Vornado Realty Trust (VNO, NYSE)
Industry: REIT - Office
Annual report, fiscal year 2010


VORNADO REALTY TRUST 2010 ANNUAL REPORT

VORNADO
REALTY TRUST



Vornado Realty Trust is a fully-integrated real estate investment trust.

The Company owns all or portions of:

## Office Properties:

- In Midtown Manhattan - 28 office properties aggregating 17.4 million square feet;

- In the Washington, DC/Northern Virginia area - 74 office properties containing 18.0 million square feet and seven residential properties containing 2,424 units;

- In San Francisco’s financial district - a 70% controlling interest in 555 California Street, a three-building complex aggregating 1.8 million square feet known as Bank of America Center;

## Retail Properties:

- In Manhattan, 24 retail properties aggregating over 1.9 million square feet (including 800,000 square feet reported in the New York Office segment);

- 137 strip shopping centers, regional malls, and single tenant retail assets, primarily in the northeast states, California and Puerto Rico aggregating 24.5 million square feet;

## Merchandise Mart Properties:

- 6.9 million square feet of showroom and office space including the 3.5 million square foot Merchandise Mart in Chicago;

## Other Real Estate Investments:

- A 32.4% interest in Alexander’s Inc. (NYSE:ALX) which owns seven properties in the New York metropolitan area including 731 Lexington Avenue, the 1.3 million square foot Bloomberg headquarters building;

• The 1,700 room Hotel Pennsylvania in Manhattan;

• A 32.7% interest in Toys “R” Us, Inc.;

• A 9.9% economic interest in JC Penney Company, Inc. (NYSE:JCP);

- A 25.0% interest in our $800 million real estate investment fund in which we are the general partner and investment manager; and

- Other real estate and investments including marketable securities and mezzanine loans on real estate, including a 26.2% equity interest in LNR Property Corporation, an industry leading servicer and special servicer of commercial mortgage loans and CMBS, and a diversified real estate, investment and finance company.

Vornado’s common shares are listed on the New York Stock Exchange and are traded under the symbol: VNO.



<table><tr><td>Year Ended December 31,</td><td></td><td>2010</td><td>2009</td></tr><tr><td>Revenues</td><td>$     2,779,727,000</td><td>$     2,696,692,000</td><td></td></tr><tr><td>EBITDA (before noncontrolling interests and gains on sale of real estate)*</td><td>$     2,180,335,000</td><td>$     1,651,840,000</td><td></td></tr><tr><td>Net income</td><td>$     596,731,000</td><td>$     49,093,000</td><td></td></tr><tr><td>Net income per share—basic</td><td>$     3.27</td><td>$     0.28</td><td></td></tr><tr><td>Net income per share—diluted</td><td>$     3.24</td><td>$     0.28</td><td></td></tr><tr><td>Total assets</td><td>$     20,517,471,000</td><td>$     20,185,472,000</td><td></td></tr><tr><td>Total equity</td><td>$     6,830,405,000</td><td>$     6,649,406,000</td><td></td></tr><tr><td>Funds from operations*</td><td>$     1,149,781,000</td><td>$     583,596,000</td><td></td></tr><tr><td>Funds from operations per share*</td><td>$     6.05</td><td>$     3.36</td><td></td></tr><tr><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA, adjusted for comparability*</td><td>$     2,004,725,000</td><td>$     1,920,672,000</td><td></td></tr><tr><td>Funds from operations adjusted for comparability*</td><td>$     1,022,059,000</td><td>$     848,603,000</td><td></td></tr><tr><td>Funds from operations adjusted for comparability per share*</td><td>$     5.38</td><td>$     4.89</td><td></td></tr></table>



## To Our Shareholders

Vornado’s Funds from Operations for the year ended December 31, 2010 was $1,149.8 million, $6.05 per diluted share, compared to $583.6 million, $3.36 per diluted share, for the year ended December 31, 2009.

Net Income applicable to common shares for the year ended December 31, 2010 was $596.7 million, $3.24 per diluted share, versus $49.1 million, $.28 per diluted share, for the previous year.

Funds from Operations Adjusted for Comparability increased 10% in 2010, to $5.38 from $4.89 per share.

Our core business is concentrated in New York and Washington, DC (the two strongest markets in the nation), is office and retail centric, and represents 80% of our EBITDA. In the 31 years we have run Vornado, cash flow from the core business has never declined either in total dollars or on a same-store basis. This was true even in the difficult recession years of 2008 and 2009.

Here are the financial results (presented in EBITDA format) by business segment:

<table><tr><td rowspan="2">(\( IN MILLIONS, EXCEPT SHARE DATA)</td><td rowspan="2">% of 2010 EBITDA</td><td rowspan="2">2010</td><td rowspan="2">2009</td><td colspan="2">Same Store</td></tr><tr><td>Cash</td><td>GAAP</td></tr><tr><td>EBITDA:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New York Office</td><td>30.6%</td><td>597.1</td><td>586.3</td><td>2.3%</td><td>1.7%</td></tr><tr><td>Washington Office</td><td>22.2%</td><td>433.7</td><td>402.6</td><td>10.0%</td><td>5.2%</td></tr><tr><td>Total Office</td><td>52.8%</td><td>1,030.8</td><td>988.9</td><td>5.6%</td><td>3.2%</td></tr><tr><td>Retail</td><td>18.9%</td><td>370.0</td><td>337.5</td><td>9.6%</td><td>8.6%</td></tr><tr><td>Merchandise Mart</td><td>4.6%</td><td>89.7</td><td>90.3</td><td>(2.3%)</td><td>(3.3%)</td></tr><tr><td>Hotel Pennsylvania</td><td>1.2%</td><td>23.7</td><td>15.1</td><td>57.0%</td><td>57.0%</td></tr><tr><td>Alexander&#x27;s</td><td>3.0%</td><td>58.4</td><td>57.5</td><td></td><td></td></tr><tr><td>Lexington Realty Trust</td><td>2.1%</td><td>41.0</td><td>49.6</td><td></td><td></td></tr><tr><td>Toys &quot;R&quot; Us</td><td>17.4%</td><td>340.0</td><td>322.3</td><td></td><td></td></tr><tr><td>Other (see Appendix 1 for detail)</td><td></td><td>226.7</td><td>(209.4)</td><td></td><td></td></tr><tr><td>EBITDA before noncontrolling interests and gains on sale of real estate</td><td>100%</td><td>2,180.3</td><td>1,651.8</td><td></td><td></td></tr><tr><td>Funds from Operations</td><td></td><td>1,149.8</td><td>583.6</td><td></td><td></td></tr><tr><td>Funds from Operations per share</td><td></td><td>6.05</td><td>3.36</td><td></td><td></td></tr></table>

This letter and this Annual Report contain 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. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors, see “Forward-Looking Statements” and “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, a copy of which accompanies this letter.



The following chart reconciles Funds from Operations to Funds from Operations Adjusted for Comparability:

<table><tr><td>($ IN MILLIONS, EXCEPT SHARE DATA)</td><td>2010</td><td>2009</td></tr><tr><td>Funds from Operations, as Reported</td><td>1,149.8</td><td>583.6</td></tr><tr><td>Adjustments for certain items that affect comparability:</td><td></td><td></td></tr><tr><td>Income from mark-to-market of derivative positions in JC Penney</td><td>130.2</td><td>--</td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td></tr><tr><td>Mezzanine loans loss (accrual) reversal</td><td>53.1</td><td>(190.7)</td></tr><tr><td>Real Estate development costs</td><td>(94.5)</td><td>(80.7)</td></tr><tr><td>Investment in Lexington Realty Trust</td><td>--</td><td>(18.6)</td></tr><tr><td>Investments in other partially-owned entities</td><td>(11.5)</td><td>(18.4)</td></tr><tr><td>Marketable equity securities</td><td>--</td><td>(3.3)</td></tr><tr><td>Other real estate assets</td><td>(33.0)</td><td>(7.0)</td></tr><tr><td>Net gain (loss) on extinguishment of debt</td><td>92.2</td><td>(25.9)</td></tr><tr><td>Net gain resulting from Lexington&#x27;s stock issuance</td><td>13.7</td><td>--</td></tr><tr><td>Litigation loss accrual and acquisitions costs</td><td>(17.0)</td><td>--</td></tr><tr><td>Forfeited deposit on land sale</td><td>--</td><td>27.0</td></tr><tr><td>Write-off of unamortized costs from voluntary surrender of equity awards</td><td>--</td><td>(32.6)</td></tr><tr><td>Toys purchase price accounting adjustments and litigation settlement income</td><td>--</td><td>24.1</td></tr><tr><td>Alexander&#x27;s stock appreciation rights and income tax benefits (in 2009)</td><td>0.7</td><td>24.8</td></tr><tr><td>Discontinued operations - FFO of real estate sold</td><td>11.0</td><td>21.2</td></tr><tr><td>Other</td><td>(7.8)</td><td>(8.1)</td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>(9.4)</td><td>23.2</td></tr><tr><td>Total adjustments</td><td>127.7</td><td>(265.0)</td></tr><tr><td>Funds from Operations Adjusted for Comparability</td><td>1,022.1</td><td>848.6</td></tr><tr><td>Funds from Operations Adjusted for Comparability per share</td><td>5.38</td><td>4.89</td></tr></table>

We use Funds from Operations Adjusted for Comparability as an earnings metric to allow for an apples-to-apples comparison of our continuing business by eliminating certain one-time items, which in most years have been significant gains. Adjustments for comparability have aggregated $496.5 million of income over the years as shown below:

<table><tr><td>($ in millions)</td><td></td></tr><tr><td>2010</td><td>127.7</td></tr><tr><td>2009</td><td>(265.0)</td></tr><tr><td>2008</td><td>(13.3)</td></tr><tr><td>2007</td><td>123.7</td></tr><tr><td>2006 and prior</td><td>523.4</td></tr><tr><td>Total Income</td><td>496.5</td></tr></table>

$496.5 million is understated currently by $142 million of unrecognized gains related to previously impaired marketable securities, principally LXP (GAAP, the accounting good book, requires mark-to-market markdowns but never markups until sale).



Funds from Operations Adjusted for Comparability increased 10% in 2010, or $.49 per share, to $5.38 from $4.89, as detailed below:

<table><tr><td>($ IN MILLIONS, EXCEPT SHARE DATA)</td><td>Amount</td><td>Per Share</td></tr><tr><td>Operations:</td><td></td><td></td></tr><tr><td>Same Store Core Operations (New York Office .05 per share, Washington Office .12 per share, Retail .16 per share)</td><td>63.3</td><td>0.33</td></tr><tr><td>Merchandise Mart</td><td>(4.3)</td><td>(0.02)</td></tr><tr><td>Toys “R” Us</td><td>12.1</td><td>0.06</td></tr><tr><td>Hotel Pennsylvania and Other</td><td>34.3</td><td>0.18</td></tr><tr><td>Investment Income</td><td>(11.4)</td><td>(0.06)</td></tr><tr><td>Interest Expense</td><td>81.1</td><td>0.43</td></tr><tr><td>Noncontrolling Interests</td><td>(1.6)</td><td>--</td></tr><tr><td>Dilution from Increased Share Count</td><td>--</td><td>(0.43)</td></tr><tr><td>Comparable FFO</td><td>173.5</td><td>0.49</td></tr></table>

## Growth

As is our custom, we present the chart below that traces our ten-year record of growth, both in absolute dollars and per share amounts:

($ AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

<table><tr><td rowspan="3"></td><td colspan="4">Adjusted for Comparability</td></tr><tr><td colspan="3">FFO</td><td rowspan="2">Shares Outstanding</td></tr><tr><td>EBITDA</td><td>Amount</td><td>Per Share</td></tr><tr><td>2001</td><td>726,438</td><td>348,384</td><td>3.49</td><td>104,858</td></tr><tr><td>2002</td><td>865,175</td><td>408,166</td><td>3.62</td><td>129,586</td></tr><tr><td>2003</td><td>882,397</td><td>451,595</td><td>3.87</td><td>137,754</td></tr><tr><td>2004</td><td>1,023,621</td><td>561,209</td><td>4.22</td><td>145,407</td></tr><tr><td>2005</td><td>1,151,000</td><td>604,276</td><td>4.16</td><td>156,487</td></tr><tr><td>2006</td><td>1,525,944</td><td>665,474</td><td>4.27</td><td>166,513</td></tr><tr><td>2007</td><td>1,863,493</td><td>819,510</td><td>4.99</td><td>167,672</td></tr><tr><td>2008</td><td>1,938,181</td><td>826,391</td><td>5.05</td><td>168,903</td></tr><tr><td>2009</td><td>1,920,672</td><td>848,603</td><td>4.89</td><td>194,082</td></tr><tr><td>2010</td><td>2,004,725</td><td>1,022,059</td><td>5.38</td><td>195,746</td></tr></table>

FFO has grown at a 12.7% rate over this ten-year period and 11.1% for the most recent five years; per share amounts have grown at a rate of 4.9% for ten years and 5.3% for five years.



## Share Performance

Here is a chart showing Vornado’s total return as compared to the RMS Index \( ^{*} \)  for various periods ending December 31, 2010 and for 2011 year-to-date:

<table><tr><td></td><td>Vornado</td><td>RMS Index</td></tr><tr><td>2011 YTD</td><td>6.9%</td><td>4.8%</td></tr><tr><td>One-year</td><td>23.2%</td><td>28.5%</td></tr><tr><td>Three-year</td><td>5.3%</td><td>2.5%</td></tr><tr><td>Five-year</td><td>15.1%</td><td>13.5%</td></tr><tr><td>Ten-year</td><td>255.7%</td><td>174.9%</td></tr><tr><td>Fifteen-year</td><td>827.3%</td><td>342.0%</td></tr><tr><td>Twenty-year</td><td>3136.5%</td><td>NA</td></tr></table>

 \( ^{*} \) RMS is the Morgan Stanley REIT Index, which was first published fifteen years ago.

While Vornado stock has performed superbly over long measuring periods, and has recently performed well enough against the pack (the Index), we have recently underperformed against several other blue chips. This is surely disturbing for a team that is accustomed to being at the head of the class. And it’s expensive; each multiple turn is worth about $6 per share.



## Acquisitions/Dispositions/Fund

Our external growth has never been programmed, formulaic or linear, i.e. we do not budget acquisition activity. Each year, we mine our deal flow for opportunities and, as such, our acquisition volume is lumpy. Here is a ten-year schedule of acquisitions and dispositions:

<table><tr><td rowspan="2">(\( IN THOUSANDS)</td><td colspan="2">Acquisitions \( ^{1} \)</td><td colspan="3">Dispositions</td></tr><tr><td>Number of Transactions</td><td>Cost</td><td>Number of Transactions</td><td>Proceeds</td><td>Profit</td></tr><tr><td>2001</td><td>2</td><td>19,200</td><td>2</td><td>82,500</td><td>12,455</td></tr><tr><td>2002</td><td>6</td><td>1,835,400</td><td>--</td><td>--</td><td>--</td></tr><tr><td>2003</td><td>9</td><td>533,000</td><td>3</td><td>299,852</td><td>161,022</td></tr><tr><td>2004</td><td>17</td><td>511,800</td><td>1</td><td>12,900</td><td>9,850</td></tr><tr><td>2005</td><td>31</td><td>4,686,000</td><td>--</td><td>--</td><td>--</td></tr><tr><td>2006</td><td>32</td><td>2,177,000</td><td>3</td><td>105,187</td><td>31,662</td></tr><tr><td>2007</td><td>38</td><td>4,063,600</td><td>5</td><td>186,259</td><td>60,120</td></tr><tr><td>2008</td><td>3</td><td>31,500</td><td>6</td><td>493,172</td><td>171,116</td></tr><tr><td>2009</td><td>--</td><td>--</td><td>16</td><td>262,838</td><td>42,987</td></tr><tr><td>2010</td><td>15</td><td>721,400</td><td>5</td><td>137,792</td><td>56,830</td></tr><tr><td>2011</td><td>1</td><td>405,800</td><td>4</td><td>145,486</td><td>49,203</td></tr><tr><td></td><td>154</td><td>14,984,700</td><td>45</td><td>1,725,986</td><td>595,245</td></tr></table>

In July 2010 (first closing) and February 2011 (final closing), we launched our first real estate fund, Vornado Capital Partners. We are the general partner and investment manager of this $800 million fund and have committed $200 million. It is our exclusive investment vehicle during its three-year investment period excluding carve-outs for land and ground-up development; investments using our securities; investments related to our current properties; and noncontrolling interests in equity and debt securities. To date, the fund has invested $231 million of equity in five deals including One Park Avenue; street retail and rental apartments at the Lucida, 86 \( ^{th} \)  Street and Lexington Avenue; and 50% of the Georgetown Park shopping center.

Mike \( ^{2} \)  and I, together with senior management, regularly review our portfolio. We will prune assets when the price we receive exceeds our estimate of the future value of an asset; to trade up in quality; or even to correct a mistake. But mainly we will sell assets to recycle capital into better opportunities.



## Lease, Lease, Lease

The mission of our business is to create value for shareholders by growing our asset base through the addition of carefully selected properties and by adding value through intensive and efficient management. As in past years, we present leasing and occupancy statistics for our businesses.

<table><tr><td rowspan="2">(SQUARE FEET IN THOUSANDS)</td><td rowspan="2">Total</td><td colspan="2">Office</td><td rowspan="2">Retail</td><td colspan="2">Merchandise Mart</td></tr><tr><td>New York</td><td>Washington</td><td>Office</td><td>Showroom</td></tr><tr><td>Year Ended</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2010</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet leased</td><td>5,157</td><td>1,277</td><td>1,697</td><td>1,209</td><td>364</td><td>610</td></tr><tr><td>Mark-to-Market*</td><td></td><td>(1.9)%</td><td>10.0%</td><td>13.4%</td><td>14.9%</td><td>4.0%</td></tr><tr><td>Occupancy rate</td><td></td><td>95.6%</td><td>94.3%</td><td>92.3%</td><td>91.5%</td><td>93.2%</td></tr><tr><td>Number of transactions</td><td></td><td>154</td><td>234</td><td>182</td><td>15</td><td>238</td></tr><tr><td>2009</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet leased</td><td>6,702</td><td>1,448</td><td>3,158</td><td>1,139</td><td>203</td><td>754</td></tr><tr><td>Mark-to-Market*</td><td></td><td>4.7%</td><td>18.9%</td><td>16.4%</td><td>18.0%</td><td>8.2%</td></tr><tr><td>Occupancy rate</td><td></td><td>95.5%</td><td>93.3%</td><td>91.6%</td><td>88.8%</td><td>89.4%</td></tr><tr><td>2008</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet leased</td><td>5,775</td><td>1,246</td><td>2,152</td><td>1,022</td><td>493</td><td>862</td></tr><tr><td>Mark-to-Market*</td><td></td><td>48.4%</td><td>17.7%</td><td>18.1%</td><td>4.3%</td><td>10.2%</td></tr><tr><td>Occupancy rate</td><td></td><td>96.7%</td><td>94.1%</td><td>92.0%</td><td>96.4%</td><td>93.3%</td></tr></table>



## Capital Markets

Since January 1, 2010, we have executed the following financial transactions:

- Nine financings secured by real estate aggregating $1.255 billion at a weighted average interest rate of 4.70% and a weighted average term of 7.0 years. Five of these financings were to support newly acquired assets; the other four yielded $290 million of net proceeds.

- In August 2010, we sold $660,000,000 of ten-year mortgage notes cross collateralized by 40 of our strip shopping centers. This loan was a first-out-of-the-box single issuer securitization. The notes are comprised of a $600,000,000, 4.31% fixed rate component and a $60,000,000 variable rate component. This financing repaid a $393 million, 7.93% loan on a similar pool of assets, and yielded $267 million of net proceeds.

- In March 2010, we completed a public offering of $500,000,000, five-year 4.287% senior unsecured notes.

- In 2010 and 2009, we repaid $422 million and $2.306 billion of our convertible senior debentures and senior unsecured notes, mainly through tender offers and open-market purchases. There remains outstanding only $178.5 million due November 2011 and $10 million due April 2012. \( ^{3} \) 

At year-end, we had $1.057 billion of cash, restricted cash and marketable securities \( ^{4} $  and $1.701 billion undrawn under our $2.560 billion revolving credit facilities. Our immediate liquidity today is about $500 million more.

Over the two-year period 2009 and 2010, we delevered almost $1.7 billion, reducing our consolidated debt to $10.555 billion from $12.270 billion. Debt is now 39% of our market-value balance sheet. Since stock prices fluctuate, Joe (Joe Macnow, our esteemed CFO) and I believe an even better measure of leverage may be debt to EBITDA – ours is currently 5.9x, down from 7.6x a couple of years ago. It is quite clear in REITLand that lower levered companies are rewarded with higher stock multiples. While this may be a bit counterintuitive, it is a fact that has long stood the test of time and one that our management embraces.

Unsecured debt must be managed carefully since it bears the full faith and credit of the entire company (sort of like a personal guarantee) – low LTVs and carefully laddered maturities are appropriate. Secured debt is recourse solely to pledged assets or pools of assets. Both have their place in our capital structure.

Vornado remains committed to maintaining our investment grade rating.

Our excellent Capital Markets team is headed by EVP Wendy Silverstein with SVP Dan Guglielmone and VP Richard Reczka.



## New York

Our flagship New York office business is managed by David Greenbaum, Division President, with Glen Weiss (Leasing), Gaston Silva (Operations), Tom Sanelli (Financial), Barry Langer and Eli Zamek (Development/Construction), and Fred Grapstein (Hotel Pennsylvania). There are none better than these award winners.

Notwithstanding the ferocity of the 2008 – 2009 recession, New York suffered job loss of “only” 140,000, a fraction of the job loss in the prior two recessions. What’s more, New York has already gained back 61,000 jobs, or 43% of those lost. By comparison, the U.S. as a whole has gained back only 14% of jobs lost. (Our other major market, Washington, DC, suffered job loss of 96,000 and has already gained back 88% of jobs lost.) Rents bottomed last year (after a decline of 36% in the recession) and are now on the rise. Absorption is now positive, and vacancy has fallen to below 11%. Importantly, most sublease space has been withdrawn from the market. As an interesting measure of tone, there are approximately 40 blocks of over 100,000 square feet available, with at least 67 prospects chasing them. The current strength of the New York market is not just in financial services, but has extended to, for example, Google, Li & Fung, Bloomberg and NYU Langone Medical Center, etc., etc. As another sign of strength, the vacancy rate above the 25 \( ^{th} \)  floor is 4.2%. We are very constructive on New York.

I am not a chartist, but the chart \( ^{5} \)  shows that rents have declined only twice in the last 20 years, during the 1990 and 2001 recessions. Rent declines then were 23% and 25% and were followed by rent gains of 118% and 76% in the seven year and three year recoveries which followed. We are now only in the second year of this recovery. In a thin market characterized by few transactions, prices for New York office buildings have recovered to within hailing distance of peak pricing - this in anticipation of and a prediction of the rent spike to come. \( ^{6} \)  There is no doubt that New York assets and Washington assets are number one and two on global investors’ wish lists.

The Park Avenue submarket has long been the highest rent, lowest vacancy, most sought after sub-market in New York. We discuss below our interest in 280 Park Avenue (1,237,000 square feet) and our ownership interest in One Park Avenue (933,000 square feet); we also own 90 Park Avenue (906,000 square feet) and 350 Park Avenue (555,000 square feet).

