the Company's expenses. The Company estimates that it has adequate borrowing
capacity under its credit facility with Vornado to meet its cash needs until
December 31, 2004. However, the principal, interest and fees outstanding under
the line of credit come due on such date. The Company currently has no external
sources of financing except this facility.

      The Company's other potential source of cash is its investment in
AmeriCold Logistics. However, AmeriCold Logistics has also reported losses since
inception and, at June 30, 2004, the Company's 60% share of AmeriCold Logistics'
partners' deficit was $63,163,000, which includes $65,552,000 of deferred rent
(rent recognized as expense but not paid in cash) to its landlord, the Vornado
REIT/Crescent REIT Partnership (the "Landlord"). AmeriCold Logistics anticipates
that in 2004 additional cash flow will be provided from a lease restructuring or
some other option. There can be no assurance that AmeriCold Logistics will be
successful in obtaining additional cash flow. Further, the Landlord is under no
obligation to restructure the leases and there can be no assurance that it will
do so. In the absence of obtaining additional cash flow, AmeriCold Logistics
will not have the ability to distribute funds to the Company and, in turn, the
Company will not have resources sufficient to repay its $26,179,000 loan from
Vornado or the ability to continue as a going concern.

                                     Page 11

<PAGE>

CRITICAL ACCOUNTING POLICIES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make 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. Set forth below is a summary of the accounting policies that
management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Company's significant accounting policies included in
Note 3 to the consolidated financial statements included in "Item 8. Financial
Statements and Supplementary Data" in the Company's Annual Report on Form 10-K
for the year ended December 31, 2003. The Company's critical accounting policies
have not changed during the six months ended June 30, 2004.

Investments in and Advances to AmeriCold Logistics

      The Company's 60% interest in AmeriCold Logistics is currently accounted
for under the equity method of accounting as COPI, the Company's partner in
AmeriCold Logistics, has substantive participating rights. The investments in
and advances to AmeriCold Logistics are recorded initially at cost and
subsequently adjusted for the Company's share of comprehensive income or loss
and cash distributions or principal repayments from AmeriCold Logistics. The
interest earned on the advances to AmeriCold Logistics is recorded as a
component of income or loss from AmeriCold Logistics. The Company does not
record comprehensive losses in excess of the cost of its investments in and
advances to AmeriCold Logistics, as the Company is not liable for the
obligations of, or otherwise committed to provide additional financial support
to, AmeriCold Logistics. The Company did not record its 60% share of AmeriCold
Logistics' net losses for the year ended December 31, 2003 and the six months
ended June 30, 2004 as the Company's investments in and advances to AmeriCold
Logistics were fully absorbed by the Company's share of the comprehensive losses
of AmeriCold Logistics at December 31, 2002. In addition, the Company's
cumulative share of other comprehensive losses of AmeriCold Logistics not
recorded at June 30, 2004 was $6,882,000. The Company will record its share of
future comprehensive income from AmeriCold Logistics only for the portion of
such income that exceeds its share of comprehensive losses not previously
recorded. The Company's exposure to losses from AmeriCold Logistics is limited
to its investments in and advances to AmeriCold Logistics. The Company's method
of accounting for AmeriCold Logistics will change in the fourth quarter of 2004
(see "Recently Issued Accounting Standards" below).

Recently Issued Accounting Standards

      In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities,
an interpretation of ARB No. 51. FIN No. 46 required the consolidation of an
entity by an enterprise if (i) that enterprise, known as a "primary
beneficiary," has an interest that will absorb a majority of the entity's
expected losses if they occur, receive a majority of the entity's expected
residual returns if they occur, or both and (ii) the entity is a variable
interest entity. An entity is a variable interest entity if (a) the total equity
investment at risk in the entity is not sufficient to permit the entity to
finance its activities without additional subordinated financial support from
other parties or (b) the equity investors do not have the characteristics of a
controlling financial interest in the entity. The initial determination of
whether an entity is a variable interest entity shall be made as of the date at
which an enterprise became involved with the entity and reconsidered as of the
date that certain triggering events described in FIN No. 46 occur.