In June 2006, we made a 10.25%, ten-year, $73.7 million mezzanine loan, through $923 per square foot last dollar loss, to the partnership that owned 280 Park Avenue, the full block between 48-49 \( ^{th} \)  Streets. This loan was made to a government of Dubai sponsored entity with an interest reserve expected to carry through the term. In 2009, as rents and values collapsed, we reserved the loan. As quickly as asset values sank, that’s how quickly they recovered. SL Green recently acquired, in multiple steps, $326.3 million face amount of mezzanine debt senior to ours at a discount of 12%. We, of course, monitored their accumulation and decided to stand pat, expecting that our $73.7 million position would be the fulcrum piece or be dollar good. Two weeks ago, we announced that Vornado and SL Green had formed a joint venture to hold our combined debt positions (we equalized with SLG par for par).

In March 2011, we acquired on behalf of our fund (with Vornado owning 46.5% as a fund LP and a co-investor) One Park Avenue, a full block-front building between 32-33 \( ^{rd} \)  Streets. Our acquisition price was 394 million compared to the last sale of this building at 550 million in 2007. The key to this deal was a lease extension and expansion to 368,000 square feet of major tenant NYU Langone Medical Center, orchestrated in record time by David and Glen.



I am reprinting below my suggestion, originally written in last year’s letter, that New York City rezone Park Avenue:

Park Avenue, the major corporate corridor of New York, comprises about 40 million square feet from Grand Central to 59th Street and buildings there are on average about 45 years old (which is about the average age of the entire New York office stock). So here’s an idea for the powers that be. To keep regenerating New York, why not upzone Park Avenue as an economic incentive to tear down old buildings and replace them with new-builds which may be say, half again the size. They do this in London, quite successfully. (Park Avenue is only one example.)

In July, we were granted ULURP approval for a Pelli Clarke Pelli designed, 2.8 million square foot, 1,215 foot office tower to be built on the site of the Hotel Pennsylvania, 33 \( ^{rd} \)  Street and Seventh Avenue (15 Penn Plaza). \( ^{7} \)  This two-year effort was led by our David Greenbaum and by dean of the land use bar, Sandy Lindenbaum. We will not proceed with this building without a major tenant. To enhance the financial performance of the Hotel Pennsylvania while we seek a tenant, we will renovate rooms, common areas and retail space. In connection with our renovation and the renovation by our neighbor, Madison Square Garden, we will continue to enhance the Penn Plaza area, where we own 6.9 million square feet.

While we are certainly not counting our chickens, we are working hard to put the pieces in place to build a 1.5 million square foot tower 20 Times Square over the Port Authority Bus Terminal, at 42 \( ^{nd} \)  Street and Eighth Avenue. \( ^{8} \) 

In 2005, we acquired for $131.5 million the rent-stabilized residential building located at 220 Central Park South. David recently achieved a milestone here by reaching agreement, in a court supported process, to buy out all the remaining rent-stabilized residential tenants. There remains one commercial tenant. This wonderful Central Park fronting condo site continues to be a work in progress. \( ^{8,9} \)



## Washington

Our Vornado/Charles E. Smith Washington DC/Northern Virginia business is the largest in its market (the best real estate market in the nation) by a factor. This is a big business - 82 properties, 21.1 million square feet, 424 employees, including 26 in leasing; 61 in property management; 226 in engineering; 24 in construction and development; 47 in third-party management; and 40 in executive management, human resources, accounting, administrative, marketing, acquisitions and IT. This business is managed by the A-Team of Division President Mitchell Schear and chief lieutenants Brendan Owen and Jim Creedon (Leasing), Laurie Kramer (Finance), Patrick Tyrrell (Operations) with Mitch Bonanno, Paul Sowter and Lisa Marier (Development), and Ernie Wittich (Acquisitions).

Our growth here comes from the increase in the income and value of our owned buildings, as well as from acquisitions and development.

After a three-year process (thank you Mitchell and Mitch Bonanno), a new Crystal City Sector Plan was approved in September 2010. This entitlement provides us the ability to increase our 8.3 million square feet in Crystal City up to 12.4 million square feet. Execution here would require razing buildings to build bigger buildings, achieving higher-rise, new-built, state-of-the-art buildings. As the maiden project here, in 2012, we will take the 348,000 square foot 1851 South Bell Street out of service with plans to replace it with a 700,000 square foot new-build to be re-addressed 1900 Crystal Drive. \( ^{8} \) 

We own a 46% interest in five buildings containing 725,000 square feet of office and 196 units of residential in Rosslyn, on the Potomac directly across from the Kennedy Center. In its existing form, it is a money maker. It is also a placeholder for the best development site in Northern Virginia. We also own two superb ten-acre land parcels in Pentagon City. These three sites will support future development of 3.7 million square feet of office space, 2,400 apartments and 600 hotel rooms. \( ^{8} \) 

From time to time, we have taken profits and recycled capital in Washington. In 2010, we monetized a portion of our investment by creating a joint venture with the Canada Pension Plan Investment Board (CPP), which contributed $91 million in exchange for a 45% equity interest in the Warner and 1101 17th Street. In 2011 we sold two mid-block District of Columbia buildings for $107 million net proceeds. In 2009, we sold 1999 K Street for a record $830 per square foot. In previous years, we sold five properties generating $377 million. All told, aggregate proceeds have been $783 million.

A major focus for the next few years will be to readjust our Washington portfolio for BRAC, the Base Realignment and Closure Commission mandate, which requires the Department of Defense to relocate about two million square feet from our buildings to military bases. For us this relocation will involve staggered move-outs that will start in Q4 2011 and extend through 2015. Please see page 46 of our 10-K at www.vno.com for additional details. We’ve been through this before, when in 2004 - 2005 the PTO (U.S. Patent Trademark Office) relocated a similar two million square feet. While it took a few years then (as it will now), Crystal City benefited enormously by adding more private sector tenants. \( ^{10} \)  Our sleeves are rolled up, and we look forward to the work ahead.



## Retail

Our retail business is a strong three-legged stool - Manhattan street retail, strip shopping centers and regional malls. Our bloodlines are retail, and we are good at it.

Here are some of our 2010 accomplishments. We encourage you to take a look, or even better, come by and shop with us:

- 1540 Broadway at 46 \( ^{th} \)  Street, the very bull’s-eye of the Times Square bow tie is now open for business. This asset features Disney’s flagship (and only New York store) and Forever 21’s 100,000 square foot megastore, which in keeping with the spirit of Times Square, is open until 2:00 am every night.

- Bergen Town Center (Route 4, Paramus, NJ) is now substantially complete, featuring Century 21, Target, Whole Foods, Bloomingdale’s first outlet store, Neiman Marcus’ Last Call and Nordstrom Rack.

• Manhattan Mall at Herald Square is anchored by JC Penney’s flagship Manhattan store.

- In July, we opened in North Bergen (Tonnelle Avenue) a 200,000 square foot Wal-Mart Supercenter. This huge store is jammed all day and night.

• Alexander’s Rego Park II is now open, featuring Costco, Century 21, Kohl’s, Toys “R” US, T.J. Maxx, etc.

- 510 Fifth Avenue at 43 \( ^{rd} \)  Street (acquired October 2010), will be the new home of Joe Fresh’s first U.S. store. Joe Fresh is a 310-store division of Canadian giant Loblaw.

- Our fund acquired a 50% interest in Georgetown Park, a 300,000 square foot multi-level retail property in the heart of Georgetown, Washington, DC, and the Lucida with 96,000 square feet of retail and 24 rental apartments on 86 \( ^{th} \)  Street and Lexington Avenue.

- In December 2010, we acquired a leasehold interest in Wayne Town Center, a 49-acre fixer-upper adjacent to the Willowbrook Mall in Wayne, NJ.

- In October 2010, we acquired the 55% interest that we did not already own in a 646,000 square foot power strip shopping center in San Jose, California.

Springfield Mall is a 1.4 million square foot fixer-upper regional mall located in the under-malled southwest quadrant of Washington, on the Beltway. We acquired this property in 2006 for 275 million, consisting of 25 million in cash, the assumption of 170 million mortgage debt and a deferred payment to the seller of 80 million. In 2009, we completed entitlements for a major renovation and repositioning plus rights to build an additional three million square feet of apartment and office on the surrounding parking lots. \( ^{8} \)  In respect to changing times and changing economics of the project, we negotiated a DPO (discounted pay off) of the mortgage for 115 million and a discount of the deferred payment to the owner of 55 million, saving in the aggregate 103 million, which was recognized as income in Fourth Quarter 2010. We also recognized an impairment of 65 million in the Fourth Quarter. For lots of reasons, we will likely bring in a joint venture partner here.



## Merchandise Mart

We entered the Mart business in April 1998 by acquiring the famous 3.5 million square foot Chicago Merchandise Mart Building from the even more famous Joseph P. Kennedy family. This business has been well managed by Chris Kennedy and lieutenant, Mark Falanga (Office Furniture Industry), John Brennen (Residential Furniture Industry), Myron Maurer (Operations) and John Jennings (Financial). It is a combination of conventional office space (about 1/3), showroom space (about 2/3) and trade shows catering to the office furniture, residential furniture, and giftware industries.

Over the years we expanded the Mart business by making bolt-on acquisitions in High Point, Boston and Los Angeles and by transferring 7 West 34 \( ^{th} \)  Street and a portion of 150 East 58 \( ^{th} \)  Street from New York Office to the Mart Segment. We also acquired numerous trade shows.

The Mart business has been good to us, earning as much as 11% in its best years, but trailing off to 7% recently. In First Quarter 2011, we “sold” High Point to the lender, realizing an $82 million gain. In 2011, we will withdraw capital from the unencumbered 350 West Mart building in Chicago (almost entirely an office building) by financing, sale or both. We will also focus on LA Mart. We will transition 7 West 34 \( ^{th} \)  back to New York Office by 2015. Effectively this will scale the business back to its core, the Chicago Merchandise Mart plus the Washington and Boston Mart operations. Valuing the entire business today at what we believe to be building-by-building market pricing, we would have earned a 9.6% IRR.

## Alexander's

With the completion of Rego Park II, Alexander’s development program is substantially complete. Our 32.4% stake in Alexander’s has a cost basis of $73.7 million and a mark-to-market gain of $601 million. Alexander’s began paying a cash dividend in 2010, which was raised First Quarter 2011, to a quarterly running rate of $3 per share. Shareholders should note that Alexander’s current earnings are penalized by holding $544 million in cash, earning nil.

## Toys “R” Us

Toys “R” Us reported 2010 results last month. Their Form 10-K is available at their website at www.toysrusinc.com. Jerry Storch, CEO, and his team have run Toys “R” Us since 2006, achieving extraordinary results; they have taken Adjusted EBITDA from $726 million to over $1.1 billion.

## JC Penney

We have a life-long history of successful investments in more than a dozen retailers, the first of which was the takeover 31 years ago of Vornado itself (then D/B/A Two Guys discount department stores). In fourth quarter 2010, we invested $616 million in 23.4 million shares of JC Penney, a 9.9% stake. \( ^{11} \)  Our average cost here is $26.32 per share, and we have a $274 million mark-to-market gain, so far.



## Team Building

In 2010, the talented men and women of Vornado, 4,780 strong:

• managed, maintained, cleaned and provided security for over 100 million square feet of commercial space;

• leased 5,157,000 square feet in 823 separate transactions;

• were responsible for the investment of $589 million in development and maintenance capital;

• executed over $2.7 billion of capital markets transactions (not including assisting in those of Toys “R” Us and other affiliates);

• acquired $721 million of assets in 15 transactions;

• sold assets for $138 million of proceeds with profits of $57 million in 5 transactions;

• produced over 1,500 pages of financial reports and SEC filings, and

• collected $2.8 billion of revenue from 5,624 tenants.

We are delighted to welcome Michael J. Franco as Executive Vice President - Co-Head of Acquisitions and Capital Markets. Michael was a 20-year veteran with Morgan Stanley, where he last headed their US Real Estate Funds (MSREF).

Michael joins EVP Wendy Silverstein, for 13 years our Capital Markets guru and pride and joy, in co-heading our acquisitions and capital markets group.

Special thanks to Michelle Felman, who, after 11 years, left Vornado at year-end. She had been head of acquisitions working under Mike in executing our important acquisitions during that period. We are delighted Michelle has agreed to continue as a consultant, helping on LNR and our fund.

Sandeep Mathrani, who was head of our retail group for nine years, won the contest to be the next CEO of General Growth Properties. Sandeep had always wanted to run his own company, and he deserves it. Mike and I are happy for him. A super strong team remains – Ben Schall (strip centers), Bob Minutoli (Malls), Sherri White (Manhattan street retail) - each experienced and expert in the operation of our retail business. We will announce our organizational next steps here shortly.

Michael J. DeMarco joined as EVP-Acquisitions in July 2010. Mike and I have known Mike DeMarco forever. As a senior banker then at Lehman Brothers, Mike represented us in 2001 in the multi-billion dollar acquisition of the Charles E. Smith Washington office business. Mike’s most important current assignment is executing the disposition program of assets that we will prune.

We are delighted that super developer Mel Blum is re-joining Vornado. Mel was with us from 2000 to 2005 and was senior on the Bloomberg Tower and the 640 Fifth Avenue over-build.

And, welcome to Adam I. Popper, SVP – Director of Office Acquisitions, a very talented and experienced executive.



## Sustainability

At Vornado, we believe that environmental sustainability is not only responsible citizenry, it is also good business. Our goal is to be a leader in sustainability by creating a corporate culture that integrates the principles of environmental responsibility and sustainable growth into our business practices, our planning and our relationships. Vornado’s award-winning sustainability effort is managed by Sukanya Paciorek, Vice President-Corporate Sustainability, under the watchful eye of Mitchell and David. Please see highlights of the sustainability section of our website reprinted on pages 19-22 of our annual report. Special mention here is deserved for the $18 million, 6.2 megawatt co-gen plant that went into service on October 1, 2010 at our 2.5 million square foot One Penn Plaza. This plant services 60% of the building’s electricity and 30% of its steam.

## *****

## LNR

Loans bundled into CMBS (Commercial Mortgage Backed Securities) are a huge form of financing for commercial real estate (and residential, autos, refrigerators, etc., as well). LNR is the largest special servicer in the nation, named special servicer for $195.6 billion of CMBS, and is currently special servicing 1,467 loans with a face amount of $27.7 billion. In 2005, LNR was sold in a process to Cerberus. We were the underbidder. In connection with that transaction, we made two mezzanine loans, a $60 million loan that was repaid and a $75 million loan that was worked out in LNR’s July 2010 reorganization; we invested an additional $116 million and are now a 26.2% equity holder, with partners iStar, Cerberus, Oaktree and Aozora. This investment is economic in its own right and additionally will give us an eye into this critical market.

## Downtown Crossing, Boston

In 2008, the partnership here (in which we have a 50% interest) made the correct decision to suspend the project in place – hundreds of similar projects in every major city across the country had to do the same. We have taken our lumps on this project, writing off $36 million (our share) of predevelopment costs – our current book is $46 million. The partnership is currently in a process to sell or venture the site.

By and large, building (i.e. new supply) stopped nationwide in 2008. Lack of supply begets, over time, higher real estate prices. Always. This is a prediction for the future.

This cycle has surely been confusing. Everyone expected the chaos and distress of the residential real estate markets (the eye of the storm) to carry over and infect the commercial markets. This did not happen - sellers have held on, financing has come back (albeit at lower amounts) and prices have rebounded. The great buying/distressed opportunity did not materialize. Whether this was caused by the wall of liquidity, zero interest rates or lenders just holding on, the fact is there was no flood of distress (other than stocks and bonds for a short period in 2009). But, as prices rise, a fire hose of assets will come to market.



I have a five and dime store plaque sitting on my desk, which reads “trouble is opportunity”. And it is. There is an old saying that…“they don’t ring the bell at the bottom.” But maybe they do. A lesson learned from the panic of 2008 is when the government steps in to rescue and refugiously…it is the time to buy.

The smartest money is going “all-in” wagering that current monetary policy will beget inflation and that current zero percent interest rate policy will give way to renormalized, i.e. much higher rates. Our day job is running Vornado, not speculating on markets, but we must be prepared for inflation, and rising interest rates. And we are.

Education may be the single most important issue facing our country. While 85% of our population has completed high school, it is startling that only 28% hold a college or advanced degree. So it goes hand-in-hand that Washington, DC is both the best office market and has the most educated workforce in the nation – 48% de gree. And New York is no slouch, ranking fourth at 38% de gree.

There has been much talk of late about dissolving Fannie Mae and Freddie Mac. I believe that would be a mistake. Since 1938, the public policy of the United States has been to support home ownership of its citizens by passing on to the homebuyer the reduced interest rate of the GSE’s (Government Sponsored Entities). This worked swimmingly well for decade after decade. In fact, the financing available to the American homebuyer supported our economy and differentiated our country from the rest of the world. In recent years, the GSEs fell victim to human error as overambitious GSE managers followed, all too closely, their private market brethren. Properly managed, Fannie Mae and Freddie Mac have an important role in our economy. \( ^{12} \)



Nick is going to Brown. Ben and Jeannie are the proud parents of a beautiful boy, Miller Mun. Barry and Erica were married. Our Vornado family has been blessed with 28 marriages and 47 births (all future Toys “R” Us customers, for sure). Glen keeps getting awards, and he deserves them. And, Andy Ackerman won REBNY’s 2011 Rookie of the Year award. Thanks to James Bry. Thanks to Joe, Ross, our fact man, and LouAnn. Matt and Nora had a boy, Luke David.

Mike and I are fortunate to work every day with the gold medal team. Our operating platforms are the best in the business. We admire and appreciate the talents and energy of our partners, Michael Franco, David Greenbaum, Chris Kennedy, Joe Macnow, Mitchell Schear and Wendy Silverstein and our retail trio and Mike DeMarco and Mel Blum, too.

Mike and I appreciate the dedication, hard work, wisdom and oversight of our Board.

Mike and Joe spend a fair amount of time with our analysts and our investors. I, a little less. We learn from each exchange with each of you and we appreciate it.

Steven Roth

Chairman

April 11, 2011

Again this year, I offer to assist shareholders with tickets to my wife’s theatrical productions on Broadway – Love, Loss and What I Wore (National tour begins in Chicago in September), The Normal Heart, and A Time to Kill opening in Washington, DC in May. Please call if I can be of help.



## Sustainability at Vornado

At Vornado, we believe that environmental sustainability is not only responsible citizenry, it is also good business. Our goal is to be a leader in sustainability by creating a corporate culture that integrates the principles of environmental responsibility and sustainable growth into our business practices, our planning, and our relationships. Vornado has already incorporated many sustainable initiatives in our buildings and in our programs, and is expanding and developing environmental best practices in our operations across the country.

Consistent with our sustainability goals, each division is engaged in comprehensive sustainability programs and projects. The cornerstones of our efforts are energy efficiency projects, progressive energy management programs, and our LEED certification and tenant outreach efforts. To successfully manage our sustainability practices, we have organized teams within each division and within each building to identify and implement cost-effective opportunities to reduce our carbon footprint.

## Policy

Vornado’s corporate policy outlines our commitment to sustainable practices in several key areas as outlined below.

## New Development

In all new development and redevelopment projects, Vornado will strive to achieve LEED NC/CS Gold certification or better.

## Existing Buildings

Vornado’s goal is to operate its buildings in an environmentally sustainable manner. Operations staff will establish best practices in energy efficiency, resource conservation, ecologically sensitive products, and other sustainable practices, and implement them in all possible locations. Capital upgrades and renovations incorporate, wherever feasible and practicable, sustainable materials, equipment, and technologies. When possible and appropriate, existing buildings will be certified under the LEED-EB rating system.

## Culture/Office Management

Vornado encourages a sustainability-minded culture in every division and at every level. Our goal is for our offices and employees to operate with regard to sustainability best practices, with focus on the following efforts:

• Employee training and education

• Indoor air quality

• Resource conservation (water, energy, materials)

• Responsible procurement (ecologically sensitive materials/vendors)

• Transportation (mass transit and alternative commuting)

• Waste reduction (recycling)

## Strategic Application Of Sustainable Practices

Vornado strives to rely upon its unique strengths to identify and apply the most effective sustainable practices. We seek opportunities that leverage the scale and diversity of our portfolio, the depth and breadth of our experience, and our operational expertise across all divisions. We test promising sustainable technologies in real-life circumstances in our portfolio to implement innovative products, services, and ideas that offer the broadest possible value to our company, our customers, our industry, our communities, and the environment.

## Relationships

Vornado integrates sustainable practices and thinking into our relationships with tenants, contractors and consultants, incorporating sustainable standards in contractual documents and agreements.



## Energy Efficiency and Management

Vornado’s engineering and staff at every building utilize sophisticated building management systems and technology to manage and mitigate the energy consumption throughout our portfolio. Many Vornado properties also participate in demand response programs, with the capability in 2010 to curtail over 7 megawatts of power during peak demand periods when the electricity grid is strained. We continue to enhance our energy management capabilities through ongoing improvements to our metering and technology. Highlights of our energy management efforts include our one-of-a-kind Tenant Service Center and our trademarked Energy Information Portal (“EIP”) \( ^{TM} \) .

## Tenant Service Center

Vornado operates one of the largest and most sophisticated energy management and building systems control centers in the United States—designed to commission, monitor and regulate power consumption in over 19.5 million square feet of Vornado-owned and managed properties in the Washington, DC area. At our Tenant Service Center, buildings are remotely monitored and controlled around-the-clock by licensed engineers who track building performance by monitoring over 80 different sensors in every building.

## Energy Information Portal

In 2009, Vornado launched its Energy Information Portal, a web-based tool through which submetered tenants have access to their electricity bill, and their energy usage profiles and data. With over 70% of the energy used in office buildings consumed by tenants within their spaces, this tool is intended to help tenants identify and change wasteful energy practices within their spaces, lower electricity costs and become more energy efficient.

## Onsite Generation

Cogeneration (also known as combined heat and power, CHP) is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat. It is one of the most common forms of energy recycling.

The advantages of on-site cogeneration in the commercial office setting are compelling, including the delivery of power with increased efficiency and a lower carbon footprint, and the ability to provide back-up power to tenants and more reliability to the grid. Vornado’s 6.2 megawatt project at One Penn Plaza commenced operation in 2010, and is projected to provide up to 60% of the building’s electricity and offset 30% of the building’s steam requirement, making it one of the largest existing Cogen projects to be integrated into an existing New York City office building. Vornado continues to investigate further opportunities to implement on-site cogeneration in our portfolio.

In addition to cogeneration, Vornado is also investigating opportunities to deploy solar projects in its portfolio. In 2010, Vornado Retail began implementation of our first solar project, a 1 megawatt solar panel project at the Bergen Town Center in New Jersey.

## Green Cleaning

Maintaining a clean building environment is critical to employee health and the environment. “Green” cleaning standards utilize cleaning best practices with low environmental-impact products to ensure a high degree of sustainability. Our buildings are cleaned and maintained using a green cleaning system managed according to sustainability best practices, with a focus on:

• Employee training and education

• Energy conservation

• Indoor air quality

• Resource conservation

• Responsible procurement and low environmental-impact product lines

• Waste reduction

• Water conservation.



## Recycling & Reclamation

Successful recycling and reclamation programs are key to providing a “sustainable built environment.” By preventing the waste of potentially useful materials and reducing the consumption of fresh raw materials, recycling and reclamation projects help to reduce systemic energy usage and reduce the need for conventional waste disposal.

Vornado is committed to supporting the recycling and diversion of waste away from landfills, wherever possible.

This includes everyday waste produced in a building (trash, paper waste, food waste) as well as construction waste and debris. Our goal is to maximize and optimize our diversion ratio of waste, to ensure that materials that can be recycled are diverted away from landfills to separation and recycling facilities.

Of note in 2010, we completed the successful reclamation and salvage at the famous Carnelian Room restaurant on the top floor of our property at 555 California Street in San Francisco. Vornado's team worked with Ohmega Salvage Company to salvage 7,600 pounds of wood paneling and doors from the demolished space. At least 70% of the other non-hazardous tenant improvements were recycled.