      The Company previously disclosed that its investment in AmeriCold
Logistics met the criteria for consolidation under FIN No. 46 and it would
consolidate AmeriCold Logistics beginning July 1, 2003 by restating its prior
period consolidated financial statements. However, in October 2003, FASB issued
FASB Staff Position No. FIN 46-6, Effective Date of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities. This position allowed public
entities to defer the date for implementing FIN No. 46, except certain required
disclosures, until the end of the first interim or annual period ending after
December 15, 2003 if certain conditions apply. The Company concluded that it
qualified for deferral and elected to implement FIN No. 46 on December 31, 2003.
However, on December 24, 2003, FASB issued a revision to FIN No. 46 to, among
other things, clarify some of the provisions of FIN No. 46. The revision allows
a public entity which is a small business issuer, as defined in Regulation S-B,
that has not previously applied FIN No. 46 to implement the revision no later
than the end of the first interim or annual period ending after December 15,
2004. The Company meets the criteria of the small business issuer definition and
has elected to implement the revision on December 31, 2004. The Company is
evaluating its implementation alternatives (i.e., restatement of its previously
issued consolidated financial statements or a cumulative effect adjustment). Had
AmeriCold Logistics been consolidated as of June 30, 2004, the Company's
accumulated deficit and accumulated other comprehensive loss would have
increased to $130,391,000 and $15,363,000, respectively.

                                     Page 12

<PAGE>

RESULTS OF OPERATIONS

      The Company had a net loss of $515,000 for the three months ended June 30,
2004, compared to $173,000 for the three months ended June 30, 2003, an increase
of $342,000, and a net loss of $730,000 for the six months ended June 30, 2004,
compared to $378,000 for the six months ended June 30, 2003, an increase of
$352,000.

      General and administrative expenses were $599,000 for the three months
ended June 30, 2004, compared to $257,000 for the three months ended June 30,
2003, an increase of $342,000. General and administrative expenses were $901,000
for the six months ended June 30, 2004, compared to $535,000 for the six months
ended June 30, 2003, an increase of $366,000. These increases primarily resulted
from (i) higher professional fees as the Company reviews its business
alternatives and (ii) higher franchise taxes.

      Interest and debt expense to Vornado Realty Trust was $394,000 for the
three months ended June 30, 2004, compared to $392,000 for the three months
ended June 30, 2003, an increase of $2,000, and $784,000 for the six months
ended June 30, 2004, compared to $780,000 for the six months ended June 30,
2003, an increase of $4,000. The higher average balances outstanding in the
current year periods were offset by lower average LIBOR rates under the
Revolving Credit Agreement with Vornado.

      The following represents the components of the Company's income from notes
receivable from AmeriCold Logistics.

<TABLE>
<CAPTION>
                                                     Three Months          Six Months
                                                    Ended June 30,       Ended June 30,
                                                ---------------------   -----------------
          (amounts in thousands)                  2004         2003       2004      2003
                                                --------     --------   --------  -------
<S>                                             <C>          <C>        <C>       <C>
Interest on loans...........................    $    220     $    252   $    448  $   507
Recovery from repayments of loans
  previously reduced by equity in losses....         257          223        504      428
                                                --------     --------   --------  -------
                                                $    477     $    475   $    952  $   935
                                                ========     ========   ========  =======
</TABLE>

      The Company did not record $10,174,000 and $17,520,000, its 60% share of
AmeriCold Logistics' net losses of $16,956,000 and $29,200,000, respectively,
for the three and six months ended June 30, 2004, or $7,141,000 and $11,251,000,
its 60% share of AmeriCold Logistics' net losses of $11,902,000 and $18,752,000,
respectively, for the three and six months ended June 30, 2003, as the Company's
investments in and advances to AmeriCold Logistics were fully absorbed by the
Company's share of the comprehensive losses of AmeriCold Logistics at December
31, 2002 and as the Company is not liable for the obligations of, or otherwise
committed to provide additional financial support to, AmeriCold Logistics. The
decreases in interest earned on the Company's loans to AmeriCold Logistics are
attributable to lower average loans outstanding in the current year periods. The
Company recognized loan repayments from AmeriCold Logistics that were made
during the reporting periods as income as these loans were previously reduced by
equity in losses of AmeriCold Logistics.

      To keep the Company's stockholders knowledgeable about the Company's sole
investment, a discussion of AmeriCold Logistics' results of operations is
included below. The amounts discussed below in "AmeriCold Logistics' Results of
Operations for the Three and Six Months Ended June 30, 2004 and 2003" exclude
income related to the Company's loans with AmeriCold Logistics.

   AmeriCold Logistics' Results of Operations for the Three and Six Months
Ended June 30, 2004 and 2003

      The following is a discussion of the results of operations of AmeriCold
Logistics, the Company's investee in the temperature controlled logistics
business (see the Company's Annual Report on Form 10-K for the year ended
December 31, 2003 for a discussion of this business and see Note 4 to the
unaudited consolidated financial statements included in this Quarterly Report on
Form 10-Q for condensed balance sheet and operating data of AmeriCold
Logistics). The data below represents 100% of this business, in which the
Company holds a 60% interest. For the purpose of the discussion below, "Leased
Operations" refer to operations at warehouses leased by AmeriCold Logistics and
"Other Operations" refer to (i) warehouses managed by AmeriCold Logistics for
the accounts of customers ("Managed Warehouses") and (ii) Transportation
Management Services, which includes freight routing, dispatching, freight rate
negotiation, backhaul coordination, and distribution channel assessments.

            Certain prior period amounts in this discussion were reclassified to
      conform to the current period presentation.

                                     Page 13

<PAGE>

            Revenues were $165,674,000 for the three months ended June 30, 2004,
      compared to $154,158,000 for the three months ended June 30, 2003, an
      increase of $11,516,000, and $335,911,000 for the six months ended June
      30, 2004, compared to $313,880,000 for the six months ended June 30, 2003,
      an increase of $22,031,000. Revenues from Leased Operations were
      $102,644,000 for the three months ended June 30, 2004, compared to
      $102,507,000 for the three months ended June 30, 2003, an increase of
      $137,000, and $207,293,000 for the six months ended June 30, 2004,
      compared to $207,587,000 for the six months ended June 30, 2003, a
      decrease of $294,000. Revenues from Other Operations were $63,030,000 for
      the three months ended June 30, 2004, compared to $51,651,000 for the
      three months ended June 30, 2003, an increase of $11,379,000, and
      $128,618,000 for the six months ended June 30, 2004, compared to
      $106,293,000 for the six months ended June 30, 2003, an increase of
      $22,325,000.

            The increase in revenue from Other Operations was due to new Managed
      Warehouse contracts that commenced after the first quarter of 2003 and
      additional Transportation Management Services business in 2004 from both
      new and existing customers.

            The gross margin for Leased Operations was $34,548,000, or 33.7%,
      for the three months ended June 30, 2004, compared to $36,493,000, or
      35.6%, for the three months ended June 30, 2003, a decrease of $1,945,000,
      and $71,831,000, or 34.7%, for the six months ended June 30, 2004,
      compared to $76,216,000, or 36.7%, for the six months ended June 30, 2003,
      a decrease of $4,385,000. These decreases were attributable to (i) start
      up costs for existing customers at new locations and (ii) a change in
      revenue mix as higher margin storage revenues declined and lower margin
      handling revenues increased.

            Operating income from Other Operations was $3,226,000 for the three
      months ended June 30, 2004, compared to $3,892,000 for the three months
      ended June 30, 2003, a decrease of $666,000, and $6,818,000 for the six
      months ended June 30, 2004, compared to $7,686,000 for the six months
      ended June 30, 2003, a decrease of $868,000. These decreases were the
      result of lower margins for the Transportation Management Services
      business due to unused truck capacity and increased costs as a result of
      new legislation reducing the maximum hours that truck drivers are
      permitted to drive in a day, partially offset by increased margin from new
      and existing Managed Warehouse customers.

            Rent expense was $41,708,000 for the three months ended June 30,
      2004, compared to $41,799,000 for the three months ended June 30, 2003, a
      decrease of $91,000, and $82,268,000 for the six months ended June 30,
      2004, compared to $81,304,000 for the six months ended June 30, 2003, an
      increase of $964,000.

            General and administrative expenses were $8,481,000 for the three
      months ended June 30, 2004, compared to $7,759,000 for the three months
      ended June 30, 2003, an increase of $722,000, and $17,316,000 for the six
      months ended June 30, 2004, compared to $15,819,000 for the six months
      ended June 30, 2003, an increase of $1,497,000. These increases were
      primarily due to higher professional fees, payroll and travel expenses.