The Merchandise Mart’s partnership with the ReBuilding Exchange in Chicago has also provided an important outlet for diverting materials. In 2010, we diverted over 15,000 pounds of materials from the Mart through this partnership.

## LEED

Developed by the U.S. Green Building Council (USGBC), the LEED (Leadership in Energy and Environmental Design) rating system provides building owners and operators a concise framework for identifying and implementing practical and measurable green building design, construction, operations and maintenance solutions.

Vornado’s corporate sustainability policy commits us to strive for LEED NC/CS Gold certification or better in all new construction and development that we manage. Recent examples of our commitment are the completion and LEED Gold certification of 1999 K Street and 25 West End properties in Washington, DC.

Vornado is also currently working to certify its existing buildings portfolio under the LEED EB O&M platform. The LEED EB system is an internationally recognized certification that measures how well a building or community performs across important environmental metrics: energy savings, water efficiency, CO \( _{2} \)  emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.

The first building in our portfolio to reach LEED EB status (Silver certification in 2007) is our Merchandise Mart building in Chicago. Since then, we have certified another 10 million square feet of space under the LEED EB rating system, with an additional 4 million square feet expected by the end of 2011. The Mart also has 13 LEED CI tenants (10 gold, 3 silver), and the 350 W Mart Center/Holiday Mart Plaza project received LEED EBOM Gold. This is one of few mixed-use properties with a hotel that has received this level of certification.

## To learn more about LEED, visit www.usgbc.org

## Education and Outreach

Understanding sustainability, efficiency and environmental stewardship is a key part of maintaining a high performance building. At Vornado, we offer regular educational sessions for our property managers and engineers to help them stay up to date on the latest sustainability and LEED principles.

Engaging our tenants in our sustainability effort has also been a critical component in making our programs effective. Our outreach through our website, quarterly newsletters, and email announcements has helped make tenants aware of our progress. More importantly, our outreach has helped to build strong landlord-tenant energy reduction partnerships.



## ENERGY STAR Partner

As an ENERGY STAR Corporate Partner, Vornado is committed not only to optimizing our energy efficiency and energy management efforts, but to using our business platforms to help educate our tenants, clients and customers about ENERGY STAR programs.

Benchmarking energy usage is the keystone to any effective energy efficiency and management program, and Vornado utilizes the ENERGY STAR Portfolio Manager Program to benchmark and monitor the efficiency of our buildings. ENERGY STAR is a joint program of the U.S. EPA and the U.S. Department of Energy focused on promoting energy efficiency. For commercial buildings, the ENERGY STAR program scores the energy performance of buildings on a 1-100 scale. Facilities that achieve a score of 75 or higher are eligible for the ENERGY STAR award, indicating that they are among the top 25% of facilities in the country for energy performance.

We are proud that over 22 million square feet of buildings in our office portfolio have received the prestigious ENERGY STAR label, and we are working to receive more.

Moreover, we are using our sustainability initiatives, at our buildings and malls, to convey information about ENERGY STAR programs and energy reduction measures, and to help consumers and tenants better understand what they can do to reduce their energy consumption.

## Recent Corporate Awards and Recognition

• Over 22 million square feet of EPA-designated Energy Star buildings

• Over 15 million square feet of LEED EB certified existing buildings in the portfolio

• Over 1.4 million square feet of LEED NC or CS certified new buildings

• NAREIT Leader in the Light Gold Award 2010, highest level award



## APPENDIX 1 – DETAIL OF OTHER EBITDA – See Page 2

<table><tr><td>($ IN THOUSANDS)</td><td>2010</td><td>2009</td></tr><tr><td>555 California Street</td><td>45,392</td><td>44,757</td></tr><tr><td>Industrial Warehouses</td><td>2,528</td><td>4,737</td></tr><tr><td>Corporate general and administrative expenses</td><td>(90,343)</td><td>(79,843)</td></tr><tr><td>Investment Income</td><td>27,167</td><td>32,386</td></tr><tr><td>Interest income on mortgages receivable</td><td>9,669</td><td>32,181</td></tr><tr><td>Other investments</td><td>60,015</td><td>6,981</td></tr><tr><td>Non-cash write-downs:</td><td></td><td></td></tr><tr><td>Investment in Lexington Realty Trust</td><td>--</td><td>(19,121)</td></tr><tr><td>Marketable equity securities</td><td>--</td><td>(3,361)</td></tr><tr><td>Real Estate development costs:</td><td></td><td></td></tr><tr><td>Partially owned entities</td><td>(11,481)</td><td>(17,820)</td></tr><tr><td>Wholly owned entities</td><td>(127,513)</td><td>(87,823)</td></tr><tr><td>Mezzanine loans loss (accrual) reversal</td><td>53,100</td><td>(190,738)</td></tr><tr><td>Net gain (loss on early extinguishment of debt)</td><td>92,150</td><td>(25,915)</td></tr><tr><td>Income from terminated sale of land</td><td>130,153</td><td>27,089</td></tr><tr><td>Derivative positions in marketable securities</td><td>--</td><td>--</td></tr><tr><td>Alexanders&#x27; SARs</td><td>--</td><td>11,105</td></tr><tr><td>Alexanders&#x27; income tax benefit</td><td>--</td><td>13,100</td></tr><tr><td>Toys &quot;R&quot; Us purchase price adjustment and litigation settlement income</td><td>--</td><td>16,268</td></tr><tr><td>Write-off of unamortized costs from voluntary surrender of equity awards</td><td>--</td><td>(32,588)</td></tr><tr><td>Discontinued operations - EBITDA of properties sold</td><td>34,742</td><td>47,685</td></tr><tr><td>Other, net</td><td>1,151</td><td>11,486</td></tr><tr><td>Total</td><td>226,730</td><td>(209,434)</td></tr></table>



Below is a reconciliation of Net Income to EBITDA:

<table><tr><td>(\( IN MILLIONS)</td><td>2010</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td><td>2005</td><td>2004</td><td>2003</td><td>2002</td><td>2001</td></tr><tr><td>Net Income</td><td>647.9</td><td>106.2</td><td>359.3</td><td>541.5</td><td>554.8</td><td>536.9</td><td>592.9</td><td>460.7</td><td>232.9</td><td>263.7</td></tr><tr><td>Interest and debt expense</td><td>828.1</td><td>826.8</td><td>821.9</td><td>853.5</td><td>698.4</td><td>418.9</td><td>313.3</td><td>296.1</td><td>305.9</td><td>266.8</td></tr><tr><td>Depreciation, amortization, and income taxes</td><td>706.4</td><td>739.0</td><td>568.1</td><td>680.9</td><td>530.7</td><td>346.2</td><td>298.7</td><td>281.1</td><td>257.7</td><td>188.9</td></tr><tr><td>Cumulative effect of change in accounting principle</td><td>--</td><td>--</td><td>--</td><td>--</td><td>--</td><td>--</td><td>--</td><td>30.1</td><td>4.1</td><td></td></tr><tr><td>EBITDA</td><td>2,182.4</td><td>1,672.0</td><td>1,749.3</td><td>2,075.9</td><td>1,783.9</td><td>1,302.0</td><td>1,204.9</td><td>1,037.9</td><td>826.6</td><td>723.5</td></tr><tr><td>Gains on sale of real estate</td><td>(57.2)</td><td>(45.3)</td><td>(57.5)</td><td>(65.0)</td><td>(32.6)</td><td>(31.6)</td><td>(75.8)</td><td>(161.8)</td><td>--</td><td>(15.5)</td></tr><tr><td>Noncontrolling Interests</td><td>55.2</td><td>25.1</td><td>55.4</td><td>69.8</td><td>79.9</td><td>133.5</td><td>156.5</td><td>175.7</td><td>137.4</td><td>109.9</td></tr><tr><td>EBITDA before noncontrolling interests and gains on sale of real estate</td><td>2,180.4</td><td>1,651.8</td><td>1,747.2</td><td>2,080.7</td><td>1,831.2</td><td>1,403.9</td><td>1,285.6</td><td>1,051.8</td><td>964.0</td><td>817.9</td></tr><tr><td>Non-comparable items</td><td>(175.5)</td><td>268.9</td><td>191.0</td><td>(217.2)</td><td>(305.2)</td><td>(252.9)</td><td>(262.0)</td><td>(169.4)</td><td>(98.8)</td><td>(91.5)</td></tr><tr><td>EBITDA adjusted for comparability</td><td>2,004.9</td><td>1,920.7</td><td>1,938.2</td><td>1,863.5</td><td>1,526.0</td><td>1,151.0</td><td>1,023.6</td><td>882.4</td><td>865.2</td><td>726.4</td></tr></table>

Below is a reconciliation of Net Income to FFO:

<table><tr><td>(\( IN MILLIONS, EXCEPT SHARE AMOUNTS)</td><td>2007</td><td>2006</td><td>2005</td><td>2004</td><td>2003</td><td>2002</td><td>2001</td></tr><tr><td>Net Income</td><td>541.5</td><td>554.8</td><td>536.9</td><td>592.9</td><td>460.7</td><td>232.9</td><td>263.7</td></tr><tr><td>Preferred share dividends</td><td>(57.1)</td><td>(57.5)</td><td>(46.5)</td><td>(21.9)</td><td>(20.8)</td><td>(23.2)</td><td>(36.5)</td></tr><tr><td>Net Income applicable to common shares</td><td>484.4</td><td>497.3</td><td>490.4</td><td>571.0</td><td>439.9</td><td>209.7</td><td>227.2</td></tr><tr><td>Depreciation and amortization of real property</td><td>451.3</td><td>337.7</td><td>276.9</td><td>228.3</td><td>208.6</td><td>195.8</td><td>119.6</td></tr><tr><td>Net gains on sale of real estate and insurance settlements</td><td>(60.8)</td><td>(33.8)</td><td>(31.6)</td><td>(75.8)</td><td>(161.8)</td><td>--</td><td>(15.5)</td></tr><tr><td>Cumulative effect of change in accounting principle</td><td>--</td><td>--</td><td>--</td><td>--</td><td>--</td><td>30.1</td><td>4.1</td></tr><tr><td>Partially-owned entity adjustments:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>134.0</td><td>105.6</td><td>42.1</td><td>49.4</td><td>54.8</td><td>51.9</td><td>65.6</td></tr><tr><td>Net gains on sale of real estate</td><td>(15.5)</td><td>(13.2)</td><td>(2.9)</td><td>(3.0)</td><td>(6.8)</td><td>(3.4)</td><td>(6.3)</td></tr><tr><td>Income tax effect of adjustments included above</td><td>(28.8)</td><td>(21.0)</td><td>(4.6)</td><td>--</td><td>--</td><td>--</td><td>--</td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>(46.7)</td><td>(39.8)</td><td>(32.0)</td><td>(28.0)</td><td>(20.1)</td><td>(50.5)</td><td>(19.7)</td></tr><tr><td>Interest on exchangeable senior debentures</td><td>25.0</td><td>24.7</td><td>18.0</td><td>--</td><td>--</td><td>--</td><td>--</td></tr><tr><td>Preferred share dividends</td><td>0.3</td><td>0.7</td><td>0.9</td><td>8.1</td><td>3.6</td><td>6.2</td><td>19.5</td></tr><tr><td>Funds From Operations</td><td>943.2</td><td>858.2</td><td>757.2</td><td>750.0</td><td>518.2</td><td>439.8</td><td>394.5</td></tr><tr><td>Funds From Operations per share</td><td>$5.75</td><td>$5.51</td><td>$5.21</td><td>$5.63</td><td>$4.44</td><td>$3.91</td><td>$3.96</td></tr></table>



# UNITED STATES
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, 2010

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: ___ 1-11954

## VORNADO REALTY TRUST

(Exact name of Registrant as specified in its charter)

<table><tr><td>Maryland</td><td>22-1657560</td></tr><tr><td>(State or other jurisdiction of incorporation or organization)</td><td>(I.R.S. Employer Identification Number)</td></tr><tr><td>888 Seventh Avenue, New York, New York</td><td>10019</td></tr><tr><td>(Address of Principal Executive Offices)</td><td>(Zip Code)</td></tr><tr><td>Registrant&#x27;s telephone number including area code:</td><td>(212) 894-7000</td></tr></table>

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

<table><tr><td>Title of Each Class</td><td>Name of Each Exchange on Which Registered</td></tr><tr><td>Common Shares of beneficial interest, $0.04 par value per share</td><td>New York Stock Exchange</td></tr><tr><td>Series A Convertible Preferred Shares of beneficial interest, no par value</td><td>New York Stock Exchange</td></tr><tr><td>Cumulative Redeemable Preferred Shares of beneficial interest, no par value:</td><td></td></tr><tr><td>8.5% Series B</td><td>New York Stock Exchange</td></tr><tr><td>8.5% Series C</td><td>New York Stock Exchange</td></tr><tr><td>7.0% Series E</td><td>New York Stock Exchange</td></tr><tr><td>6.75% Series F</td><td>New York Stock Exchange</td></tr><tr><td>6.625% Series G</td><td>New York Stock Exchange</td></tr><tr><td>6.75% Series H</td><td>New York Stock Exchange</td></tr><tr><td>6.625% Series I</td><td>New York Stock Exchange</td></tr></table>

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



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

## YES ☒ NO ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

## YES ☐ NO ☒

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 ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

## Yes ☒ 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. □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

☒ Large Accelerated Filer

☐ Non-Accelerated Filer (Do not check if smaller reporting company)

☐ Accelerated Filer

☐ Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

## YES ☐ NO ☒

The aggregate market value of the voting and non-voting common shares held by non-affiliates of the registrant, i.e. by persons other than officers and trustees of Vornado Realty Trust, was $11,920,063,000 at June 30, 2010.

As of December 31, 2010, there were 183,661,875 of the registrant’s common shares of beneficial interest outstanding.

## Documents Incorporated by Reference

Part III: Portions of Proxy Statement for Annual Meeting of Shareholders to be held on May 26, 2011.

This Annual Report on Form 10-K omits financial statements required under Rule 3-09 of Regulation S-X, for Toys “R” Us, Inc. An amendment to this Annual Report on Form 10-K will be filed as promptly as practicable following the availability of such financial statements.



## INDEX

<table><tr><td></td><td>Item</td><td>Financial Information:</td><td>Page Number</td></tr><tr><td>PART I.</td><td>1.</td><td>Business</td><td>4</td></tr><tr><td></td><td>1A.</td><td>Risk Factors</td><td>10</td></tr><tr><td></td><td>1B.</td><td>Unresolved Staff Comments</td><td>23</td></tr><tr><td></td><td>2.</td><td>Properties</td><td>23</td></tr><tr><td></td><td>3.</td><td>Legal Proceedings</td><td>60</td></tr><tr><td>PART II.</td><td>5.</td><td>Market for Registrant&#x27;s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</td><td>61</td></tr><tr><td></td><td>6.</td><td>Selected Financial Data</td><td>63</td></tr><tr><td></td><td>7.</td><td>Management&#x27;s Discussion and Analysis of Financial Condition and Results of Operations</td><td>65</td></tr><tr><td></td><td>7A.</td><td>Quantitative and Qualitative Disclosures about Market Risk</td><td>112</td></tr><tr><td></td><td>8.</td><td>Financial Statements and Supplementary Data</td><td>113</td></tr><tr><td></td><td>9.</td><td>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</td><td>167</td></tr><tr><td></td><td>9A.</td><td>Controls and Procedures</td><td>167</td></tr><tr><td></td><td>9B.</td><td>Other Information</td><td>169</td></tr><tr><td>PART III.</td><td>10.</td><td>Directors, Executive Officers and Corporate Governance(1)</td><td>169</td></tr><tr><td></td><td>11.</td><td>Executive Compensation(1)</td><td>170</td></tr><tr><td></td><td>12.</td><td>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters(1)</td><td>170</td></tr><tr><td></td><td>13.</td><td>Certain Relationships and Related Transactions, and Director Independence(1)</td><td>170</td></tr><tr><td></td><td>14.</td><td>Principal Accounting Fees and Services(1)</td><td>170</td></tr><tr><td>PART IV.</td><td>15.</td><td>Exhibits and Financial Statement Schedules</td><td>171</td></tr><tr><td>Signatures</td><td></td><td></td><td>172</td></tr></table>

(1) These items are omitted in whole or in part because the registrant will file a definitive Proxy Statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission not later than 120 days after December 31, 2010, portions of which are incorporated by reference herein.



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. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our 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 “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10-K. We also note the following forward-looking statements: in the case of our development projects, the estimated completion date, estimated project cost and cost to complete; and estimates of future capital expenditures, dividends to common and preferred shareholders and operating partnership distributions. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

For these statements, we claim 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 our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.



## PART I

## ITEM 1. BUSINESS

## THE COMPANY

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 93.2% of the common limited partnership interest in the Operating Partnership at December 31, 2010. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

As of December 31, 2010, we own:

## Office Properties:

(i) all or portions of 28 properties aggregating 17.4 million square feet in the New York City metropolitan area (primarily Manhattan);

(ii) all or portions of 82 properties aggregating 21.1 million square feet in the Washington, DC / Northern Virginia area;

(iii) a 70% controlling interest in 555 California Street, a three-building complex aggregating 1.8 million square feet in San Francisco’s financial district, known as the Bank of America Center;

## Retail Properties:

(iv) 161 properties aggregating 25.6 million square feet primarily in Manhattan, the northeast states, California and Puerto Rico;

## Merchandise Mart Properties:

(v) 6 properties aggregating 6.9 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;

## Toys “R” Us, Inc. (“Toys”):

(vi) a 32.7% interest in Toys which owns and/or operates 1,589 stores worldwide, including 857 stores in the United States and 732 stores internationally;

## Other Investments:

(vii) 32.4% of the common stock of Alexander’s, Inc. (NYSE: ALX), which has seven properties aggregating 3.2 million square feet in the greater New York metropolitan area;

(viii) the Hotel Pennsylvania containing 1.4 million square feet in New York City;

(ix) a 9.9% economic interest in J.C. Penney Company, Inc. (NYSE: JCP), a major retailer that operates 1,108 department stores nationwide;

(x) a 26.2% equity interest in LNR Property Corporation, an industry leading servicer and special servicer of commercial mortgage loans and CMBS, and a diversified real estate, investment and finance company;

(xi) a 36.4% interest in our real estate investment fund in which we are the general partner and investment manager with aggregate equity commitments of $550 million, of which we committed $200 million; and

(xii) other real estate and investments, including marketable securities and mezzanine loans on real estate.



## OBJECTIVES AND STRATEGY

Our business objective is to maximize shareholder value. We intend to achieve this objective by continuing to pursue our investment philosophy and executing our operating strategies through:

• Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;

- Investing in properties in select markets, such as New York City and Washington, DC, where we believe there is a high likelihood of capital appreciation;

• Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;

• Investing in retail properties in select under-stored locations such as the New York City metropolitan area;

• Developing and redeveloping our existing properties to increase returns and maximize value; and

• Investing in operating companies that have a significant real estate component.

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire our shares or any other securities in the future.

## BUSINESS ENVIRONMENT

Substantially all businesses, including ours, were negatively affected by the 2008/2009 economic recession and illiquidity and volatility in the capital and financial markets. Although there are signs of an economic recovery and greater stability in the capital and financial markets, it is not possible for us to predict whether these trends will continue in the future or quantify the impact of these or any other trends on our financial results.

## ACQUISITIONS AND INVESTMENTS

## Vornado Capital Partners, L.P. and Vornado Capital Partners Parallel, L.P. (the “Fund”)

On July 6, 2010, we completed an initial closing of the Fund with aggregate equity commitments of $550,000,000, of which we committed $200,000,000. We expect to close on an additional $250,000,000 of equity commitments in the first quarter of 2011. We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund's investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America. The Fund has a term of eight years. We consolidate the accounts of the Fund into our consolidated financial statements. In 2010, we incurred $6,482,000 for organization costs of the Fund, net of the Fund's reimbursement to us, which are included in "general and administrative" expenses on our consolidated statement of income.

The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. As of December 31, 2010, the Fund received $146,789,000 of capital from partners, including $53,378,000 from us. During the second half of 2010, the Fund made four investments aggregating approximately $145,000,000 and reimbursed us for $1,500,000 of organization costs.



## ACQUISITIONS AND INVESTMENTS – CONTINUED

Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)

We own an economic interest in 23,400,000 J.C. Penney common shares, or 9.9% of J.C. Penney’s outstanding common shares. Below are the details of our investment.

We own 18,584,010 common shares at an average price of $25.70 per share, or $477,678,000 in the aggregate. These shares, which have an aggregate fair value of $600,449,000 at December 31, 2010, are included in marketable equity securities on our consolidated balance sheet and are classified as “available for sale.” Of these shares, 15,500,000 were acquired through the exercise of a call option that originated on September 28, 2010 and settled on November 9, 2010. During the period in which the call option was outstanding and classified as a derivative instrument, we recognized $112,537,000 of income from the mark-to-market of the underlying common shares, which is included in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from November 10 through December 31, 2010, we recognized $10,234,000 from the mark-to-market of the common shares classified as available-for-sale, which is included in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet).

We also own an economic interest in 4,815,990 common shares through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.65 per share, or $137,989,000 in the aggregate. The contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012. The counterparty may accelerate settlement, in whole or in part, upon one year's notice to us. The strike price per share increases at an annual rate of LIBOR plus 80 basis points and decreases for dividends received on the shares. The contract is a derivative instrument that does not qualify for hedge accounting treatment. Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from October 7, 2010 through December 31, 2010, we recognized $17,616,000 of income from the mark-to-market of this position, based on J.C. Penney’s closing share price of $32.31 per share at December 31, 2010.

As of December 31, 2010, the aggregate economic net gain on our investment in J.C. Penney was $140,387,000, based on J.C. Penney’s closing share price of $32.31 per share and our weighted average cost of $26.31 per share.

## Investment in LNR Property Corporation (“LNR”)

On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco Corp. The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to $425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below. We account for our equity interest in LNR under the equity method on a one-quarter lag basis.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $142 billion as of September 30, 2010, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated income statement.

## 510 Fifth Avenue

On October 8, 2010, we acquired 510 Fifth Avenue, a 59,000 square foot retail property located at 43 \( ^{rd} \)  Street and Fifth Avenue in New York, for 57,000,000, comprised of 24,700,000 in cash and 32,300,000 of existing debt.

## San Jose, California

On October 15, 2010, we acquired the 55% interest that we did not already own of a 646,000 square foot retail property located in San Jose, California, for $97,000,000, consisting of $27,000,000 in cash and $70,000,000 of existing debt.

## Atlantic City, New Jersey

On November 4, 2010, we acquired 11.3 acres of the land under a portion of the Borgata Hotel and Casino complex for $83,000,000 in cash. The land is leased to the partnership that controls the Borgata Hotel and Casino complex through December 2070. In January 2011, we completed a 10-year $60,000,000 financing of this land. The loan has a fixed interest rate of 5.14% and amortizes beginning in the third year, based on a 30-year schedule.



## DISPOSITIONS

On October 20, 2010, we sold a 45% ownership interest in 1299 Pennsylvania Avenue (the Warner Building) and 1101 17 \( ^{th} \)  Street, for 236,700,000, comprised of 91,000,000 in cash and the assumption of existing mortgage debt. We retained the remaining 55% ownership interest and continue to manage and lease the properties. Based on the Warner Building’s implied fair value of 445,000,000, we recognized a net gain of 54,000,000 in the fourth quarter of 2010. The gain on 1101 17 \( ^{th} \)  Street, based on an implied fair value of 81,000,000, will be recognized when we monetize our investment.