            Depreciation and amortization expense was $2,747,000 for the three
      months ended June 30, 2004, compared to $2,456,000 for the three months
      ended June 30, 2003, an increase of $291,000, and $5,578,000 for the six
      months ended June 30, 2004, compared to $4,858,000 for the six months
      ended June 30, 2003, an increase of $720,000. These increases were
      primarily attributable to depreciation on additional machinery and
      equipment.

            Interest expense was $1,175,000 for the three months ended June 30,
      2004, compared to $823,000 for the three months ended June 30, 2003, an
      increase of $352,000, and $2,231,000 for the six months ended June 30,
      2004, compared to $1,654,000 for the six months ended June 30, 2003, an
      increase of $577,000. These increases resulted from higher average
      deferred rent balances, partially offset by lower average borrowings
      outstanding.

            Other expense, net, was $619,000 for the three months ended June 30,
      2004, compared to other income, net, of $550,000 for the three months
      ended June 30, 2003, a decrease of $1,169,000. Other expense, net, was
      $456,000 for the six months ended June 30, 2004, compared to other income,
      net, of $981,000 for the six months ended June 30, 2003, a decrease of
      $1,437,000. These decreases resulted primarily from taxes on earnings from
      AmeriCold Logistics' warehouse in Alberta, Canada and foreign currency
      translation losses in the current year, compared to foreign currency gains
      in the prior year.

                                     Page 14

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Substantial doubt exists as to the Company's ability to continue as a
going concern and its ability to discharge its liabilities in the normal course
of business. The Company has incurred losses since its inception and, in the
aggregate, its investments have not generated sufficient cash flow to pay all of
the Company's expenses. The Company estimates that it has adequate borrowing
capacity under its credit facility with Vornado to meet its cash needs until
December 31, 2004. However, the principal, interest and fees outstanding under
the line of credit come due on such date. The Company currently has no external
sources of financing except this facility.

      The Company's other potential source of cash is its investment in
AmeriCold Logistics. However, AmeriCold Logistics has also reported losses since
inception and, at June 30, 2004, the Company's 60% share of AmeriCold Logistics'
partners' deficit was $63,163,000, which includes $65,552,000 of deferred rent
(rent recognized as expense but not paid in cash) to its Landlord. AmeriCold
Logistics anticipates that in 2004 additional cash flow will be provided from a
lease restructuring or some other option. There can be no assurance that
AmeriCold Logistics will be successful in obtaining additional cash flow.
Further, the Landlord is under no obligation to restructure the leases and there
can be no assurance that it will do so. In the absence of obtaining additional
cash flow, AmeriCold Logistics will not have the ability to distribute funds to
the Company and in turn, the Company will not have resources sufficient to repay
its $26,179,000 loan from Vornado or the ability to continue as a going concern.

      The Company has a $75,000,000 unsecured Revolving Credit Agreement with
Vornado which expires on December 31, 2004. Borrowings under this facility bear
interest at LIBOR plus 3% (4.37% at June 30, 2004). The Company pays Vornado a
commitment fee equal to 1% per annum on the average daily unused portion of the
facility pursuant thereto; for the six months ended June 30, 2004 and 2003, the
Company recorded commitment fees under the facility of $249,000 and $256,000,
respectively. Amounts may be borrowed under the Revolving Credit Agreement,
repaid and reborrowed from time to time on a revolving basis (so long as the
principal amount outstanding at any time does not exceed $75,000,000). Principal
payments are not required under the Revolving Credit Agreement during its term.
The Revolving Credit Agreement prohibits the Company from incurring indebtedness
to third parties (other than certain purchase money debt and certain other
exceptions) and prohibits the Company from paying any dividends. The Company
currently has no external sources of financing except this facility. At June 30,
2004, $2,375,000 of interest and commitment fees were unpaid, which reduces the
availability under the Revolving Credit Agreement to $48,821,000. After December
31, 2004, balances outstanding under this facility will bear interest at LIBOR
plus 6%. See the preceeding two paragraphs regarding the substantial doubt as to
the Company's ability to continue as a going concern and discharge this
liability in the normal course of business.