On January 12, 2011, we sold 1140 Connecticut Avenue and contracted to sell 1227  $ 25^{th} \)  Street, subject to customary closing conditions, for an aggregate price of 127,000,000. We will retain net proceeds of approximately 107,000,000, after repaying an existing mortgage and recognize a net gain of approximately 44,000,000 in the first quarter of 2011.

In March 2010, we ceased making debt service payments on the mortgage loan secured by the High Point Complex in North Carolina as a result of insufficient cash flow and the loan went into default. In November 2010, the property was placed in receivership. While the receivership process is inherently lengthy, we anticipate that the property will be sold in the first half of 2011, at which time the assets and liabilities will be removed from our consolidated balance sheet and we will recognize a net gain of approximately $80,000,000.

## FINANCING ACTIVITIES

On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office building. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of 5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately $139,000,000 after repaying the existing loan and closing costs.

On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building located in Crystal City, Arlington, Virginia. The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year schedule beginning in third year. This property was previously unencumbered.

On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip shopping center. The seven-year fixed rate loan bears interest rate at 4.59%, provides for interest only payments during the first five years of the term and amortizes based on a 25-year schedule. This property was previously unencumbered.

In December 2010, we acquired the mortgage loan secured by the Springfield Mall, located in Fairfax County, Virginia for $115,000,000 in cash. The loan had an outstanding balance of $171,500,000. In a separate transaction, we acquired our partner's interest in the partnership that owns the mall in exchange for $25,000,000 in Operating Partnership units. These transactions resulted in a $102,932,000 net gain on early extinguishment of debt.

In August 2010, we sold $660,000,000 of 10-year mortgage notes in a single issuer securitization. The notes are comprised of a $600,000,000 fixed rate component and a $60,000,000 variable rate component and are cross-collateralized by 40 of our strip shopping centers. The $600,000,000 fixed rate portion bears interest at an initial rate of 4.18% and a weighted average rate of 4.31% over the 10-year term and amortizes based on a 30-year schedule. The variable rate portion bears interest at LIBOR plus 1.36%, with a 1% floor (2.36% at December 31, 2010).

In March 2010, we completed a public offering of $500,000,000 aggregate principal amount of 4.25% senior unsecured notes due April 1, 2015 and retained net proceeds of approximately $496,000,000. The notes were sold at 99.834% of their face amount to yield 4.287%. The notes can be redeemed without penalty beginning January 1, 2015.

In 2010, through open market repurchases and tender offers, we purchased $270,491,000 aggregate face amount ($264,476,000 aggregate carrying amount) of our convertible senior debentures and $17,000,000 aggregate face amount ($16,981,000 aggregate carrying amount) of our senior unsecured notes for $274,857,000 and $17,382,000 in cash, respectively, resulting in a net loss of $10,381,000 and $401,000, respectively.



## DEVELOPMENT AND REDEVELOPMENT PROJECTS

We expended $156,775,000 in 2010 to complete development projects.

On October 1, 2010, Arlington County adopted a new Sector Plan for Crystal City that provides for additional density and increased building heights which would permit us to grow our assets in Crystal City from 8.0 million square feet currently to as much as 11.5 million square feet.

During 2010, we entered into agreements with Cuyahoga County, Ohio (the “County”) to develop and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and conference center in Cleveland’s central business district. The County will fund the development of the Facility, using proceeds from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and maintain effective control of the property. During the 17-year development and operating period, we will receive net settled payments of approximately $10,000,000 per year, which is net of our $36,000,000 annual obligation to the County. Our obligation has been pledged by the County to the bondholders, but is payable by us only to the extent that we first receive at least an equal payment from the County. We engaged a contractor to construct the Facility pursuant to a guaranteed maximum price contract. Although we are ultimately responsible for cost overruns, the contractor is responsible for all costs incurred in excess of its contract and has provided a completion guaranty. Construction of the Facility is expected to be completed in 2013. Subsequent thereto, we are required to fund $11,500,000, primarily for tenant improvements, are responsible for all operating expenses and are entitled to the net operating income, if any, of the Facility. The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if we fail to achieve certain performance thresholds. We plan to account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as we are providing development, marketing, leasing, and other property management related services over the 17-year term. We plan to recognize development fees using the percentage of completion method of accounting.

We are also evaluating other development and redevelopment opportunities for which final plans, budgeted costs and financing have yet to be determined. These projects include the Springfield Mall in Springfield, Virginia and the Hotel Pennsylvania and 220 Central Park South in Manhattan.

There can be no assurance that any of our development projects will commence, or if commenced, be completed on schedule or within budget.

## SEGMENT DATA

We operate in the following business segments: New York Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart Properties and Toys “R” Us. Financial information related to these business segments for the years ended December 31, 2010, 2009 and 2008 is set forth in Note 22 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K. The Merchandise Mart Properties segment has trade show operations in Canada and Switzerland. The Toys segment has 732 locations internationally.

## SEASONALITY

Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings, cash flows and funds from operations, and therefore impacts comparisons of the current quarter to the previous quarter. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for more than 80% of its fiscal year net income. The New York and Washington, DC Office Properties and Merchandise Mart Properties segments have historically experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart Properties segment has also experienced higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail Properties segment revenue in the fourth quarter is typically higher due to the recognition of percentage rental income.



## TENANTS ACCOUNTING FOR OVER 10% OF REVENUES

None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2010, 2009 and 2008.

## CERTAIN ACTIVITIES

We are not required to base our acquisitions and investments on specific allocations by type of property. We have historically held our properties for long-term investment; however, it is possible that properties in the portfolio may be sold as circumstances warrant. Further, we have not adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. While we may seek the vote of our shareholders in connection with any particular material transaction, generally our activities are reviewed and may be modified from time to time by our Board of Trustees without the vote of shareholders.

## EMPLOYEES

As of December 31, 2010, we have approximately 4,780 employees, of which 317 are corporate staff. The New York Office Properties segment has 126 employees and an additional 2,680 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning, security and engineering services primarily to our New York Office and Washington, DC Office properties. The Washington, DC Office Properties, Retail Properties and Merchandise Mart Properties segments have 400, 176 and 576 employees, respectively, and the Hotel Pennsylvania has 505 employees. The foregoing does not include employees of partially owned entities, including Toys or Alexander's, of which we own 32.7% and 32.4%, respectively.

## PRINCIPAL EXECUTIVE OFFICES

Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894-7000.

## MATERIALS AVAILABLE ON OUR WEBSITE

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of us, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial information about us, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K.



Material factors that may adversely affect our business, operations and financial condition are summarized below.

## REAL ESTATE INVESTMENTS' VALUE AND INCOME FLUCTUATE DUE TO VARIOUS FACTORS.

The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows.

The factors that affect the value of our real estate investments include, among other things:

• national, regional and local economic conditions;

• competition from other available space;

- local conditions such as an oversupply of space or a reduction in demand for real estate in the area;

• how well we manage our properties;

- the development and/or redevelopment of our properties;

• changes in market rental rates;

- the timing and costs associated with property improvements and rentals;

- whether we are able to pass all or portions of any increases in operating costs through to tenants;

• changes in real estate taxes and other expenses;

• whether tenants and users such as customers and shoppers consider a property attractive;

- the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;

• availability of financing on acceptable terms or at all;

• fluctuations in interest rates;

• our ability to obtain adequate insurance;

• changes in zoning laws and taxation;

• government regulation;

• consequences of any armed conflict involving, or terrorist attack against, the United States;

• potential liability under environmental or other laws or regulations;

• natural disasters;

• general competitive factors; and

• climate changes.

The rents we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If rental revenues and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness and for distribution to shareholders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline.

## Capital markets and economic conditions can materially affect our financial condition and results of operations and the value of our debt and equity securities.

There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the economy, which have recently negatively affected substantially all businesses, including ours. Demand for office and retail space may decline nationwide as it did in 2008 and 2009, due to bankruptcies, downsizing, layoffs and cost cutting. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our debt and equity securities.

## Real estate is a competitive business.

Our business segments – New York Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart Properties and Toys – operate in a highly competitive environment. We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC / Northern Virginia area. We compete with a large number of property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and the breadth and quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulation, legislation and population trends.



We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able to pay.

Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. In addition, because a majority of our income comes from renting of real property, our income, funds available to pay indebtedness and funds available for distribution to shareholders will decrease if a significant number of our tenants cannot pay their rent or if we are not able to maintain occupancy levels on favorable terms. If a tenant does not pay its rent, we may not be able to enforce our rights as landlord without delays and may incur substantial legal costs. During periods of economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates.

## Bankruptcy or insolvency of tenants may decrease our revenue, net income and available cash.

From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent in the future. In the case of our shopping centers, the bankruptcy or insolvency of a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property. As a result, the bankruptcy or insolvency of a major tenant could result in decreased revenue, net income and funds available for the payment of indebtedness or for distribution to shareholders.

## We may incur costs to comply with environmental laws.

Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or tanks or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.

Each of our properties has been subject to varying degrees of environmental assessment. The environmental assessments did not, as of this date, reveal any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in clean-up or compliance requirements could result in significant costs to us.

## Inflation or deflation may adversely affect our financial condition and results of operations.

Although neither inflation nor deflation has materially impacted our operations in the recent past, increased inflation could have a pronounced negative impact on our mortgages and interest rates and general and administrative expenses, as these costs could increase at a rate higher than our rents. Inflation could also have an adverse effect on consumer spending which could impact our tenants' sales and, in turn, our percentage rents, where applicable. Conversely, deflation could lead to downward pressure on rents and other sources of income. In addition, we own residential properties which are leased to tenants with one-year lease terms. Because these are short-term leases, declines in market rents will impact our residential properties faster than if the leases were for longer terms.



## Some of our potential losses may not be covered by insurance.

We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, up to a $150,000,000 annual aggregate.

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Our coverage for NBCR losses is up to $2 billion per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements, contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.

## Because we operate a hotel, we face the risks associated with the hospitality industry.

We own and operate the Hotel Pennsylvania in New York City. The following factors, among others, are common to the hotel industry and may reduce the revenues generated by the hotel, which would reduce cash available for distribution to our shareholders:

- our hotel competes for guests with other hotels, a number of which have greater marketing and financial resources;

- if there is an increase in operating costs resulting from inflation and other factors, we may not be able to offset such increase by increasing room rates;

- our hotel is subject to the fluctuating and seasonal demands of business travelers and tourism;

- our hotel is subject to general and local economic and social conditions that may affect demand for travel in general, including war and terrorism; and

• physical condition, which may require substantial additional capital.

Because of the ownership structure of the Hotel Pennsylvania, we face potential adverse effects from changes to the applicable tax laws.

Under the Internal Revenue Code, REITs like us are not allowed to operate hotels directly or indirectly. Accordingly, we lease the Hotel Pennsylvania to our taxable REIT subsidiary (“TRS”). While the TRS structure allows the economic benefits of ownership to flow to us, the TRS is subject to tax on its income from the operations of the hotel at the federal and state level. In addition, the TRS is subject to detailed tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to a TRS are modified, we may be forced to modify the structure for owning the hotel, and such changes may adversely affect the cash flows from the hotel. In addition, the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any such actions may prospectively or retroactively modify the tax treatment of the TRS and, therefore, may adversely affect our after-tax returns from the hotel.



Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs.

The Americans with Disabilities Act (“ADA”) generally requires that public buildings, including our properties, meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. From time to time persons have asserted claims against us with respect to some of our properties under the ADA, but to date such claims have not resulted in any material expense or liability. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to shareholders.

Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

## Our business and operations would suffer in the event of system failures.

Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions.

## We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control.

Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”) from conducting business or engaging in transactions in the United States. Our leases, loans and other agreements may require us to comply with OFAC requirements. If a tenant or other party with whom we conduct business is placed on the OFAC list we may be required to terminate the lease or other agreement. Any such termination could result in a loss of revenue or otherwise negatively affect our financial results and cash flows.



OUR INVESTMENTS ARE CONCENTRATED IN THE NEW YORK CITY METROPOLITAN AREA AND WASHINGTON, DC / NORTHERN VIRGINIA AREA. CIRCUMSTANCES AFFECTING THESE AREAS GENERALLY COULD ADVERSELY AFFECT OUR BUSINESS.

A significant portion of our properties are located in the New York City / New Jersey metropolitan area and Washington, DC / Northern Virginia area and are affected by the economic cycles and risks inherent to those areas.

During 2010, approximately 74% of our EBITDA, excluding items that affect comparability, came from properties located in the New York City / New Jersey metropolitan areas and the Washington, DC / Northern Virginia area. We may continue to concentrate a significant portion of our future acquisitions in these areas or in other geographic real estate markets in the United States or abroad. Real estate markets are subject to economic downturns and we cannot predict how economic conditions will impact these markets in either the short or long term. Declines in the economy or a decline in the real estate markets in these areas could hurt our financial performance and the value of our properties. The factors affecting economic conditions in these regions include:

- financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate industries;

- space needs of the United States Government, including the effect of a deficit reduction plan and/or base closures and repositioning under the Defense Base Closure and Realignment Act of 2005, as amended;

• business layoffs or downsizing;

• industry slowdowns;

• relocations of businesses;

• changing demographics;

• increased telecommuting and use of alternative work places;

• infrastructure quality; and

• any oversupply of, or reduced demand for, real estate.

It is impossible for us to assess the future effects of trends in the economic and investment climates of the geographic areas in which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global economic downturns, would negatively affect our businesses and profitability.

Terrorist attacks, such as those of September 11, 2001 in New York City and the Washington, DC area, may adversely affect the value of our properties and our ability to generate cash flow.

We have significant investments in large metropolitan areas, including the New York, Washington, DC, Chicago, Boston and San Francisco metropolitan areas. In the aftermath of a terrorist attack, tenants in these areas may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity and fewer customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. As a result, the value of our properties and the level of our revenues and cash flows could decline materially.

WE MAY ACQUIRE OR SELL ASSETS OR ENTITIES OR DEVELOP PROPERTIES. OUR FAILURE OR INABILITY TO CONSUMMATE THESE TRANSACTIONS OR MANAGE THE RESULTS OF THESE TRANSACTIONS COULD ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS.

We have grown rapidly since 1999 through acquisitions. We may not be able to maintain this rapid growth and our failure to do so could adversely affect our stock price.

We have experienced rapid growth since 1999, increasing our total assets from approximately $5.5 billion at December 31, 1999 to approximately $20.5 billion at December 31, 2010. We may not be able to maintain a similar rate of growth in the future or manage growth effectively. Our failure to do so may have a material adverse effect on our financial condition and results of operations as well as the amount of cash available for distributions to shareholders.



## We may acquire or develop properties or acquire other real estate related companies and this may create risks.

We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or development is consistent with our business strategy. We may not, however, succeed in consummating desired acquisitions or in completing developments on time or within budget. In addition, we may face competition in pursuing acquisition or development opportunities that could increase our costs. When we do pursue a project or acquisition, we may not succeed in leasing newly developed or acquired properties at rents sufficient to cover costs of acquisition or development and operations. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management's attention. Acquisitions or developments in new markets or industries where we do not have the same level of market knowledge may result in weaker than anticipated performance. We may also abandon acquisition or development opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. Furthermore, acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. Development of our existing properties presents similar risks.

From time to time we have made, and in the future we may seek to make, one or more material acquisitions. The announcement of such a material acquisition may result in a rapid and significant decline in the price of our common shares.

We are continuously looking at material transactions that we will believe will maximize shareholder value. However, an announcement by us of one or more significant acquisitions could result in a quick and significant decline in the price of our common shares and convertible and exchangeable securities.

## It may be difficult to buy and sell real estate quickly, which may limit our flexibility.

Real estate investments are relatively difficult to buy and sell quickly. Consequently, we may have limited ability to vary our portfolio promptly in response to changes in economic or other conditions.

We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might otherwise desire to do so without incurring additional costs.

As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance.

From time to time we make investments in companies over which we do not have sole control. Some of these companies operate in industries that differ from our current operations, with different risks than investing in real estate.

From time to time we make debt or equity investments in other companies that we may not control or over which we may not have sole control. These investments include but are not limited to, Alexander’s, Inc. (“Alexander’s”), Toys “R” Us (“Toys”), Lexington Realty Trust (“Lexington”), J.C. Penney Company, Inc. (“J.C. Penney”), LNR Property Corporation (“LNR”) and other equity and mezzanine investments. Although these businesses generally have a significant real estate component, some of them operate in businesses that are different from our primary lines of business including, without limitation, operating or managing toy stores and department stores. Consequently, investments in these businesses, among other risks, subjects us to the operating and financial risks of industries other than real estate and to the risk that we do not have sole control over the operations of these businesses. From time to time we may make additional investments in or acquire other entities that may subject us to similar risks. Investments in entities over which we do not have sole control, including joint ventures, present additional risks such as having differing objectives than our partners or the entities in which we invest, or becoming involved in disputes, or competing with those persons. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.



## We are subject to risks that affect the general retail environment.

A substantial portion of our properties are in the retail shopping center real estate market and we have a significant investment in retailers such as Toys and J.C. Penney. This means that we are subject to factors that affect the retail environment generally, including the level of consumer spending and consumer confidence, the threat of terrorism and increasing competition from discount retailers, outlet malls, retail websites and catalog companies. These factors could adversely affect the financial condition of our retail tenants and the retailers in which we hold an investment and the willingness of retailers to lease space in our shopping centers, and in turn, adversely affect us.

Our investment in Toys subjects us to risks that are different from our other lines of business and may result in increased seasonality and volatility in our reported earnings.

Because Toys is a retailer, its operations subject us to the risks of a retail company that are different than those presented by our other lines of business. The business of Toys is highly seasonal. Historically, Toys fourth quarter net income accounts for more than 80% of its fiscal year net income. In addition, our fiscal year ends on December 31 whereas, as is common for retailers, Toys' fiscal year ends on the Saturday nearest to January 31. Therefore, we record our pro-rata share of Toys' net earnings on a one-quarter lag basis. For example, our financial results for the year ended December 31, 2010 include Toys' financial results for its first, second and third quarters ended October 30, 2010, as well as Toys' fourth quarter results of 2009. Because of the seasonality of Toys, our reported net income shows increased volatility. We may also, in the future and from time to time, invest in other businesses that may report financial results that are more volatile than our historical financial results.

## We depend upon our anchor tenants to attract shoppers.

We own several regional malls and other shopping centers that are typically anchored by well-known department stores and other tenants who generate shopping traffic at the mall or shopping center. The value of our properties would be adversely affected if tenants or anchors failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their operations, including as a result of bankruptcy. If the sales of stores operating in our properties were to decline significantly due to economic conditions, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery charges. In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.

Our decision to dispose of real estate assets would change the holding period assumption in our valuation analyses, which could result in material impairment losses and adversely affect our financial results.

We evaluate real estate assets for impairment based on the projected cash flow of the asset over our anticipated holding period. If we change our intended holding period, due to our intention to sell or otherwise dispose of an asset, then under accounting principles generally accepted in the United States of America, we must reevaluate whether that asset is impaired. Depending on the carrying value of the property at the time we change our intention and the amount that we estimate we would receive on disposal, we may record an impairment loss that would adversely affect our financial results. This loss could be material to our results of operations in the period that it is recognized.

We invest in subordinated or mezzanine debt of certain entities that have significant real estate assets. These investments involve greater risk of loss than investments in senior mortgage loans.

We invest, and may in the future invest, in subordinated or mezzanine debt of certain entities that have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. These investments involve greater risk of loss than investments in senior mortgage loans which are secured by real property. If a borrower defaults on debt to us or on debt senior to us, or declares bankruptcy, we may not be able to recover some or all of our investment. In addition, there may be significant delays and costs associated with the process of foreclosing on collateral securing or supporting these investments. The value of the assets securing or supporting our investments could deteriorate over time due to factors beyond our control, including acts or omissions by owners, changes in business, economic or market conditions, or foreclosure. Such deteriorations in value may result in the recognition of impairment losses and/or valuation allowances on our statements of income. As of December 31, 2010, our investments in mezzanine debt securities have an aggregate carrying amount of $202,412,000, net of a $73,216,000 valuation allowance.



We evaluate the collectability of both interest and principal of each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. There can be no assurance that our estimates of collectible amounts will not change over time or that they will be representative of the amounts we will actually collect, including amounts we would collect if we chose to sell these investments before their maturity. If we collect less than our estimates, we will record impairment losses which could be material.

We invest in marketable equity securities of companies that have significant real estate assets. The value of these investments may decline as a result of operating performance or economic or market conditions.

We invest in marketable equity securities of publicly-traded real estate companies or companies that have significant real estate assets, such as J.C. Penney. As of December 31, 2010, our marketable securities have an aggregate carrying amount of $766,116,000. Significant declines in the value of these investments due to operating performance or economic or market conditions may result in the recognition of impairment losses which could be material.

## OUR ORGANIZATIONAL AND FINANCIAL STRUCTURE GIVES RISE TO OPERATIONAL AND FINANCIAL RISKS.

## We May Not Be Able to Obtain Capital to Make Investments.

We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information about our available sources of funds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.

Vornado Realty Trust (“Vornado”) depends on dividends and distributions from its direct and indirect subsidiaries. The creditors and preferred security holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to Vornado.

Substantially all of Vornado’s assets are held through its Operating Partnership that holds substantially all of its properties and assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make distributions to holders of its units depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to the Operating Partnership. Likewise, Vornado’s ability to pay dividends to holders of common and preferred shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions payable to holders of preferred units and then to make distributions to Vornado.

Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before payment of distributions to holders of Class A units of the Operating Partnership, including Vornado. Thus, Vornado’s ability to pay cash dividends to its shareholders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to holders of its Class A units, including Vornado. As of December 31, 2010, there were seven series of preferred units of the Operating Partnership not held by Vornado with a total liquidation value of $316,165,000.

In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the liquidation, reorganization or insolvency, is only after the claims of the creditors, including trade creditors and preferred security holders, are satisfied.



We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on acceptable terms.

As of December 31, 2010, we had approximately $13.8 billion of total debt outstanding, including our pro rata share of debt of partially owned entities, and excluding $37 billion for our pro rata share of LNR's liabilities related to its consolidated CMBS and CDO trusts, which are non-recourse to LNR and its equity holders, including us. Our ratio of total debt to total enterprise value was approximately 44%. When we say “enterprise value” in the preceding sentence, we mean market equity value of our common and preferred shares plus total debt outstanding, including our pro rata share of debt of partially owned entities, and excluding LNR's liabilities related to its consolidated CMBS and CDO trusts. In the future, we may incur additional debt to finance acquisitions or property developments and thus increase our ratio of total debt to total enterprise value. If our level of indebtedness increases, there may be an increased risk of a credit rating downgrade or a default on our obligations that could adversely affect our financial condition and results of operations. In addition, in a rising interest rate environment, the cost of existing variable rate debt and any new debt or other market rate security or instrument may increase. Furthermore, we may not be able to refinance existing indebtedness in sufficient amounts or on acceptable terms.

Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.

The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured credit facilities, unsecured debt securities and other loans that we may obtain in the future contain, or may contain, customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio of total debt to total assets, our ratio of secured debt to total assets, our ratio of EBITDA to interest expense, and fixed charges, and that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or may be available only on unattractive terms.

We rely on debt financing, including borrowings under our unsecured credit facilities, issuances of unsecured debt securities and debt secured by individual properties, to finance acquisitions and development activities and for working capital. If we are unable to obtain debt financing from these or other sources, or refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. If we breach covenants in our debt agreements, the lenders can declare a default and, if the debt is secured, can take possession of the property securing the defaulted loan.

Vornado may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.

Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we may fail to remain qualified in this way. Qualification as a REIT for federal income tax purposes is governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations. Our qualification as a REIT also depends on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualifying as a REIT.