      At June 30, 2004, $6,969,000 was outstanding under the Company's secured
loans to AmeriCold Logistics, which mature on December 31, 2004. These loans are
carried at zero in the Company's consolidated balance sheets as they have been
fully absorbed by the Company's share of comprehensive losses of AmeriCold
Logistics. AmeriCold Logistics is required to make loan payments approximating
$159,000 per month. The portions of the loan payments that represented the
repayment of principal during the reporting periods covered herein are reflected
as income from AmeriCold Logistics as this principal was previously reduced to
zero by equity in losses of AmeriCold Logistics.

      During the six months ended June 30, 2004, AmeriCold Logistics exercised
its right, pursuant to the terms of its leases with the Landlord, to defer the
payment of rent. AmeriCold Logistics' deferred rent liability at June 30, 2004
is as follows:

<TABLE>
<CAPTION>
(amounts in thousands)                                             Total
                                                               --------------
<S>                                                            <C>
Deferred during the three months ended June 30, 2004.........  $       16,085
Deferred during the three months ended March 31, 2004........          10,775
Aggregate deferral at December 31, 2003......................          82,394
                                                               --------------
                                                               $      109,254
                                                               ==============
</TABLE>

      On January 20, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $6,120,000 to a joint venture (the "Quarry Company") owned by
Vornado (44%) and Crescent Real Estate Equities Company (56%), the owners of the
Landlord, for $6,000,000 in cash. AmeriCold Logistics recognized a loss of
$120,000 on the sale. The accounts receivable have been collected in full.

      On March 29, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $4,080,000 to the Quarry Company for $4,000,000 in cash. AmeriCold
Logistics recognized a loss of $80,000 on the sale. The accounts receivable have
been collected in full.

                                     Page 15

<PAGE>

      On July 2, 2004, AmeriCold Logistics sold, without recourse, accounts
receivable of $6,120,000 to the Quarry Company for $6,000,000 in cash. AmeriCold
Logistics will recognize a loss of $120,000 on the sale in the three months
ended September 30, 2004. AmeriCold Logistics also agreed to act as agent to
collect the accounts receivable. The Company does not believe that any
significant servicing asset or liability exists.

      At December 31, 2002, the Company's investments in and advances to
AmeriCold Logistics were fully absorbed by the Company's share of comprehensive
losses of AmeriCold Logistics. AmeriCold Logistics has reported losses since its
inception and, at June 30, 2004, the Company's share of AmeriCold Logistics'
partners' deficit was $63,163,000, which includes $65,552,000 of deferred rent
(rent recognized as expense but not paid in cash) to the Landlord. On March 2,
2004, AmeriCold Logistics and the Landlord extended the deferred rent period to
December 31, 2005 from December 31, 2004. Based on the right to defer rent, the
management of AmeriCold Logistics anticipates it will have sufficient cash flows
to operate at least through June 30, 2005. AmeriCold Logistics anticipates that
in 2004 additional cash flow will be provided from a lease restructuring or some
other option. There can be no assurance that AmeriCold Logistics will be
successful in obtaining additional cash flow. Further, the Landlord is under no
obligation to restructure the leases and there can be no assurance that it will
do so. In the absence of obtaining additional cash flow, AmeriCold Logistics
will not have the ability to distribute funds to the Company and, in turn, the
Company will not have resources sufficient to repay its $26,179,000 loan from
Vornado or the ability to continue as a going concern.

Cash Flows for the Six Months Ended June 30, 2004

      Net cash used in operating activities of $135,000 was comprised of (i) a
net loss of $730,000 and (ii) the recovery from repayments on loans to AmeriCold
Logistics previously reduced by equity in losses of $504,000, partially offset
by (iii) the net change in operating assets and liabilities of $1,099,000.

      Cash provided by investing activities of $504,000 resulted from repayments
of loans to AmeriCold Logistics.

      There were no cash flows from financing activities.

Cash Flows for the Six Months Ended June 30, 2003

      Net cash provided by operating activities of $5,000 was comprised of (i)
the net change in operating assets and liabilities of $811,000, partially offset
by (ii) a net loss of $378,000 and (iii) the recovery from repayments on loans
to AmeriCold Logistics previously reduced by equity in losses of $428,000.

      Cash provided by investing activities of $428,000 resulted from repayments
of loans to AmeriCold Logistics.