If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief provisions, we could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to shareholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. Although we currently intend to operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause us to revoke the REIT election or fail to qualify as a REIT.



We face possible adverse changes in tax laws, which may result in an increase in our tax liability.

From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends.

Loss of our key personnel could harm our operations and adversely affect the value of our common shares.

We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees of Vornado, and Michael D. Fascitelli, the President and Chief Executive Officer of Vornado. While we believe that we could find replacements for these and other key personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.

## VORNADO'S CHARTER DOCUMENTS AND APPLICABLE LAW MAY HINDER ANY ATTEMPT TO ACQUIRE US.

Our Amended and Restated Declaration of Trust sets limits on the ownership of our shares.

Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of Vornado's taxable year. The Internal Revenue Code defines "individuals" for purposes of the requirement described in the preceding sentence to include some types of entities. Under Vornado's Amended and Restated Declaration of Trust, as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted the limit and other persons approved by Vornado's Board of Trustees. These restrictions on transferability and ownership may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of the shareholders. We refer to Vornado's Amended and Restated Declaration of Trust, as amended, as the "declaration of trust."

Vornado has a classified Board of Trustees and that may reduce the likelihood of certain takeover transactions.

Vornado’s Board of Trustees is divided into three classes of trustees. Trustees of each class are chosen for three-year staggered terms. Staggered terms of trustees may reduce the possibility of a tender offer or an attempt to change control of Vornado, even though a tender offer or change in control might be in the best interest of Vornado’s shareholders.

We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.

Vornado’s declaration of trust authorizes the Board of Trustees to:

• cause Vornado to issue additional authorized but unissued common shares or preferred shares;

• classify or reclassify, in one or more series, any unissued preferred shares;

- set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and

• increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.

The Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of Vornado’s shareholders, although the Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders.



## The Maryland General Corporation Law contains provisions that may reduce the likelihood of certain takeover transactions.

Under the Maryland General Corporation Law, as amended, which we refer to as the “MGCL,” as applicable to REITs, certain “business combinations,” including certain mergers, consolidations, share exchanges and asset transfers and certain issuances and reclassifications of equity securities, between a Maryland REIT and any person who beneficially owns ten percent or more of the voting power of the trust’s shares or an affiliate or an associate, as defined in the MGCL, of the trust who, at any time within the two-year period before the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting shares of beneficial interest of the trust, which we refer to as an “interested shareholder,” or an affiliate of the interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. After that five-year period, any business combination of these kinds must be recommended by the board of trustees of the trust and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding voting shares of beneficial interest of the trust and (b) two-thirds of the votes entitled to be cast by holders of voting shares of beneficial interest of the trust other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination is to be effected or held by an affiliate or associate of the interested shareholder. These supermajority voting requirements do not apply if the trust’s common shareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its common shares.

The provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of trustees of the applicable trust before the interested shareholder becomes an interested shareholder, and a person is not an interested shareholder if the board of trustees approved in advance the transaction by which the person otherwise would have become an interested shareholder.

In approving a transaction, the Board may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the Board. Vornado’s Board has adopted a resolution exempting any business combination between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates may be able to enter into business combinations with Vornado that may not be in the best interest of Vornado’s shareholders. With respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of the shareholders. The business combination statute may discourage others from trying to acquire control of Vornado and increase the difficulty of consummating any offer.

## We may change our policies without obtaining the approval of our shareholders.

Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.

## OUR OWNERSHIP STRUCTURE AND RELATED-PARTY TRANSACTIONS MAY GIVE RISE TO CONFLICTS OF INTEREST.

Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of our other trustees and officers have interests or positions in other entities that may compete with us.

As of December 31, 2010, Interstate Properties, a New Jersey general partnership, and its partners owned approximately 7.0% of the common shares of Vornado and approximately 27.2% of the common stock of Alexander’s, which is described below. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of the Board of Vornado, the managing general partner of Interstate Properties and the Chairman of the Board and Chief Executive Officer of Alexander’s. Messrs. Wight and Mandelbaum are trustees of Vornado and also directors of Alexander’s.

Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado and on the outcome of any matters submitted to Vornado’s shareholders for approval. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and Interstate Properties and our other equity or debt holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.



We currently manage and lease the real estate assets of Interstate Properties under a management agreement for which we receive an annual fee equal to 4% of base rent and percentage rent. The management agreement has a one-year term and is automatically renewable unless terminated by either of the parties on 60 days' notice at the end of the term. Because of the relationship among Vornado, Interstate Properties and Messrs. Roth, Mandelbaum and Wight, as described above, the terms of the management agreement and any future agreements between us and Interstate Properties may not be comparable to those we could have negotiated with an unaffiliated third party.

## There may be conflicts of interest between Alexander’s and us.

As of December 31, 2010, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT engaged in leasing, managing, developing and redeveloping properties, focusing primarily on the locations where its department stores operated before they ceased operations in 1992. Alexander’s has seven properties, which are located in the greater New York metropolitan area. In addition to the 2.3% that they indirectly own through Vornado, Interstate Properties, which is described above, and its partners owned 27.2% of the outstanding common stock of Alexander’s as of December 31, 2010. Mr. Roth is the Chairman of the Board of Vornado, the managing general partner of Interstate, and the Chairman of the Board and Chief Executive Officer of Alexander’s. Messrs. Wight and Mandelbaum are trustees of Vornado and also directors of Alexander’s and general partners of Interstate. Michael D. Fascitelli is the President and Chief Executive Officer of Vornado and the President of Alexander’s and Dr. Richard West is a trustee of Vornado and a director of Alexander’s. In addition, Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with Alexander’s. Alexander’s common stock is listed on the New York Stock Exchange under the symbol “ALX.”

We manage, develop and lease Alexander’s properties under management and development agreements and leasing agreements under which we receive annual fees from Alexander’s. These agreements have a one-year term expiring in March of each year and are all automatically renewable. Because Vornado and Alexander’s share common senior management and because certain of the trustees of Vornado constitute a majority of the directors of Alexander’s, the terms of the foregoing agreements and any future agreements between us and Alexander’s may not be comparable to those we could have negotiated with an unaffiliated third party.

For a description of Interstate Properties’ ownership of Vornado and Alexander’s, see “Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of our other trustees and officers have interests or positions in other entities that may compete with us” above.



## THE NUMBER OF SHARES OF VORNADO REALTY TRUST AND THE MARKET FOR THOSE SHARES GIVE RISE TO VARIOUS RISKS.

## The trading price of our common shares has been volatile and may fluctuate.

The trading price of our common shares has been volatile and may continue to fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future adversely affect the market price of our common shares. Among the factors that could affect the price of our common shares are:

• our financial condition and performance;

- the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;

- the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities;

• uncertainty and volatility in the equity and credit markets;

- changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other real estate investment trusts;

• failure to meet analysts’ revenue or earnings estimates;

• speculation in the press or investment community;

• strategic actions by us or our competitors, such as acquisitions or restructurings;

• the extent of institutional interest in us;

• the extent of short-selling of our common shares and the shares of our competitors;

• fluctuations in the stock price and operating results of our competitors;

- general financial and economic market conditions and, in particular, developments related to market conditions for real estate investment trusts and other real estate related companies;

• domestic and international economic factors unrelated to our performance; and

• all other risk factors addressed elsewhere in this document.

A significant decline in our stock price could result in substantial losses for shareholders.

## Vornado has many shares available for future sale, which could hurt the market price of its shares.

The interests of our current shareholders could be diluted if we issue additional equity securities. As of December 31, 2010, we had authorized but unissued, 66,338,125 common shares of beneficial interest, $0.04 par value and 77,659,991 preferred shares of beneficial interest, no par value; of which 39,203,325 common shares are reserved for issuance upon redemption of Class A Operating Partnership units, convertible securities and employee stock options and 7,200,000 preferred shares are reserved for issuance upon redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from registration. We cannot predict the effect that future sales of our common and preferred shares or Operating Partnership Class A and preferred units will have on the market prices of our outstanding shares.

## Increased market interest rates may hurt the value of our common and preferred shares.

We believe that investors consider the distribution rate on REIT shares, expressed as a percentage of the price of the shares, relative to market interest rates as an important factor in deciding whether to buy or sell the shares. If market interest rates go up, prospective purchasers of REIT shares may expect a higher distribution rate. Higher interest rates would likely increase our borrowing costs and might decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common and preferred shares to decline.



## ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved comments from the staff of the Securities Exchange Commission as of the date of this Annual Report on Form 10-K.

## ITEM 2. PROPERTIES

We operate in five business segments: New York Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart Properties and Toys “R” Us. The following pages provide details of our real estate properties.



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>NEW YORK OFFICE:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New York City:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>NEW YORK OFFICE (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Madison/Fifth:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>640 Fifth Avenue</td><td>100.0 %</td><td>97.1 %</td><td>75.76</td><td>323,000</td><td>-</td><td>-</td><td>$</td><td>-</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>595 Madison Avenue</td><td>100.0 %</td><td>88.9 %</td><td>64.76</td><td>319,000</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>689 Fifth Avenue</td><td>100.0 %</td><td>94.1 %</td><td>69.81</td><td>89,000</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total Madison/Fifth</td><td></td><td>93.2 %</td><td>70.24</td><td>731,000</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>United Nations:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>866 United Nations Plaza</td><td>100.0 %</td><td>94.7 %</td><td>54.36</td><td>358,000</td><td>-</td><td>-</td><td>44,978</td><td>Fross Zelnick, Mission of Japan, The United Nations, Mission of Finland</td></tr><tr><td>Midtown South:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>770 Broadway</td><td>100.0 %</td><td>99.8 %</td><td>52.14</td><td>1,071,000</td><td>-</td><td>-</td><td>353,000</td><td>AOL, J. Crew, Kmart, Structure Tone, Nielsen Company (US) Inc.</td></tr><tr><td>Rockefeller Center:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1290 Avenue of the Americas</td><td>70.0 %</td><td>94.2 %</td><td>60.03</td><td>2,061,000</td><td>-</td><td>-</td><td>424,136</td><td>AXA Equitable Life Insurance, Bank of New York Mellon, Broadpoint Gleacher Securities Group, Bryan Cave LLP, Microsoft Corporation, Morrison &amp; Foerster LLP, Warner Music Group, Cushman &amp; Wakefield, Fitzpatrick, Cella, Harper &amp; Scinto</td></tr><tr><td>Downtown:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>20 Broad Street (ground leased through 2081)</td><td>100.0 %</td><td>97.6 %</td><td>52.15</td><td>472,000</td><td>-</td><td>-</td><td>-</td><td>New York Stock Exchange</td></tr><tr><td>40 Fulton Street</td><td>100.0 %</td><td>76.4 %</td><td>34.25</td><td>249,000</td><td>-</td><td>-</td><td>-</td><td>Graphnet Inc., Market News International Inc., Sapient Corp.</td></tr><tr><td>40-42 Thompson Street</td><td>100.0 %</td><td>100.0 %</td><td>46.81</td><td>29,000</td><td>-</td><td>-</td><td>-</td><td>Crown Management</td></tr><tr><td>Total Downtown</td><td></td><td>90.7 %</td><td>46.00</td><td>750,000</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Total New York City</td><td></td><td>95.8 %</td><td>55.52</td><td>17,503,000</td><td>-</td><td>181,000</td><td>2,607,228</td><td></td></tr><tr><td>New Jersey</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Paramus</td><td>100.0 %</td><td>87.1 %</td><td>20.28</td><td>132,000</td><td>-</td><td>-</td><td>-</td><td>Vornado&#x27;s Administrative Headquarters</td></tr><tr><td>Total New York City Office</td><td></td><td>95.7 %</td><td>55.51</td><td>17,635,000</td><td>-</td><td>181,000</td><td>2,607,228</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>95.6 %</td><td>55.45</td><td>16,239,000</td><td>-</td><td>45,000</td><td>2,347,771</td><td></td></tr></table>

(1) Annualized Rent PSF excludes retail rent in office buildings, ground rent, storage rent and garages.

(2) Excludes US Post Office leased through 2038 (including five five-year renewal options for which the annual escalated rent is $11.12 PSF).



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>WASHINGTON, DC OFFICE:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Crystal City:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>WASHINGTON, DC OFFICE (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1726 M Street, NW</td><td>100.0 %</td><td>75.3 %</td><td>39.32</td><td>90,000</td><td>-</td><td>-</td><td>$ -</td><td>Aptima, Inc., Nelnet Corporation</td></tr><tr><td>Kaempfer Interests:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>401 M Street, SW</td><td>2.5 %</td><td>100.0 %</td><td>46.85</td><td>2,100,000</td><td>-</td><td>1,471,000</td><td>217,106</td><td>District of Columbia</td></tr><tr><td>1501 K Street, NW</td><td>5.0 %</td><td>98.2 %</td><td>57.93</td><td>379,000</td><td>-</td><td>-</td><td>100,250</td><td>Sidley Austin LLP, UBS</td></tr><tr><td>1399 New York Avenue, NW</td><td>2.5 %</td><td>94.8 %</td><td>88.31</td><td>123,000</td><td>-</td><td>-</td><td>39,087</td><td>Bloomberg</td></tr><tr><td>Total Central Business District</td><td></td><td>95.6 %</td><td>52.73</td><td>5,831,000</td><td>-</td><td>1,471,000</td><td>1,105,927</td><td></td></tr><tr><td>I-395 Corridor:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Skyline Place - 7 buildings</td><td>100.0 %</td><td>92.2 %</td><td>33.21</td><td>2,117,000</td><td>-</td><td>-</td><td>543,300</td><td>General Services Administration, SAIC, Inc., Northrop Grumman, Axiom Resource Management, Booz Allen, Jacer Corporation, Intellidyne, Inc.</td></tr><tr><td>One Skyline Tower</td><td>100.0 %</td><td>100.0 %</td><td>32.73</td><td>518,000</td><td>-</td><td>-</td><td>134,700</td><td>General Services Administration</td></tr><tr><td>Total I-395 Corridor</td><td>100.0 %</td><td>93.7 %</td><td>33.11</td><td>2,635,000</td><td>-</td><td>-</td><td>678,000</td><td></td></tr><tr><td>Rosslyn / Ballston:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2200 / 2300 Clarendon Blvd (Courthouse Plaza) - 2 buildings</td><td>100.0 %</td><td>94.9 %</td><td>39.31</td><td>631,000</td><td>-</td><td>-</td><td>59,278</td><td>Arlington County, General Services Administration, AMC Theaters</td></tr><tr><td>Rosslyn Plaza - Office - 4 buildings</td><td>46.0 %</td><td>86.2 %</td><td>32.72</td><td>725,000</td><td>-</td><td>-</td><td>56,680</td><td>General Services Administration</td></tr><tr><td>Total Rosslyn / Ballston</td><td></td><td>91.9 %</td><td>35.88</td><td>1,356,000</td><td>-</td><td>-</td><td>115,958</td><td></td></tr><tr><td>Reston:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Reston Executive - 3 buildings</td><td>100.0 %</td><td>75.1 %</td><td>31.71</td><td>493,000</td><td>-</td><td>-</td><td>93,000</td><td>SAIC, Inc., Quadramed Corp</td></tr><tr><td>Commerce Executive - 3 buildings</td><td>100.0 %</td><td>98.3 %</td><td>28.96</td><td>397,000</td><td>-</td><td>-</td><td>-</td><td>L-3 Communications, SAIC, Inc., BT North America</td></tr><tr><td>Total Reston</td><td></td><td>85.4 %</td><td>30.31</td><td>890,000</td><td>-</td><td>-</td><td>93,000</td><td></td></tr><tr><td>Rockville/Bethesda:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Democracy Plaza One</td><td>100.0 %</td><td>87.2 %</td><td>41.38</td><td>214,000</td><td>-</td><td>-</td><td>-</td><td>National Institutes of Health</td></tr><tr><td>Tysons Corner:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fairfax Square - 3 buildings</td><td>20.0 %</td><td>85.4 %</td><td>37.39</td><td>523,000</td><td>-</td><td>-</td><td>71,764</td><td>EDS Information Services, Dean &amp; Company, Womble Carlyle</td></tr><tr><td>Total Tysons Corner</td><td></td><td>85.4 %</td><td>37.39</td><td>523,000</td><td>-</td><td>-</td><td>71,764</td><td></td></tr><tr><td>Pentagon City:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fashion Centre Mall</td><td>7.5 %</td><td>98.4 %</td><td>38.25</td><td>818,000</td><td>-</td><td>-</td><td>146,453</td><td>Macy&#x27;s, Nordstrom</td></tr><tr><td>Washington Tower</td><td>7.5 %</td><td>100.0 %</td><td>45.80</td><td>170,000</td><td>-</td><td>-</td><td>40,000</td><td>The Rand Corporation</td></tr><tr><td>Total Pentagon City</td><td></td><td>98.7 %</td><td>39.56</td><td>988,000</td><td>-</td><td>-</td><td>186,453</td><td></td></tr><tr><td>Total Washington, DC office properties</td><td></td><td>94.2 %</td><td>40.68</td><td>19,733,000</td><td>-</td><td>1,618,000</td><td>2,659,193</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>94.0 %</td><td>39.43</td><td>15,115,000</td><td>-</td><td>184,000</td><td>1,921,965</td><td></td></tr></table>



## ITEM 2. PROPERTIES - Continued

<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>WASHINGTON, DC OFFICE (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Other:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>For rent residential:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>

(1) Annualized Rent PSF excludes ground rent, storage rent and garages.

(2) Excludes 24,000 square feet representing our 7.5% pro rata share of the Ritz Carlton building which is owned by the ground lessee on land leased by us.



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="4">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned by Company</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>RETAIL (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Kearny</td><td>100.0 %</td><td>100.0 %</td><td>$ 14.24</td><td>104,000</td><td>32,000</td><td>72,000</td><td>-</td><td>$ -</td><td>Pathmark, Marshalls</td></tr><tr><td>Turnersville</td><td>100.0 %</td><td>100.0 %</td><td>6.25</td><td>96,000</td><td>89,000</td><td>7,000</td><td>-</td><td>-</td><td>Haynes Furniture (3)</td></tr><tr><td>Lodi (Washington Street)</td><td>100.0 %</td><td>47.8 %</td><td>23.31</td><td>85,000</td><td>85,000</td><td>-</td><td>-</td><td>9,881</td><td>Rite Aid</td></tr><tr><td>Carlstadt (ground leased through 2050)</td><td>100.0 %</td><td>90.7 %</td><td>22.22</td><td>78,000</td><td>78,000</td><td>-</td><td>-</td><td>7,442</td><td>Stop &amp; Shop</td></tr><tr><td>East Hanover (200 Route 10 West)</td><td>100.0 %</td><td>86.9 %</td><td>22.57</td><td>76,000</td><td>76,000</td><td>-</td><td>-</td><td>10,306 (2)</td><td>Loehmann&#x27;s</td></tr><tr><td>North Bergen (Kennedy Boulevard)</td><td>100.0 %</td><td>100.0 %</td><td>29.78</td><td>62,000</td><td>6,000</td><td>56,000</td><td>-</td><td>5,385 (2)</td><td>Waldbaum&#x27;s</td></tr><tr><td>South Plainfield (ground leased through 2039)</td><td>100.0 %</td><td>100.0 %</td><td>21.14</td><td>56,000</td><td>56,000</td><td>-</td><td>-</td><td>5,414 (2)</td><td>Staples</td></tr><tr><td>Englewood</td><td>100.0 %</td><td>100.0 %</td><td>30.73</td><td>41,000</td><td>41,000</td><td>-</td><td>-</td><td>12,222</td><td>New York Sports Club</td></tr><tr><td>Eatontown</td><td>100.0 %</td><td>100.0 %</td><td>26.14</td><td>30,000</td><td>30,000</td><td>-</td><td>-</td><td>-</td><td>Petco</td></tr><tr><td>East Hanover (280 Route 10 West)</td><td>100.0 %</td><td>94.0 %</td><td>32.00</td><td>26,000</td><td>26,000</td><td>-</td><td>-</td><td>4,806 (2)</td><td>REI</td></tr><tr><td>Montclair</td><td>100.0 %</td><td>100.0 %</td><td>23.34</td><td>18,000</td><td>18,000</td><td>-</td><td>-</td><td>2,779 (2)</td><td>Whole Foods Market</td></tr><tr><td>Total New Jersey</td><td></td><td></td><td></td><td>7,549,000</td><td>4,504,000</td><td>2,127,000</td><td>918,000</td><td>500,879</td><td></td></tr><tr><td>New York:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Poughkeepsie</td><td>100.0 %</td><td>78.9 %</td><td>7.62</td><td>522,000</td><td>519,000</td><td>3,000</td><td>-</td><td>-</td><td>Kmart, Burlington Coat Factory, ShopRite, Hobby Lobby, Christmas Tree Shops, Bob&#x27;s Discount Furniture</td></tr><tr><td>Bronx (Bruckner Boulevard)</td><td>100.0 %</td><td>95.4 %</td><td>20.98</td><td>500,000</td><td>386,000</td><td>114,000</td><td>-</td><td>-</td><td>Kmart, Toys &quot;R&quot; Us, Key Food</td></tr><tr><td>Buffalo (Amherst)</td><td>100.0 %</td><td>59.8 %</td><td>5.64</td><td>296,000</td><td>227,000</td><td>69,000</td><td>-</td><td>-</td><td>T.J. Maxx, Toys &quot;R&quot; Us,</td></tr><tr><td>Huntington</td><td>100.0 %</td><td>96.5 %</td><td>13.26</td><td>208,000</td><td>208,000</td><td>-</td><td>-</td><td>17,602 (2)</td><td>Kmart, Marshalls, Old Navy</td></tr><tr><td>Rochester</td><td>100.0 %</td><td>100.0 %</td><td>-</td><td>205,000</td><td>-</td><td>205,000</td><td>-</td><td>4,632 (2)</td><td>Wal-Mart</td></tr><tr><td>Mt. Kisco</td><td>100.0 %</td><td>98.4 %</td><td>21.04</td><td>189,000</td><td>72,000</td><td>117,000</td><td>-</td><td>29,382</td><td>Target, A&amp;P</td></tr><tr><td>Freeport (437 East Sunrise Highway)</td><td>100.0 %</td><td>100.0 %</td><td>17.70</td><td>173,000</td><td>173,000</td><td>-</td><td>-</td><td>22,581 (2)</td><td>The Home Depot, Staples</td></tr><tr><td>Staten Island</td><td>100.0 %</td><td>95.7 %</td><td>17.52</td><td>165,000</td><td>165,000</td><td>-</td><td>-</td><td>17,400</td><td>Western Beef, Bally Total Fitness</td></tr><tr><td>Rochester (Henrietta) (ground leased through 2056)</td><td>100.0 %</td><td>89.2 %</td><td>3.31</td><td>158,000</td><td>158,000</td><td>-</td><td>-</td><td>-</td><td>Kohl&#x27;s, Ollie&#x27;s Bargain Outlet</td></tr><tr><td>Albany (Menands)</td><td>100.0 %</td><td>74.0 %</td><td>9.00</td><td>140,000</td><td>140,000</td><td>-</td><td>-</td><td>-</td><td>Bank of America</td></tr><tr><td>New Hyde Park (ground and building leased through 2029)</td><td>100.0 %</td><td>100.0 %</td><td>18.73</td><td>101,000</td><td>101,000</td><td>-</td><td>-</td><td>-</td><td>Stop &amp; Shop</td></tr><tr><td>North Syracuse (ground and building leased through 2014)</td><td>100.0 %</td><td>100.0 %</td><td>-</td><td>98,000</td><td>-</td><td>98,000</td><td>-</td><td>-</td><td>Wal-Mart</td></tr><tr><td>Inwood</td><td>100.0 %</td><td>97.8 %</td><td>20.65</td><td>96,000</td><td>96,000</td><td>-</td><td>-</td><td>-</td><td>Stop &amp; Shop</td></tr><tr><td>Bronx (1750-1780 Gun Hill Road)</td><td>100.0 %</td><td>52.6 %</td><td>43.23</td><td>83,000</td><td>83,000</td><td>-</td><td>-</td><td>-</td><td>ALDI (lease not commenced) T.G.I. Friday&#x27;s</td></tr></table>



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="4">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned by Company</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>RETAIL (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>West Babylon</td><td>100.0 %</td><td>85.7 %</td><td>11.82</td><td>79,000</td><td>79,000</td><td>-</td><td>-</td><td>-</td><td>Waldbaum&#x27;s</td></tr><tr><td>Queens</td><td>100.0 %</td><td>100.0 %</td><td>36.26</td><td>56,000</td><td>56,000</td><td>-</td><td>-</td><td>-</td><td>New York Sports Club</td></tr><tr><td>Commack (ground and building leased through 2021)</td><td>100.0 %</td><td>100.0 %</td><td>20.11</td><td>47,000</td><td>47,000</td><td>-</td><td>-</td><td>-</td><td>PetSmart</td></tr><tr><td>Dewitt (ground leased through 2041)</td><td>100.0 %</td><td>100.0 %</td><td>18.60</td><td>46,000</td><td>46,000</td><td>-</td><td>-</td><td>-</td><td>Best Buy</td></tr><tr><td>Freeport (240 West Sunrise Highway) (ground and building leased through 2040)</td><td>100.0 %</td><td>100.0 %</td><td>18.44</td><td>44,000</td><td>44,000</td><td>-</td><td>-</td><td>-</td><td>Bob&#x27;s Discount Furniture</td></tr><tr><td>Oceanside</td><td>100.0 %</td><td>100.0 %</td><td>27.83</td><td>16,000</td><td>16,000</td><td>-</td><td>-</td><td>-</td><td>Party City</td></tr><tr><td>Total New York</td><td></td><td></td><td></td><td>3,222,000</td><td>2,616,000</td><td>606,000</td><td>-</td><td>91,597</td><td></td></tr><tr><td>Pennsylvania:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Allentown</td><td>100.0 %</td><td>99.6 %</td><td>15.10</td><td>627,000</td><td>270,000</td><td>357,000</td><td>-</td><td>31,670 (2)</td><td>Wal-Mart, ShopRite, Burlington Coat Factory, T.J. Maxx, Dick&#x27;s Sporting Goods</td></tr><tr><td>Philadelphia</td><td>100.0 %</td><td>78.1 %</td><td>12.52</td><td>430,000</td><td>430,000</td><td>-</td><td>-</td><td>-</td><td>Kmart, Health Partners</td></tr><tr><td>Wilkes-Barre</td><td>100.0 %</td><td>83.3 %</td><td>13.26</td><td>329,000 (4)</td><td>204,000</td><td>125,000 (4)</td><td>-</td><td>20,727</td><td>Target (4), Babies &quot;R&quot; Us, Ross Dress for Less</td></tr><tr><td>Lancaster</td><td>100.0 %</td><td>100.0 %</td><td>4.52</td><td>228,000</td><td>58,000</td><td>170,000</td><td>-</td><td>5,703 (2)</td><td>Lowe&#x27;s, Weis Markets</td></tr><tr><td>Bensalem</td><td>100.0 %</td><td>98.9 %</td><td>11.15</td><td>185,000</td><td>177,000</td><td>8,000</td><td>-</td><td>15,720 (2)</td><td>Kohl&#x27;s (3), Ross Dress for Less, Staples</td></tr><tr><td>Broomall</td><td>100.0 %</td><td>100.0 %</td><td>10.73</td><td>169,000</td><td>147,000</td><td>22,000</td><td>-</td><td>11,291 (2)</td><td>Giant Food (3), A.C. Moore, PetSmart</td></tr><tr><td>Bethlehem</td><td>100.0 %</td><td>87.1 %</td><td>5.82</td><td>167,000</td><td>164,000</td><td>3,000</td><td>-</td><td>5,906 (2)</td><td>Giant Food, Superpetz</td></tr><tr><td>Upper Moreland</td><td>100.0 %</td><td>100.0 %</td><td>2.00</td><td>122,000</td><td>122,000</td><td>-</td><td>-</td><td>-</td><td>Benjamin Foods</td></tr><tr><td>York</td><td>100.0 %</td><td>100.0 %</td><td>8.16</td><td>110,000</td><td>110,000</td><td>-</td><td>-</td><td>5,501 (2)</td><td>Ashley Furniture</td></tr><tr><td>Levittown</td><td>100.0 %</td><td>100.0 %</td><td>6.25</td><td>105,000</td><td>105,000</td><td>-</td><td>-</td><td>-</td><td>Haynes Furniture (3)</td></tr><tr><td>Glenolden</td><td>100.0 %</td><td>93.5 %</td><td>26.00</td><td>102,000</td><td>10,000</td><td>92,000</td><td>-</td><td>7,238 (2)</td><td>Wal-Mart</td></tr><tr><td>Wilkes-Barre (ground and building leased through 2040)</td><td>100.0 %</td><td>50.1 %</td><td>6.53</td><td>81,000</td><td>81,000</td><td>-</td><td>-</td><td>-</td><td>Ollie&#x27;s Bargain Outlet</td></tr><tr><td>Wyomissing (ground and building leased through 2065)</td><td>100.0 %</td><td>89.0 %</td><td>14.47</td><td>79,000</td><td>79,000</td><td>-</td><td>-</td><td>-</td><td>LA Fitness, PetSmart</td></tr><tr><td>Springfield (ground and building leased through 2025)</td><td>100.0 %</td><td>100.0 %</td><td>19.00</td><td>41,000</td><td>41,000</td><td>-</td><td>-</td><td>-</td><td>PetSmart</td></tr><tr><td>Total Pennsylvania</td><td></td><td></td><td></td><td>2,775,000</td><td>1,998,000</td><td>777,000</td><td>-</td><td>103,756</td><td></td></tr><tr><td>California:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>San Jose</td><td>100.0 %</td><td>93.1 %</td><td>29.24</td><td>649,000 (4)</td><td>486,000</td><td>163,000 (4)</td><td>-</td><td>120,863</td><td>Target (4), The Home Depot, Toys &quot;R&quot; Us, Best Buy</td></tr><tr><td>Beverly Connection, Los Angeles</td><td>100.0 %</td><td>75.3 %</td><td>36.17</td><td>306,000</td><td>306,000</td><td>-</td><td>-</td><td>100,000</td><td>Marshalls, Old Navy, Sports Chalet, Nordstrom Rack, Ross Dress for Less</td></tr><tr><td>Pasadena (ground leased through 2077)</td><td>100.0 %</td><td>62.1 %</td><td>30.45</td><td>133,000</td><td>133,000</td><td>-</td><td>-</td><td>-</td><td>Trader Joe&#x27;s</td></tr></table>



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="4">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned by Company</td><td>In Service</td><td>Owned By Tenant</td></tr><tr><td>RETAIL (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>San Francisco (2675 Geary Street) (ground and building leased through 2043)</td><td>100.0 %</td><td>100.0 %</td><td>$ 45.76</td><td>55,000</td><td>55,000</td><td>-</td><td>-</td><td>$ -</td><td>Best Buy</td></tr><tr><td>Redding</td><td>100.0 %</td><td>100.0 %</td><td>10.53</td><td>45,000</td><td>45,000</td><td>-</td><td>-</td><td>-</td><td>PetSmart</td></tr><tr><td>Signal Hill</td><td>100.0 %</td><td>100.0 %</td><td>21.89</td><td>45,000</td><td>45,000</td><td>-</td><td>-</td><td>-</td><td>Best Buy</td></tr><tr><td>Vallejo (ground leased through 2043)</td><td>100.0 %</td><td>100.0 %</td><td>15.92</td><td>45,000</td><td>45,000</td><td>-</td><td>-</td><td>-</td><td>Best Buy</td></tr><tr><td>Merced</td><td>100.0 %</td><td>100.0 %</td><td>13.27</td><td>31,000</td><td>31,000</td><td>-</td><td>-</td><td>-</td><td>PetSmart</td></tr><tr><td>San Francisco (3700 Geary Boulevard)</td><td>100.0 %</td><td>100.0 %</td><td>30.00</td><td>30,000</td><td>30,000</td><td>-</td><td>-</td><td>-</td><td>OfficeMax</td></tr><tr><td>Walnut Creek (1149 South Main Street)</td><td>100.0 %</td><td>100.0 %</td><td>45.11</td><td>29,000</td><td>29,000</td><td>-</td><td>-</td><td>-</td><td>Barnes &amp; Noble</td></tr><tr><td>Total California</td><td></td><td></td><td></td><td>1,368,000</td><td>1,205,000</td><td>163,000</td><td>-</td><td>220,863</td><td></td></tr><tr><td>Maryland:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Baltimore (Towson)</td><td>100.0 %</td><td>86.0 %</td><td>15.33</td><td>150,000</td><td>150,000</td><td>-</td><td>-</td><td>16,502</td><td>(2) Shoppers Food Warehouse, hhgregg, Staples, Golf Galaxy</td></tr><tr><td>Annapolis (ground and building leased through 2042)</td><td>100.0 %</td><td>100.0 %</td><td>8.99</td><td>128,000</td><td>128,000</td><td>-</td><td>-</td><td>-</td><td>The Home Depot</td></tr><tr><td>Glen Burnie</td><td>100.0 %</td><td>78.5 %</td><td>10.42</td><td>121,000</td><td>65,000</td><td>56,000</td><td>-</td><td>-</td><td>Weis Markets</td></tr><tr><td>Rockville</td><td>100.0 %</td><td>99.3 %</td><td>23.39</td><td>94,000</td><td>94,000</td><td>-</td><td>-</td><td>-</td><td>Regal Cinemas</td></tr><tr><td>Wheaton (ground leased through 2060)</td><td>100.0 %</td><td>100.0 %</td><td>13.58</td><td>66,000</td><td>66,000</td><td>-</td><td>-</td><td>-</td><td>Best Buy</td></tr><tr><td>Total Maryland</td><td></td><td></td><td></td><td>559,000</td><td>503,000</td><td>56,000</td><td>-</td><td>16,502</td><td></td></tr><tr><td>Massachusetts:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Chicopee</td><td>100.0 %</td><td>100.0 %</td><td>-</td><td>224,000</td><td>-</td><td>224,000</td><td>-</td><td>8,772</td><td>(2) Wal-Mart</td></tr><tr><td>Springfield</td><td>100.0 %</td><td>97.3 %</td><td>15.09</td><td>152,000</td><td>33,000</td><td>119,000</td><td>-</td><td>6,051</td><td>(2) Wal-Mart</td></tr><tr><td>Milford (ground and building leased through 2019)</td><td>100.0 %</td><td>100.0 %</td><td>8.01</td><td>83,000</td><td>83,000</td><td>-</td><td>-</td><td>-</td><td>Kohl&#x27;s (3)</td></tr><tr><td>Cambridge (ground and building leased through 2033)</td><td>100.0 %</td><td>100.0 %</td><td>19.84</td><td>48,000</td><td>48,000</td><td>-</td><td>-</td><td>-</td><td>PetSmart</td></tr><tr><td>Dorchester</td><td>100.0 %</td><td>100.0 %</td><td>29.85</td><td>45,000</td><td>45,000</td><td>-</td><td>-</td><td>-</td><td>Best Buy</td></tr><tr><td>Total Massachusetts</td><td></td><td></td><td></td><td>552,000</td><td>209,000</td><td>343,000</td><td>-</td><td>14,823</td><td></td></tr><tr><td>Florida:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tampa (Hyde Park Village)</td><td>75.0 %</td><td>79.2 %</td><td>20.52</td><td>262,000</td><td>262,000</td><td>-</td><td>-</td><td>21,862</td><td>Pottery Barn, CineBistro, Brooks Brothers, Williams Sonoma, Lifestyle Family Fitness</td></tr><tr><td>Tampa (1702 North Dale Mabry)</td><td>100.0 %</td><td>100.0 %</td><td>19.80</td><td>45,000</td><td>45,000</td><td>-</td><td>-</td><td>-</td><td>Nordstrom Rack</td></tr><tr><td>Miami (ground and building leased through 2034)</td><td>100.0 %</td><td>100.0 %</td><td>13.17</td><td>33,000</td><td>33,000</td><td>-</td><td>-</td><td>-</td><td>Office Depot</td></tr><tr><td>Total Florida</td><td></td><td></td><td></td><td>340,000</td><td>340,000</td><td>-</td><td>-</td><td>21,862</td><td></td></tr></table>



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="4">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned by Company</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>RETAIL (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Springfield Mall, Springfield, VA</td><td>97.5 %</td><td>100.0 %</td><td>$ 24.09 (5)</td><td>1,408,000 (4)</td><td>532,000</td><td>390,000 (4)</td><td>486,000</td><td>$ -</td><td>Macy&#x27;s, J.C. Penney (4), Target (4)</td></tr><tr><td>Broadway Mall, Hicksville, NY</td><td>100.0 %</td><td>87.5 %</td><td>34.18 (5)</td><td>1,142,000 (4)</td><td>766,000</td><td>376,000 (4)</td><td>-</td><td>90,227</td><td>Macy&#x27;s, Ikea, Target (4), National Amusement</td></tr><tr><td>Bergen Town Center - West, Paramus, NJ</td><td>100.0 %</td><td>99.0 %</td><td>45.52 (5)</td><td>930,000</td><td>853,000</td><td>13,000</td><td>64,000</td><td>279,044</td><td>Target, Century 21, Whole Foods Market, Marshalls, Nordstrom Rack, Saks Off 5th, Neiman Marcus Last Call Studio, Bloomingdale&#x27;s Outlet, Nike Factory Store, Blink Fitness</td></tr><tr><td>Montehiedra, Puerto Rico</td><td>100.0 %</td><td>91.9 %</td><td>41.16 (5)</td><td>540,000</td><td>540,000</td><td>-</td><td>-</td><td>120,000</td><td>The Home Depot, Kmart, Marshalls, Caribbean Theatres, Tiendas Capri</td></tr><tr><td>Las Catalinas, Puerto Rico</td><td>100.0 %</td><td>89.1 %</td><td>55.74 (5)</td><td>495,000 (4)</td><td>356,000</td><td>139,000 (4)</td><td>-</td><td>57,737</td><td>Kmart, Sears (4)</td></tr><tr><td>Total Regional Malls</td><td></td><td>91.9 %</td><td>$ 39.37</td><td>7,803,000</td><td>5,537,000</td><td>1,716,000</td><td>550,000</td><td>$ 1,046,482</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>92.2 %</td><td>$ 39.73</td><td>6,018,000</td><td>5,153,000</td><td>327,000</td><td>538,000</td><td>$ 964,246</td><td></td></tr><tr><td>MANHATTAN STREET RETAIL</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Manhattan Mall</td><td>100.0 %</td><td>97.5 %</td><td>$ 85.90</td><td>243,000</td><td>243,000</td><td>-</td><td>-</td><td>$ 72,639</td><td>J.C. Penney, Charlotte Russe, Aeropostale, Express, Victoria&#x27;s Secret</td></tr><tr><td>4 Union Square South</td><td>100.0 %</td><td>100.0 %</td><td>55.07</td><td>203,000</td><td>203,000</td><td>-</td><td>-</td><td>75,000</td><td>Filene&#x27;s Basement, Whole Foods Market, DSW, Forever 21</td></tr><tr><td>1540 Broadway</td><td>100.0 %</td><td>100.0 %</td><td>115.03</td><td>160,000</td><td>160,000</td><td>-</td><td>-</td><td>-</td><td>Forever 21, Planet Hollywood, Disney, Swarovski, MAC Cosmetics</td></tr><tr><td>478-486 Broadway</td><td>100.0 %</td><td>100.0 %</td><td>98.57</td><td>85,000</td><td>85,000</td><td>-</td><td>-</td><td>-</td><td>Top Shop, Madewell, J. Crew</td></tr><tr><td>25 West 14th Street</td><td>100.0 %</td><td>100.0 %</td><td>58.67</td><td>62,000</td><td>62,000</td><td>-</td><td>-</td><td>-</td><td>Guitar Center, Levi&#x27;s</td></tr><tr><td>510 5th Avenue</td><td>100.0 %</td><td>66.0 %</td><td>53.00</td><td>59,000</td><td>59,000</td><td>-</td><td>-</td><td>32,189</td><td>Joe Fresh</td></tr><tr><td>155 Spring Street</td><td>100.0 %</td><td>100.0 %</td><td>88.92</td><td>46,000</td><td>46,000</td><td>-</td><td>-</td><td>-</td><td>Sigrid Olsen</td></tr><tr><td>435 Seventh Avenue</td><td>100.0 %</td><td>100.0 %</td><td>165.32</td><td>43,000</td><td>43,000</td><td>-</td><td>-</td><td>51,844</td><td>Hennes &amp; Mauritz</td></tr><tr><td>692 Broadway</td><td>100.0 %</td><td>43.3 %</td><td>43.33</td><td>35,000</td><td>35,000</td><td>-</td><td>-</td><td>-</td><td>Equinox</td></tr><tr><td>1135 Third Avenue</td><td>100.0 %</td><td>100.0 %</td><td>98.43</td><td>25,000</td><td>25,000</td><td>-</td><td>-</td><td>-</td><td>GAP</td></tr><tr><td>715 Lexington (ground leased through 2041)</td><td>100.0 %</td><td>100.0 %</td><td>155.56</td><td>23,000</td><td>23,000</td><td>-</td><td>-</td><td>-</td><td>New York &amp; Company, Zales</td></tr><tr><td>7 West 34th Street</td><td>100.0 %</td><td>100.0 %</td><td>197.53</td><td>21,000</td><td>21,000</td><td>-</td><td>-</td><td>-</td><td>Express</td></tr><tr><td>828-850 Madison Avenue</td><td>100.0 %</td><td>100.0 %</td><td>332.12</td><td>18,000</td><td>18,000</td><td>-</td><td>-</td><td>80,000</td><td>Gucci, Chloe, Cartier</td></tr><tr><td>484 Eighth Avenue</td><td>100.0 %</td><td>100.0 %</td><td>87.27</td><td>14,000</td><td>14,000</td><td>-</td><td>-</td><td>-</td><td>T.G.I. Friday&#x27;s</td></tr><tr><td>40 East 66th Street</td><td>100.0 %</td><td>100.0 %</td><td>387.85</td><td>12,000</td><td>12,000</td><td>-</td><td>-</td><td>-</td><td>Dennis Basso, Nespresso USA, J. Crew</td></tr><tr><td>431 Seventh Avenue</td><td>100.0 %</td><td>75.0 %</td><td>49.38</td><td>10,000</td><td>10,000</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>387 West Broadway</td><td>100.0 %</td><td>100.0 %</td><td>135.54</td><td>9,000</td><td>9,000</td><td>-</td><td>-</td><td>-</td><td>Reiss</td></tr><tr><td>677-679 Madison Avenue</td><td>100.0 %</td><td>100.0 %</td><td>346.23</td><td>8,000</td><td>8,000</td><td>-</td><td>-</td><td>-</td><td>Anne Fontaine</td></tr><tr><td>148 Spring Street</td><td>100.0 %</td><td>100.0 %</td><td>87.17</td><td>7,000</td><td>7,000</td><td>-</td><td>-</td><td>-</td><td></td></tr></table>



## ITEM 2. PROPERTIES - Continued

<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="4">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned by Company</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>RETAIL (Continued):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>150 Spring Street</td><td>100.0 %</td><td>100.0 %</td><td>113.30</td><td>7,000</td><td>7,000</td><td>-</td><td>-</td><td>-</td><td>Puma</td></tr><tr><td>488 8th Avenue</td><td>100.0 %</td><td>100.0 %</td><td>60.85</td><td>6,000</td><td>6,000</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>968 Third Avenue</td><td>50.0 %</td><td>100.0 %</td><td>175.81</td><td>6,000</td><td>6,000</td><td>-</td><td>-</td><td>-</td><td>ING Bank</td></tr><tr><td>386 West Broadway</td><td>100.0 %</td><td>-</td><td>-</td><td>4,000</td><td>4,000</td><td>-</td><td>-</td><td>4,197</td><td></td></tr><tr><td>825 Seventh Avenue</td><td>100.0 %</td><td>100.0 %</td><td>181.55</td><td>4,000</td><td>4,000</td><td>-</td><td>-</td><td>-</td><td>Lindy&#x27;s</td></tr><tr><td>Total Manhattan Street Retail</td><td></td><td>95.3 %</td><td>100.18</td><td>1,110,000</td><td>1,110,000</td><td>-</td><td>-</td><td>$ 315,869</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>95.3 %</td><td>99.95</td><td>1,107,000</td><td>1,107,000</td><td>-</td><td>-</td><td>$ 315,869</td><td></td></tr><tr><td>Total Retail Space</td><td></td><td>92.3 %</td><td></td><td>27,025,000</td><td>19,582,000</td><td>5,975,000</td><td>1,468,000</td><td>$ 2,359,268</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>92.3 %</td><td></td><td>24,909,000</td><td>19,130,000</td><td>4,323,000</td><td>1,456,000</td><td>$ 2,271,566</td><td></td></tr></table>

(1) Annualized Rent PSF excludes ground rent, storage rent and garages.

(2) These encumbrances are cross-collateralized under a blanket mortgage in the amount of $657,138 as of December 31, 2010.

(3) The leases for these former Bradlees locations are guaranteed by Stop and Shop (70% as to Totowa).

(4) Includes square footage of anchors who own the land and building.

(5) Annualized Base Rent shown is for mall tenants only.



<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>MERCHANDISE MART: Illinois:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Merchandise Mart, Chicago</td><td>100.0 %</td><td>93.7 %</td><td>30.16</td><td>3,492,000</td><td>-</td><td>-</td><td>$ 550,000</td><td>American Intercontinental University (AIU), Baker, Knapp &amp; Tubbs, Royal Bank of Canada, CCC Information Services, Ogilvy Group (WPP), Chicago Teachers Union, Office of the Special Deputy Receiver, Publicis Groupe, Bankers Life &amp; Casualty, Holly Hunt Ltd., Merchandise Mart Headquarters, Steelcase, Chicago School of Professional Psychology</td></tr><tr><td>350 West Mart Center, Chicago</td><td>100.0 %</td><td>89.2 %</td><td>25.31</td><td>1,242,000</td><td>-</td><td>-</td><td>-</td><td>21st Century Telecom/RCN, Ameritech, Chicago Sun-Times, Comcast, Fiserv Solutions, Ogilvy Group (WPP), Illinois Institute of Art, Ronin Capital, Upshot, Getco Holdings, TCS Education Systems</td></tr><tr><td>Other</td><td>50.0 %</td><td>93.9 %</td><td>33.77</td><td>19,000</td><td>-</td><td>-</td><td>24,530</td><td></td></tr><tr><td>Total Illinois</td><td></td><td>92.5 %</td><td>28.99</td><td>4,753,000</td><td>-</td><td>-</td><td>574,530</td><td></td></tr><tr><td>California</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>L.A. Mart</td><td>100.0 %</td><td>87.9 %</td><td>21.30</td><td>784,000</td><td>-</td><td>-</td><td>-</td><td>Penstan Investments, County of L.A. - Dept of Children &amp; Family Services</td></tr><tr><td>Massachusetts</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Boston Design Center (ground leased through 2060)</td><td>100.0 %</td><td>96.8 %</td><td>29.23</td><td>553,000</td><td>-</td><td>-</td><td>68,538</td><td>Boston Brewing/Fitch Puma, Robert Allen</td></tr><tr><td>New York</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>7 West 34th Street</td><td>100.0 %</td><td>94.6 %</td><td>39.03</td><td>419,000</td><td>-</td><td>-</td><td>-</td><td>Kurt Adler</td></tr><tr><td>Washington, DC</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Washington Design Center</td><td>100.0 %</td><td>93.1 %</td><td>37.68</td><td>393,000</td><td>-</td><td>-</td><td>43,447</td><td>General Services Administration</td></tr><tr><td>Total Merchandise Mart</td><td></td><td>92.5 %</td><td>29.33</td><td>6,902,000</td><td>-</td><td>-</td><td>686,515</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>92.5 %</td><td>29.33</td><td>6,893,000</td><td>-</td><td>-</td><td>674,250</td><td></td></tr></table>

(1) Annualized Rent PSF excludes ground rent, storage rent and garages.