      There were no cash flows from financing activities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk"
in the Company's Annual Report on Form 10-K for the year ended December 31,
2003. There has been no material change to this information.

      The fair value of the note payable to Vornado at June 30, 2004 was
approximately $21,985,000. The fair value was estimated by discounting the
future cash flows using current market rates available to the Company. Such fair
value estimate is not necessarily indicative of the amount that would be paid
upon liquidation of the Company's note payable.

ITEM 4. CONTROLS AND PROCEDURES

      (a) Disclosure Controls and Procedures. The Company's management, with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this report. Based on such evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of such
period, the Company's disclosure controls and procedures are effective.

      (b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.

                                     Page 16

<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      The Company is from time to time involved in legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the outcome of such matters will not have a material effect
on the Company's financial condition, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      On May 27, 2004, the Company held its Annual Meeting of Stockholders. Two
proposals were presented for approval for which the stockholders voted, in
person or by proxy. The results of the voting are shown below.

1) The election of two nominees to serve on the Board of Directors for a term of
three years or until their respective successors are duly elected and qualified.

<TABLE>
<CAPTION>
       NOMINEES               VOTES CAST FOR     VOTES WITHHELD
---------------------         --------------     --------------
<S>                           <C>                <C>
     Steven Roth                3,225,444           265,194
Michael D. Fascitelli           3,225,460           265,178
</TABLE>

      Because of the nature of the election of directors, there were no
abstentions or broker non-votes. In addition, directors whose term of office
continued after the Annual Meeting were: Douglas H. Dittrick, Martin N. Rosen,
Dr. Richard R. West and Russell B. Wight, Jr.

2) The ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors.

<TABLE>
<CAPTION>
VOTES CAST FOR          VOTES CAST AGAINST    ABSTENTIONS
--------------          ------------------    -----------
<S>                     <C>                   <C>
  3,416,051                   74,283              304
</TABLE>

      Because of the nature of the ratification of the Company's independent
auditors, there were no broker non-votes.

ITEM 5. OTHER INFORMATION

      On February 23, 2004, AmeriCold Logistics announced that Alec Covington
resigned as President and Chief Executive Officer, effective March 31, 2004, to
take an opportunity in an unrelated industry. A search to identify a successor
is under way. In the interim, Mike O'Connell, who has been with AmeriCold
Logistics for over ten years, has been promoted to be in charge of all
operations and, until a successor is in place, will report to Anthony
Cossentino, Chief Financial Officer.

      On June 23, 2004, Crescent Operating, Inc. ("COPI"), the Company's joint
venture partner in AmeriCold Logistics, announced that the United States
Bankruptcy Court had entered an order confirming COPI's plan of reorganization.
Consummation of this plan of reorganization will occur upon the sale of COPI's
interest in AmeriCold Logistics, payment of COPI's creditors and distribution of
shares of stock of Crescent Real Estate Equities Company to COPI's stockholders.
COPI also announced that it believes the plan of reorganization will be
consummated during the third or fourth quarter of 2004. It is uncertain what
effect this proposed change in ownership will have on the operations and
management of AmeriCold Logistics.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits required by Item 601 of Regulation S-K are filed herewith and are
      listed in the attached Exhibit Index.

(b)   Reports on Form 8-K

      During the three months ended June 30, 2004, Vornado Operating Company did
not file any reports on Form 8-K.

                                     Page 17

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                VORNADO OPERATING COMPANY
                                        ----------------------------------------
                                                       (Registrant)

Date: August 5, 2004                    By:         /s/ Joseph Macnow
                                           -------------------------------------
                                               Joseph Macnow, Executive Vice
                                           President and Chief Financial Officer
                                          (duly authorized officer and principal
                                            financial and accounting officer)

                                     Page 18

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S>              <C>                                                                          <C>
                 The following is a list of all exhibits filed as part of this
                 report.

    15.1         Letter of Deloitte & Touche LLP regarding unaudited interim
                 financial information

    31.1         Rule 15d-14(a) certification of the Chief Executive Officer

    31.2         Rule 15d-14(a) certification of the Chief Financial Officer

    32.1         Section 1350 certification of the Chief Executive Officer

    32.2         Section 1350 certification of the Chief Financial Officer
</TABLE>



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