## ITEM 2. PROPERTIES - Continued

<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>555 CALIFORNIA STREET:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>555 California Street</td><td>70.0 %</td><td>91.7 %</td><td>56.35</td><td>1,503,000</td><td>-</td><td>-</td><td>$ 640,911</td><td>Bank of America, N.A., Dodge &amp; Cox, Goldman Sachs &amp; Co., Jones Day, Kirkland &amp; Ellis LLP, Morgan Stanley &amp; Co. Inc., McKinsey &amp; Company Inc., UBS Financial Services</td></tr><tr><td>315 Montgomery Street</td><td>70.0 %</td><td>100.0 %</td><td>40.97</td><td>228,000</td><td>-</td><td>-</td><td>-</td><td>Bank of America, N.A.</td></tr><tr><td>345 Montgomery Street</td><td>70.0 %</td><td>100.0 %</td><td>98.25</td><td>64,000</td><td>-</td><td>-</td><td>-</td><td>Bank of America, N.A.</td></tr><tr><td>Total 555 California Street</td><td></td><td>93.0 %</td><td>$ 55.97</td><td>1,795,000</td><td>-</td><td>-</td><td>$ 640,911</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>93.0 %</td><td>$ 55.97</td><td>1,257,000</td><td>-</td><td>-</td><td>$ 448,169</td><td></td></tr></table>

(1) Annualized Rent PSF excludes ground rent, storage rent and garages.

(2) Cross-collateralized by 555 California Street and 315 and 345 Montgomery Street.



## ITEM 2. PROPERTIES - Continued

<table><tr><td rowspan="2">Property</td><td rowspan="2">% Ownership</td><td rowspan="2">% Occupancy</td><td rowspan="2">Annualized Rent PSF (1)</td><td colspan="3">Square Feet</td><td rowspan="2">Encumbrances (in thousands)</td><td rowspan="2">Major Tenants</td></tr><tr><td>Total Property</td><td>Owned By Tenant</td><td>Out of Service Under Development</td></tr><tr><td>WAREHOUSES:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>NEW JERSEY</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>East Hanover - Five Buildings</td><td>100.0 %</td><td>62.6 %</td><td>5.61</td><td>942,000</td><td>-</td><td>-</td><td>$ 24,358</td><td>Five Star Group Inc., Foremost Groups Inc., Fidelity Paper &amp; Supply Inc., Givaudan Flavors Corp., Gardner Industries</td></tr><tr><td>Edison</td><td>100.0 %</td><td>-</td><td>-</td><td>272,000</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Total Warehouses</td><td></td><td>48.6 %</td><td>5.61</td><td>1,214,000</td><td>-</td><td>-</td><td>$ 24,358</td><td></td></tr><tr><td>Vornado&#x27;s Ownership Interest</td><td></td><td>48.6 %</td><td>5.61</td><td>1,214,000</td><td>-</td><td>-</td><td>$ 24,358</td><td></td></tr></table>

(1) Annualized Rent PSF excludes ground rent, storage rent and garages.



## NEW YORK OFFICE PROPERTIES

As of December 31, 2010, our portfolio consisted of 28 office properties in Manhattan aggregating 17.4 million square feet, of which we own 16.2 million square feet, which is comprised of 15.2 million square feet of office space, 821,000 square feet of retail space and 183,000 square feet of showroom space. In addition, we own 1,107,000 square feet of retail space in New York City that is not part of our office buildings and is included in our Retail Properties segment. The New York Office Properties segment also includes 6 garages totaling 368,000 square feet (1,739 spaces) which are managed by, or leased to, third parties. The garage space is excluded from the statistics provided in this section.

Occupancy and average annual escalated rent per square foot:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Escalated Rent per Square Foot</td></tr><tr><td>2010</td><td>16,194,000</td><td>95.6 %</td><td>$ 55.45</td></tr><tr><td>2009</td><td>16,173,000</td><td>95.5 %</td><td>55.00</td></tr><tr><td>2008</td><td>16,108,000</td><td>96.7 %</td><td>53.08</td></tr><tr><td>2007</td><td>15,994,000</td><td>97.6 %</td><td>49.34</td></tr><tr><td>2006</td><td>13,692,000</td><td>97.5 %</td><td>46.33</td></tr></table>

2010 New York Office Properties rental revenue by tenants’ industry:

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>Finance</td><td>16 %</td></tr><tr><td>Retail</td><td>15 %</td></tr><tr><td>Legal Services</td><td>9 %</td></tr><tr><td>Banking</td><td>7 %</td></tr><tr><td>Communications</td><td>5 %</td></tr><tr><td>Insurance</td><td>5 %</td></tr><tr><td>Technology</td><td>5 %</td></tr><tr><td>Publishing</td><td>4 %</td></tr><tr><td>Government</td><td>4 %</td></tr><tr><td>Real Estate</td><td>4 %</td></tr><tr><td>Advertising</td><td>3 %</td></tr><tr><td>Pharmaceutical</td><td>3 %</td></tr><tr><td>Not-for-Profit</td><td>2 %</td></tr><tr><td>Engineering</td><td>2 %</td></tr><tr><td>Service Contractors</td><td>1 %</td></tr><tr><td>Health Services</td><td>1 %</td></tr><tr><td>Other</td><td>14 %</td></tr><tr><td></td><td>100 %</td></tr></table>

New York Office Properties lease terms generally range from five to seven years for smaller tenants to as long as 15 years for major tenants, and may provide for extension options at market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Electricity is provided to tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.



## NEW YORK OFFICE PROPERTIES – CONTINUED

Tenants accounting for 2% or more of 2010 New York Office Properties total revenues:

<table><tr><td>Tenant</td><td>Square Feet Leased</td><td>2010 Revenues</td><td>Percentage of New York Office Properties Revenues</td><td>Percentage of Total Company Revenues</td></tr><tr><td>Macy&#x27;s, Inc.</td><td>537,000</td><td>29,166,000</td><td>2.6%</td><td>1.0%</td></tr><tr><td>McGraw-Hill Companies, Inc.</td><td>480,000</td><td>22,859,000</td><td>2.1%</td><td>0.8%</td></tr><tr><td>Limited Brands</td><td>368,000</td><td>22,219,000</td><td>2.0%</td><td>0.8%</td></tr></table>

2010 New York Office Properties Leasing Activity:

<table><tr><td>Location</td><td>Square Feet</td><td>Average Initial Rent Per Square Foot (1)</td></tr><tr><td>One Penn Plaza</td><td>346,000</td><td>$ 48.31</td></tr><tr><td>90 Park Avenue</td><td>152,000</td><td>55.75</td></tr><tr><td>40 Fulton Street</td><td>123,000</td><td>31.84</td></tr><tr><td>866 United Nations Plaza</td><td>113,000</td><td>49.67</td></tr><tr><td>909 Third Avenue</td><td>80,000</td><td>47.69</td></tr><tr><td>Two Penn Plaza</td><td>69,000</td><td>47.54</td></tr><tr><td>595 Madison Ave</td><td>62,000</td><td>59.34</td></tr><tr><td>640 Fifth Avenue</td><td>49,000</td><td>53.03</td></tr><tr><td>Manhattan Mall</td><td>47,000</td><td>38.17</td></tr><tr><td>Eleven Penn Plaza</td><td>46,000</td><td>44.10</td></tr><tr><td>350 Park Avenue</td><td>45,000</td><td>103.77</td></tr><tr><td>150 East 58th Street</td><td>37,000</td><td>51.82</td></tr><tr><td>20 Broad Street</td><td>36,000</td><td>31.32</td></tr><tr><td>57th Street</td><td>22,000</td><td>41.46</td></tr><tr><td>330 Madison Avenue</td><td>21,000</td><td>65.17</td></tr><tr><td>888 Seventh Avenue</td><td>16,000</td><td>61.09</td></tr><tr><td>1290 Avenue of Americas</td><td>9,000</td><td>50.00</td></tr><tr><td>689 Fifth Avenue</td><td>4,000</td><td>58.00</td></tr><tr><td>Total</td><td>1,277,000</td><td>49.81</td></tr></table>

(1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

In addition to the office space noted above, during 2010 we leased 23,000 square feet of retail space contained in office buildings at an average initial rent of $111.19, a 42.6% increase over the prior escalated rent per square foot.



## NEW YORK OFFICE PROPERTIES – CONTINUED

Lease expirations as of December 31, 2010, assuming none of the tenants exercise renewal options:

<table><tr><td rowspan="2">Office Space:</td><td rowspan="2">Number of Expiring Leases</td><td rowspan="2">Square Feet of Expiring Leases</td><td rowspan="2">Percentage of New York Office Properties Square Feet</td><td colspan="2">Annual Escalated Rent of Expiring Leases</td></tr><tr><td>Total</td><td>Per Square Foot</td></tr><tr><td>Office Space:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Month to month</td><td>57</td><td>72,000</td><td>0.4 %</td><td>$ 2,967,000</td><td>$ 41.21</td></tr><tr><td>2011</td><td>93</td><td>1,047,000</td><td>6.3 %</td><td>57,452,000</td><td>54.87</td></tr><tr><td>2012</td><td>98</td><td>1,807,000</td><td>10.9 %</td><td>96,304,000</td><td>53.29</td></tr><tr><td>2013</td><td>72</td><td>940,000 (1)</td><td>5.6 %</td><td>47,646,000</td><td>50.69</td></tr><tr><td>2014</td><td>89</td><td>812,000</td><td>4.9 %</td><td>46,838,000</td><td>57.68</td></tr><tr><td>2015</td><td>104</td><td>2,120,000</td><td>12.7 %</td><td>121,246,000</td><td>57.19</td></tr><tr><td>2016</td><td>62</td><td>1,043,000</td><td>6.3 %</td><td>56,721,000</td><td>54.38</td></tr><tr><td>2017</td><td>41</td><td>894,000</td><td>5.4 %</td><td>50,585,000</td><td>56.58</td></tr><tr><td>2018</td><td>35</td><td>778,000</td><td>4.7 %</td><td>50,115,000</td><td>64.42</td></tr><tr><td>2019</td><td>31</td><td>649,000</td><td>3.9 %</td><td>38,404,000</td><td>59.17</td></tr><tr><td>2020</td><td>28</td><td>1,287,000</td><td>7.7 %</td><td>68,742,000</td><td>53.41</td></tr><tr><td>Retail Space:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>(contained in office buildings)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Month to month</td><td>3</td><td>2,000</td><td>-%</td><td>$ 205,000</td><td>$ 102.50</td></tr><tr><td>2011</td><td>7</td><td>48,000</td><td>0.3 %</td><td>2,349,000</td><td>49.75</td></tr><tr><td>2012</td><td>6</td><td>23,000</td><td>0.1 %</td><td>4,507,000</td><td>195.96</td></tr><tr><td>2013</td><td>17</td><td>52,000</td><td>0.3 %</td><td>8,284,000</td><td>159.31</td></tr><tr><td>2014</td><td>10</td><td>77,000</td><td>0.5 %</td><td>19,335,000</td><td>251.10</td></tr><tr><td>2015</td><td>12</td><td>39,000</td><td>0.2 %</td><td>7,930,000</td><td>203.33</td></tr><tr><td>2016</td><td>4</td><td>319,000</td><td>1.9 %</td><td>17,950,000</td><td>56.27</td></tr><tr><td>2017</td><td>1</td><td>4,000</td><td>-%</td><td>412,000</td><td>103.00</td></tr><tr><td>2018</td><td>8</td><td>128,000</td><td>0.8 %</td><td>13,360,000</td><td>104.38</td></tr><tr><td>2019</td><td>7</td><td>33,000</td><td>0.2 %</td><td>8,344,000</td><td>252.85</td></tr><tr><td>2020</td><td>6</td><td>21,000</td><td>0.1 %</td><td>2,548,000</td><td>121.33</td></tr></table>



## WASHINGTON, DC OFFICE PROPERTIES

As of December 31, 2010, our portfolio consisted of 82 properties aggregating 21.1 million square feet, of which we own 17.8 million square feet, which is comprised of 74 office buildings, 7 residential properties, a hotel property and 20.8 acres of undeveloped land. In addition, the Washington, DC Office Properties segment includes 57 garages totaling approximately 9.4 million square feet (31,419 spaces) which are managed by or leased to third parties. The garage space is excluded from the statistics provided in this section.

As of December 31, 2010, 32% percent of the space in our Washington, DC Office Properties segment was leased to various agencies of the U.S. Government.

Occupancy and average annual escalated rent per square foot:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Escalated Rent per Square Foot</td></tr><tr><td>2010</td><td>17,823,000</td><td>94.3%</td><td>39.42</td></tr><tr><td>2009</td><td>17,646,000</td><td>93.3%</td><td>38.37</td></tr><tr><td>2008</td><td>16,981,000</td><td>94.1%</td><td>37.03</td></tr><tr><td>2007</td><td>16,715,000</td><td>94.0%</td><td>34.47</td></tr><tr><td>2006</td><td>15,181,000</td><td>92.7%</td><td>32.08</td></tr></table>

2010 Washington, DC Office Properties rental revenue by tenants' industry:

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>U.S. Government</td><td>37 %</td></tr><tr><td>Government Contractors</td><td>24 %</td></tr><tr><td>Legal Services</td><td>7 %</td></tr><tr><td>Membership Organizations</td><td>6 %</td></tr><tr><td>Real Estate</td><td>3 %</td></tr><tr><td>Manufacturing</td><td>3 %</td></tr><tr><td>Computer and Data Processing</td><td>3 %</td></tr><tr><td>Business Services</td><td>2 %</td></tr><tr><td>Television Broadcasting</td><td>1 %</td></tr><tr><td>Health Services</td><td>1 %</td></tr><tr><td>Communication</td><td>1 %</td></tr><tr><td>Education</td><td>1 %</td></tr><tr><td>Other</td><td>11 %</td></tr><tr><td></td><td>100 %</td></tr></table>

Washington, DC Office Properties lease terms generally range from five to seven years, and may provide for extension options at either pre-negotiated or market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants, the tenants’ share of increases in real estate taxes and certain property operating expenses over a base year. Periodic step-ups in rent are usually based upon either fixed percentage increases or the consumer price index. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.



## WASHINGTON, DC OFFICE PROPERTIES – CONTINUED

Tenants accounting for 2% or more of Washington, DC Office Properties total revenues:

<table><tr><td>Tenant</td><td>Square Feet Leased</td><td>2010 Revenues</td><td>Percentage of Washington, DC Office Properties Revenues</td><td>Percentage of Total Company Revenues</td></tr><tr><td>U.S. Government</td><td>6,277,000</td><td>$ 191,804,000</td><td>28.9 %</td><td>6.9 %</td></tr><tr><td>Howrey LLP</td><td>327,000</td><td>17,013,000</td><td>2.6 %</td><td>0.6 %</td></tr><tr><td>Academy for Educational Development</td><td>368,000</td><td>16,824,000</td><td>2.5 %</td><td>0.6 %</td></tr><tr><td>Boeing</td><td>378,000</td><td>15,978,000</td><td>2.4 %</td><td>0.6 %</td></tr><tr><td>SAIC, Inc.</td><td>433,000</td><td>14,711,000</td><td>2.2 %</td><td>0.5 %</td></tr></table>

2010 Washington, DC Office Properties Leasing Activity:

<table><tr><td>Location</td><td>Square Feet</td><td>Average Initial Rent Per Square Foot (1)</td></tr><tr><td>Skyline Place / One Skyline Tower</td><td>368,000</td><td>36.70</td></tr><tr><td>2011-2451 Crystal Drive</td><td>230,000</td><td>41.30</td></tr><tr><td>1550-1750 Crystal Drive / 241-251 18th Street</td><td>154,000</td><td>41.45</td></tr><tr><td>S. Clark Street / 12th Street</td><td>147,000</td><td>41.93</td></tr><tr><td>1800, 1851 and 1901 South Bell Street</td><td>135,000</td><td>37.73</td></tr><tr><td>Reston Executive</td><td>120,000</td><td>29.62</td></tr><tr><td>1750 Pennsylvania Avenue, NW</td><td>100,000</td><td>44.02</td></tr><tr><td>Commerce Executive</td><td>97,000</td><td>28.98</td></tr><tr><td>Partially Owned Entities</td><td>55,000</td><td>34.09</td></tr><tr><td>2001 Jefferson Davis Highway and 223 23rd Street / 2221 South Clark Street</td><td>55,000</td><td>36.01</td></tr><tr><td>Universal Buildings (1825-1875 Connecticut Avenue, NW)</td><td>44,000</td><td>43.93</td></tr><tr><td>1101 17th Street, NW</td><td>42,000</td><td>42.98</td></tr><tr><td>2200 / 2300 Clarendon Blvd (Courthouse Plaza)</td><td>38,000</td><td>40.24</td></tr><tr><td>1150 17th Street, NW</td><td>29,000</td><td>43.06</td></tr><tr><td>1140 Connecticut Avenue, NW</td><td>25,000</td><td>42.20</td></tr><tr><td>1730 M Street, NW</td><td>22,000</td><td>42.18</td></tr><tr><td>1726 M Street, NW</td><td>19,000</td><td>39.68</td></tr><tr><td>409 3rd Street, NW</td><td>8,000</td><td>39.32</td></tr><tr><td>1227 25th Street, NW</td><td>5,000</td><td>41.50</td></tr><tr><td>Democracy Plaza One</td><td>4,000</td><td>34.90</td></tr><tr><td></td><td>1,697,000</td><td>38.41</td></tr></table>



## WASHINGTON, DC OFFICE PROPERTIES – CONTINUED

Lease expirations as of December 31, 2010, assuming none of the tenants exercise renewal options:

<table><tr><td rowspan="2">Year</td><td rowspan="2">Number of Expiring Leases</td><td rowspan="2">Square Feet of Expiring Leases</td><td rowspan="2">Percentage of Washington, DC Office Properties Square Feet</td><td colspan="2">Annual Escalated Rent of Expiring Leases</td></tr><tr><td>Total</td><td>Per Square Foot</td></tr><tr><td>Month to month</td><td>94</td><td>586,000</td><td>4.2 %</td><td>$ 20,825,000</td><td>$ 35.51</td></tr><tr><td>2011</td><td>317</td><td>1,918,000</td><td>13.6 %</td><td>69,924,000</td><td>36.45</td></tr><tr><td>2012</td><td>264</td><td>2,894,000</td><td>20.5 %</td><td>112,206,000</td><td>38.78</td></tr><tr><td>2013</td><td>168</td><td>929,000</td><td>6.6 %</td><td>35,997,000</td><td>38.75</td></tr><tr><td>2014</td><td>139</td><td>1,396,000</td><td>9.9 %</td><td>51,900,000</td><td>37.18</td></tr><tr><td>2015</td><td>130</td><td>1,417,000</td><td>10.1 %</td><td>54,178,000</td><td>38.24</td></tr><tr><td>2016</td><td>71</td><td>1,026,000</td><td>7.3 %</td><td>38,878,000</td><td>37.90</td></tr><tr><td>2017</td><td>45</td><td>392,000</td><td>2.8 %</td><td>13,988,000</td><td>35.71</td></tr><tr><td>2018</td><td>47</td><td>840,000</td><td>6.0 %</td><td>38,887,000</td><td>46.30</td></tr><tr><td>2019</td><td>43</td><td>1,029,000</td><td>7.3 %</td><td>40,503,000</td><td>39.35</td></tr><tr><td>2020</td><td>58</td><td>928,000</td><td>6.6 %</td><td>43,239,000</td><td>46.57</td></tr></table>

## Base Realignment and Closure (“BRAC”)

The lease expiration table above includes 2,395,000 square feet occupied by the Department of Defense subject to the BRAC statute. Of this amount, 348,000 square feet at 1851 South Bell Street will be taken out of service for redevelopment and approximately 286,000 square feet is expected to be relet for approximately 10 years. The remaining space is scheduled to expire as follows:

<table><tr><td rowspan="2">Year</td><td rowspan="2">Annual Escalated Rent of Expiring Leases Per Square Foot</td><td colspan="4">Square Feet of Expiring Leases</td></tr><tr><td>Total</td><td>Crystal City</td><td>Skyline</td><td>Rosslyn</td></tr><tr><td>2011</td><td>$ 28.41</td><td>446,000</td><td>-</td><td>446,000</td><td>-</td></tr><tr><td>2012</td><td>39.96</td><td>821,000</td><td>653,000</td><td>158,000</td><td>10,000</td></tr><tr><td>2013</td><td>35.96</td><td>140,000</td><td>-</td><td>-</td><td>140,000</td></tr><tr><td>2014</td><td>32.82</td><td>329,000</td><td>128,000</td><td>201,000</td><td>-</td></tr><tr><td>2015</td><td>40.21</td><td>25,000</td><td>20,000</td><td>5,000</td><td>-</td></tr><tr><td></td><td></td><td>1,761,000</td><td>801,000</td><td>810,000</td><td>150,000</td></tr></table>



## RETAIL PROPERTIES

As of December 31, 2010, our portfolio consisted of 161 retail properties, of which 130 are strip shopping centers located primarily in the Northeast, Mid-Atlantic and California; 7 are regional malls located in New York, New Jersey, Virginia and San Juan, Puerto Rico; and 24 are retail properties located in Manhattan (“Manhattan Street Retail”). Our strip shopping centers and malls are generally located on major highways in mature, densely populated areas, and therefore attract consumers from a regional, rather than a neighborhood market place.

## Strip Shopping Centers

Our strip shopping centers contain an aggregate of 17.2 million square feet, of which we own 16.9 million square feet. These properties are substantially (approximately 80%) leased to large stores (over 20,000 square feet). Tenants include destination retailers such as discount department stores, supermarkets, home improvement stores, discount apparel stores and membership warehouse clubs. Tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building materials and home improvement supplies, and compete primarily on the basis of price and location.

## Regional Malls

The Green Acres Mall in Valley Stream, Long Island, New York contains 1.8 million square feet, and is anchored by Macy’s, Sears, Wal-Mart, Kohl’s, J.C. Penney, Best Buy and BJ’s Wholesale Club.

The Monmouth Mall in Eatontown, New Jersey, in which we own a 50% interest, contains 1.5 million square feet and is anchored by Macy’s, Lord & Taylor and J.C. Penney, two of which own their stores aggregating 457,000 square feet.

The Springfield Mall in Springfield, Virginia, contains 1.4 million square feet and is anchored by Macy’s, J.C. Penney and Target, two of which own their stores aggregating 390,000 square feet. We continue to evaluate plans to renovate and reposition the mall.

The Bergen Town Center in Paramus, New Jersey contains 930,000 square feet and is anchored by Century 21, Whole Foods and Target.

The Broadway Mall in Hicksville, Long Island, New York contains 1.1 million square feet and is anchored by Macy’s, Ikea, National Amusements and Target, which owns its store containing 141,000 square feet.

The Montehiedra Mall in San Juan, Puerto Rico contains 540,000 square feet and is anchored by Home Depot, Kmart, and Marshalls.

The Las Catalinas Mall in San Juan, Puerto Rico, contains 495,000 square feet and is anchored by Kmart and Sears, which owns its 139,000 square foot store.

## Manhattan Street Retail

Manhattan Street Retail is comprised of 24 properties containing 1.1 million square feet. In addition, we own 821,000 square feet of retail space in certain of our New York office buildings, which is part of our New York Office Properties segment. Our Manhattan Street Retail properties include (i) properties in the Penn Plaza district, such as the Manhattan Mall which contains 243,000 square feet, anchored by JC Penney; (ii) 4 Union Square which contains 203,000 square feet, anchored by Whole Foods Market, Filenes Basement and DSW; (iii) 1540 Broadway in Times Square which contains 160,000 square feet, anchored by Forever 21 and Disney, (iv) 510 Fifth Avenue which contains 59,000 square feet, anchored by Joe Fresh; and (v) properties on Madison Avenue and in So-Ho occupied by retailers including H&M, Top Shop, Madewell, GAP, Gucci, Chloe and Cartier.



## RETAIL PROPERTIES – CONTINUED

Occupancy and average annual net rent per square foot:

As of December 31, 2010, the aggregate occupancy rate for the entire Retail Properties segment of 25.6 million square feet was 92.3%. Details of our ownership interest in the strip shopping centers, regional malls and Manhattan Street retail for the past five years are provided below.

## Strip Shopping Centers:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Net Rent per Square Foot</td></tr><tr><td>2010</td><td>16,866,000</td><td>92.1%</td><td>$ 15.68</td></tr><tr><td>2009</td><td>16,107,000</td><td>91.5%</td><td>15.30</td></tr><tr><td>2008</td><td>15,755,000</td><td>91.9%</td><td>14.52</td></tr><tr><td>2007</td><td>15,463,000</td><td>94.1%</td><td>14.12</td></tr><tr><td>2006</td><td>12,933,000</td><td>92.9%</td><td>13.48</td></tr></table>

Regional Malls:

<table><tr><td rowspan="2">As of December 31,</td><td rowspan="2">Rentable Square Feet</td><td rowspan="2">Occupancy Rate</td><td colspan="2">Average Annual Net Rent Per Square Foot</td></tr><tr><td>Mall Tenants</td><td>Mall and Anchor Tenants</td></tr><tr><td>2010</td><td>5,480,000</td><td>92.2%</td><td>39.73</td><td>21.47</td></tr><tr><td>2009</td><td>5,439,000</td><td>91.1%</td><td>39.56</td><td>20.67</td></tr><tr><td>2008</td><td>5,232,000</td><td>93.0%</td><td>37.59</td><td>20.38</td></tr><tr><td>2007</td><td>5,528,000</td><td>96.1%</td><td>34.94</td><td>19.11</td></tr><tr><td>2006</td><td>5,640,000</td><td>93.4%</td><td>32.64</td><td>18.12</td></tr></table>

For the years ending December 31, 2010 and 2009, mall sales per square foot, including partially owned malls, were $461.00 and $466.00, respectively.

Manhattan Street Retail:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Net Rent per Square Foot</td></tr><tr><td>2010</td><td>1,107,000</td><td>95.3%</td><td>$ 99.95</td></tr><tr><td>2009</td><td>1,007,000</td><td>95.3%</td><td>96.37</td></tr><tr><td>2008</td><td>874,000</td><td>90.4%</td><td>97.18</td></tr><tr><td>2007</td><td>943,000</td><td>86.8%</td><td>89.86</td></tr><tr><td>2006</td><td>691,000</td><td>83.6%</td><td>83.53</td></tr></table>



## RETAIL PROPERTIES – CONTINUED

2010 Retail Properties rental revenue by type of retailer

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>Discount Stores</td><td>14 %</td></tr><tr><td>Women&#x27;s Apparel</td><td>11 %</td></tr><tr><td>Family Apparel</td><td>10 %</td></tr><tr><td>Supermarkets</td><td>9 %</td></tr><tr><td>Home Improvement</td><td>6 %</td></tr><tr><td>Restaurants</td><td>6 %</td></tr><tr><td>Department Stores</td><td>5 %</td></tr><tr><td>Home Entertainment and Electronics</td><td>5 %</td></tr><tr><td>Personal Services</td><td>4 %</td></tr><tr><td>Banking and Other Business Services</td><td>3 %</td></tr><tr><td>Home Furnishings</td><td>3 %</td></tr><tr><td>Jewelry</td><td>2 %</td></tr><tr><td>Membership Warehouse Clubs</td><td>2 %</td></tr><tr><td>Other</td><td>20 %</td></tr><tr><td></td><td>100 %</td></tr></table>

Retail Properties lease terms generally range from five years or less in some instances for smaller tenants to as long as 25 years for major tenants. Leases generally provide for reimbursements of real estate taxes, insurance and common area maintenance charges (including roof and structure in strip shopping centers, unless it is the tenant’s direct responsibility), and percentage rents based on tenant sales volume. Percentage rents accounted for less than 1% of the Retail Properties total revenues during 2010.

Tenants accounting for 2% or more of 2010 Retail Properties total revenues:

<table><tr><td>Tenant</td><td>Square Feet Leased</td><td>2010 Revenues</td><td>Percentage of Retail Properties Revenues</td><td>Percentage of Total Company Revenues</td></tr><tr><td>The Home Depot, Inc</td><td>1,135,000</td><td>$ 20,037,000</td><td>3.3 %</td><td>0.7%</td></tr><tr><td>Wal-Mart/Sam&#x27;s Club</td><td>1,754,000</td><td>19,640,000</td><td>3.2 %</td><td>0.7%</td></tr><tr><td>Forever 21</td><td>149,000</td><td>15,712,000</td><td>2.6 %</td><td>0.6%</td></tr><tr><td>Best Buy Co. Inc.</td><td>664,000</td><td>15,538,000</td><td>2.6 %</td><td>0.6%</td></tr><tr><td>J.C. Penney</td><td>787,000</td><td>14,885,000</td><td>2.4 %</td><td>0.5%</td></tr><tr><td>Stop &amp; Shop Companies, Inc. (Stop &amp; Shop)</td><td>729,000</td><td>14,853,000</td><td>2.4 %</td><td>0.5%</td></tr></table>



Lease expirations as of December 31, 2010, assuming none of the tenants exercise renewal options:

<table><tr><td rowspan="2">Year</td><td rowspan="2">Number of Expiring Leases</td><td rowspan="2">Square Feet of Expiring Leases</td><td rowspan="2">Percentage of Retail Properties Square Feet</td><td colspan="2">Annual Net Rent of Expiring Leases</td></tr><tr><td>Total</td><td>Per Square Foot</td></tr><tr><td>Strip Shopping Centers:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Month to month</td><td>24</td><td>81,000</td><td>0.4 %</td><td>$ 1,404,000</td><td>$ 17.37</td></tr><tr><td>2011</td><td>58</td><td>690,000</td><td>3.2 %</td><td>6,608,000</td><td>9.58</td></tr><tr><td>2012</td><td>65</td><td>1,148,000</td><td>5.4 %</td><td>14,601,000</td><td>12.72</td></tr><tr><td>2013</td><td>108</td><td>1,899,000</td><td>8.9 %</td><td>24,600,000</td><td>12.96</td></tr><tr><td>2014</td><td>102</td><td>1,445,000</td><td>6.8 %</td><td>20,248,000</td><td>14.01</td></tr><tr><td>2015</td><td>68</td><td>699,000</td><td>3.3 %</td><td>14,801,000</td><td>21.17</td></tr><tr><td>2016</td><td>52</td><td>807,000</td><td>3.8 %</td><td>11,688,000</td><td>14.48</td></tr><tr><td>2017</td><td>36</td><td>340,000</td><td>1.6 %</td><td>4,937,000</td><td>14.53</td></tr><tr><td>2018</td><td>54</td><td>1,008,000</td><td>4.7 %</td><td>17,316,000</td><td>17.18</td></tr><tr><td>2019</td><td>43</td><td>911,000</td><td>4.3 %</td><td>16,828,000</td><td>18.46</td></tr><tr><td>2020</td><td>35</td><td>849,000</td><td>4.0 %</td><td>11,108,000</td><td>13.08</td></tr><tr><td>Regional Malls:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Month to month</td><td>65</td><td>155,000</td><td>0.7 %</td><td>$ 4,141,000</td><td>$ 26.80</td></tr><tr><td>2011</td><td>62</td><td>206,000</td><td>1.0 %</td><td>6,963,000</td><td>33.96</td></tr><tr><td>2012</td><td>47</td><td>225,000</td><td>1.1 %</td><td>5,560,000</td><td>24.71</td></tr><tr><td>2013</td><td>55</td><td>270,000</td><td>1.3 %</td><td>7,530,000</td><td>27.86</td></tr><tr><td>2014</td><td>42</td><td>335,000</td><td>1.6 %</td><td>6,391,000</td><td>19.05</td></tr><tr><td>2015</td><td>45</td><td>234,000</td><td>1.1 %</td><td>7,395,000</td><td>31.60</td></tr><tr><td>2016</td><td>36</td><td>394,000</td><td>1.8 %</td><td>4,801,000</td><td>12.19</td></tr><tr><td>2017</td><td>34</td><td>439,000</td><td>2.1 %</td><td>6,372,000</td><td>14.53</td></tr><tr><td>2018</td><td>40</td><td>91,000</td><td>0.4 %</td><td>4,723,000</td><td>52.03</td></tr><tr><td>2019</td><td>37</td><td>164,000</td><td>0.8 %</td><td>5,769,000</td><td>35.22</td></tr><tr><td>2020</td><td>32</td><td>140,000</td><td>0.7 %</td><td>5,044,000</td><td>36.13</td></tr><tr><td>Manhattan Street Retail:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Month to month</td><td>4</td><td>4,000</td><td>- %</td><td>$ 184,000</td><td>$ 41.15</td></tr><tr><td>2011</td><td>12</td><td>101,000</td><td>0.5 %</td><td>6,679,000</td><td>66.48</td></tr><tr><td>2012</td><td>8</td><td>36,000</td><td>0.2 %</td><td>2,074,000</td><td>57.18</td></tr><tr><td>2013</td><td>7</td><td>32,000</td><td>0.1 %</td><td>4,601,000</td><td>145.42</td></tr><tr><td>2014</td><td>7</td><td>28,000</td><td>0.1 %</td><td>4,034,000</td><td>142.99</td></tr><tr><td>2015</td><td>6</td><td>23,000</td><td>0.1 %</td><td>2,519,000</td><td>110.76</td></tr><tr><td>2016</td><td>7</td><td>19,000</td><td>0.1 %</td><td>3,513,000</td><td>185.72</td></tr><tr><td>2017</td><td>4</td><td>10,000</td><td>- %</td><td>1,447,000</td><td>152.21</td></tr><tr><td>2018</td><td>15</td><td>123,000</td><td>0.6 %</td><td>19,822,000</td><td>160.62</td></tr><tr><td>2019</td><td>11</td><td>62,000</td><td>0.3 %</td><td>9,998,000</td><td>161.75</td></tr><tr><td>2020</td><td>7</td><td>67,000</td><td>0.3 %</td><td>5,315,000</td><td>79.61</td></tr></table>



## RETAIL PROPERTIES – CONTINUED

2010 Retail Properties Leasing Activity:

<table><tr><td rowspan="2">Location</td><td rowspan="2">Square Feet</td><td colspan="2">Average Initial Rent Per Square Foot (1)</td></tr><tr><td></td><td></td></tr><tr><td>Strip Shopping Centers:</td><td></td><td></td><td></td></tr><tr><td>Marlton, NJ</td><td>104,000</td><td>$</td><td>9.11</td></tr><tr><td>Bordentown, NJ</td><td>57,000</td><td></td><td>6.50</td></tr><tr><td>Bergen Town Center - East, Paramus, NJ</td><td>54,000</td><td></td><td>42.60</td></tr><tr><td>Amherst, NY</td><td>50,000</td><td></td><td>12.19</td></tr><tr><td>Lansing, IL</td><td>47,000</td><td></td><td>10.00</td></tr><tr><td>Bellingham, WA</td><td>46,000</td><td></td><td>4.73</td></tr><tr><td>Broomall, PA</td><td>41,000</td><td></td><td>14.12</td></tr><tr><td>Chicago, IL</td><td>41,000</td><td></td><td>12.03</td></tr><tr><td>Huntington, NY</td><td>37,000</td><td></td><td>19.73</td></tr><tr><td>East Brunswick (339-341 Route 18 South), NJ</td><td>33,000</td><td></td><td>20.00</td></tr><tr><td>3040 M Street, Washington, DC</td><td>32,000</td><td></td><td>29.13</td></tr><tr><td>Newington, CT</td><td>27,000</td><td></td><td>20.29</td></tr><tr><td>Tampa (Hyde Park Village), FL</td><td>25,000</td><td></td><td>25.57</td></tr><tr><td>Redding, CA</td><td>22,000</td><td></td><td>17.50</td></tr><tr><td>Compack, NY</td><td>19,000</td><td></td><td>18.47</td></tr><tr><td>Bronx (1750-1780 Gun Hill Road), NY</td><td>19,000</td><td></td><td>20.00</td></tr><tr><td>Glen Burnie, MD</td><td>18,000</td><td></td><td>13.25</td></tr><tr><td>Poughkeepsie, NY</td><td>17,000</td><td></td><td>16.95</td></tr><tr><td>Queens, NY</td><td>15,000</td><td></td><td>25.00</td></tr><tr><td>Bricktown, NJ</td><td>14,000</td><td></td><td>20.70</td></tr><tr><td>Staten Island, NY</td><td>10,000</td><td></td><td>24.11</td></tr><tr><td>Other</td><td>142,000</td><td></td><td>36.95</td></tr><tr><td></td><td>870,000</td><td></td><td>19.85</td></tr><tr><td>Regional Malls:</td><td></td><td></td><td></td></tr><tr><td>Bergen Town Center - West, Paramus, NJ</td><td>126,000</td><td></td><td>34.85</td></tr><tr><td>Green Acres Mall, Valley Stream, NY</td><td>59,000</td><td></td><td>34.73</td></tr><tr><td>Springfield Mall, Springfield, VA</td><td>35,000</td><td></td><td>17.82</td></tr><tr><td>Monmouth Mall, Eatontown, NJ</td><td>28,000</td><td></td><td>25.92</td></tr><tr><td>Broadway Mall, Hicksville, NY</td><td>28,000</td><td></td><td>37.20</td></tr><tr><td>Las Catalinas Mall, Puerto Rico</td><td>22,000</td><td></td><td>57.65</td></tr><tr><td>Montehiedra, Puerto Rico</td><td>18,000</td><td></td><td>35.34</td></tr><tr><td></td><td>316,000</td><td></td><td>33.98</td></tr><tr><td>Manhattan Street Retail:</td><td></td><td></td><td></td></tr><tr><td>692 Broadway, New York, NY</td><td>15,000</td><td></td><td>43.33</td></tr><tr><td>Other</td><td>8,000</td><td></td><td>95.86</td></tr><tr><td></td><td>23,000</td><td></td><td>62.04</td></tr><tr><td></td><td>1,209,000</td><td></td><td>24.36</td></tr></table>

(1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.



## MERCHANDISE MART PROPERTIES

As of December 31, 2010, we own 6 Merchandise Mart Properties containing an aggregate of 6.9 million square feet. The Merchandise Mart Properties segment also contains 6 garages totaling 908,000 square feet (2,965 spaces). The garage space is excluded from the statistics provided in this section.

Square feet by location and use as of December 31, 2010:

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="6">Showroom</td></tr><tr><td>Total</td><td>Office</td><td>Total</td><td>Permanent</td><td>Temporary Trade Show</td><td>Retail</td></tr><tr><td>Chicago, Illinois:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Merchandise Mart</td><td>3,492</td><td>1,033</td><td>2,392</td><td>1,810</td><td>582</td><td>67</td></tr><tr><td>350 West Mart Center</td><td>1,242</td><td>1,159</td><td>83</td><td>83</td><td>-</td><td>-</td></tr><tr><td>Other</td><td>10</td><td>-</td><td>-</td><td>-</td><td>-</td><td>10</td></tr><tr><td>Total Chicago, Illinois</td><td>4,744</td><td>2,192</td><td>2,475</td><td>1,893</td><td>582</td><td>77</td></tr><tr><td>Los Angeles, California:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>L.A. Mart</td><td>784</td><td>170</td><td>614</td><td>560</td><td>54</td><td>-</td></tr><tr><td>Boston, Massachusetts:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Boston Design Center</td><td>553</td><td>126</td><td>423</td><td>423</td><td>-</td><td>4</td></tr><tr><td>New York, New York:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>7 West 34th Street</td><td>419</td><td>10</td><td>409</td><td>362</td><td>47</td><td>-</td></tr><tr><td>Washington, DC:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Washington Design Center</td><td>393</td><td>110</td><td>283</td><td>283</td><td>-</td><td>-</td></tr><tr><td>Total Merchandise Mart Properties</td><td>6,893</td><td>2,608</td><td>4,204</td><td>3,521</td><td>683</td><td>81</td></tr><tr><td>Occupancy rate</td><td>92.5%</td><td>91.5%</td><td>93.2%</td><td></td><td></td><td>91.0%</td></tr></table>

In March 2010, we ceased making debt service payments on the mortgage loan secured by the High Point Complex in North Carolina as a result of insufficient cash flow and the loan went into default. In November 2010, the property was placed in receivership. While the receivership process is inherently lengthy, we anticipate that the property will be sold in the first half of 2011, at which time the assets and liabilities will be removed from our consolidated balance sheet and we will recognize a net gain of approximately $80,000,000. Accordingly, we have reclassified the results of operations of the property to “(loss) income from discontinued operations,” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.



## MERCHANDISE MART PROPERTIES – CONTINUED

## Office Space

Occupancy and average annual escalated rent per square foot:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Escalated Rent Per Square Foot</td></tr><tr><td>2010</td><td>2,608,000</td><td>91.5%</td><td>25.31</td></tr><tr><td>2009</td><td>2,432,000</td><td>88.8%</td><td>23.86</td></tr><tr><td>2008</td><td>2,393,000</td><td>96.4%</td><td>25.18</td></tr><tr><td>2007</td><td>2,724,000</td><td>97.1%</td><td>26.86</td></tr><tr><td>2006</td><td>2,702,000</td><td>97.4%</td><td>25.64</td></tr></table>

2010 Merchandise Mart Properties office rental revenues by tenants' industry:

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>Advertising and Marketing</td><td>17%</td></tr><tr><td>Education</td><td>13%</td></tr><tr><td>Telecommunications</td><td>12%</td></tr><tr><td>Government</td><td>11%</td></tr><tr><td>Financial Services</td><td>8%</td></tr><tr><td>Banking</td><td>7%</td></tr><tr><td>Business Services</td><td>6%</td></tr><tr><td>Publications</td><td>6%</td></tr><tr><td>Insurance</td><td>5%</td></tr><tr><td>Information Research</td><td>5%</td></tr><tr><td>Other</td><td>10%</td></tr><tr><td></td><td>100%</td></tr></table>

Office lease terms generally range from three to seven years for smaller tenants to as long as 15 years for major tenants. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Electricity is provided to tenants on a sub-metered basis or included in rent and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction of its premises.

Office tenants accounting for 2% or more of Merchandise Mart Properties’ 2010 total revenues

<table><tr><td>Tenant</td><td>Square Feet Leased</td><td>2010 Revenues</td><td>Percentage of Merchandise Mart Properties Revenues</td><td>Percentage of Total Company Revenues</td></tr><tr><td>Ogilvy Group (WPP)</td><td>270,000</td><td>$ 7,537,000</td><td>3.1%</td><td>0.3%</td></tr><tr><td>Ameritech (AT&amp;T)</td><td>171,000</td><td>4,924,000</td><td>2.0%</td><td>0.2%</td></tr></table>



## MERCHANDISE MART PROPERTIES– CONTINUED

2010 leasing activity – Merchandise Mart Properties office space:

<table><tr><td rowspan="2"></td><td colspan="2">Average Initial Rent Per</td></tr><tr><td>Square Feet</td><td>Square Foot (1)</td></tr><tr><td>350 West Mart Center</td><td>193,000</td><td>$ 27.64</td></tr><tr><td>L.A. Mart</td><td>142,000</td><td>31.98</td></tr><tr><td>Merchandise Mart</td><td>29,000</td><td>23.87</td></tr><tr><td>Total</td><td>364,000</td><td>29.04</td></tr></table>

(1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased.

Lease expirations for Merchandise Mart Properties office space as of December 31, 2010, assuming none of the tenants exercise renewal options:

<table><tr><td rowspan="2">Year</td><td rowspan="2">Number of Expiring Leases</td><td rowspan="2">Square Feet of Expiring Leases</td><td rowspan="2">Percentage of Merchandise Mart Properties Office Square Feet</td><td colspan="2">Annual Escalated Rent of Expiring Leases</td></tr><tr><td>Total</td><td>Per Square Foot</td></tr><tr><td>2011</td><td>18</td><td>69,000</td><td>3.0%</td><td>$ 1,961,000</td><td>$ 28.35</td></tr><tr><td>2012</td><td>10</td><td>107,000</td><td>4.7%</td><td>3,164,000</td><td>29.58</td></tr><tr><td>2013</td><td>18</td><td>80,000</td><td>3.5%</td><td>3,163,000</td><td>39.51</td></tr><tr><td>2014</td><td>5</td><td>106,000</td><td>4.6%</td><td>3,132,000</td><td>29.51</td></tr><tr><td>2015</td><td>12</td><td>189,000</td><td>8.3%</td><td>5,735,000</td><td>30.33</td></tr><tr><td>2016</td><td>5</td><td>138,000</td><td>6.0%</td><td>3,678,000</td><td>26.70</td></tr><tr><td>2017</td><td>4</td><td>76,000</td><td>3.3%</td><td>1,594,000</td><td>21.05</td></tr><tr><td>2018</td><td>10</td><td>287,000</td><td>12.6%</td><td>8,517,000</td><td>29.64</td></tr><tr><td>2019</td><td>4</td><td>8,000</td><td>0.4%</td><td>334,000</td><td>40.73</td></tr><tr><td>2020</td><td>6</td><td>310,000</td><td>13.5%</td><td>9,106,000</td><td>29.41</td></tr></table>



## MERCHANDISE MART PROPERTIES – CONTINUED

## Showroom Space

The showrooms provide manufacturers and wholesalers with permanent and temporary space in which to display products for buyers, specifiers and end users. The showrooms are also used for hosting trade shows for the [contract furniture, casual furniture,] gift, carpet, crafts, apparel and design industries. Merchandise Mart Properties own and operate five of the leading furniture and gift trade shows, including the contract furniture industry’s largest trade show, NeoCon, which attracts over 50,000 attendees each June and is hosted at the Merchandise Mart building in Chicago.

Occupancy and average escalated rent per square foot:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Escalated Rent Per Square Foot</td></tr><tr><td>2010</td><td>4,204,000</td><td>93.2%</td><td>31.43</td></tr><tr><td>2009</td><td>4,351,000</td><td>89.4%</td><td>31.56</td></tr><tr><td>2008</td><td>4,377,000</td><td>93.3%</td><td>30.84</td></tr><tr><td>2007</td><td>4,385,000</td><td>89.3%</td><td>30.43</td></tr><tr><td>2006</td><td>4,388,000</td><td>91.5%</td><td>29.25</td></tr></table>

2010 Merchandise Mart Properties showroom rental revenues by tenants' industry:

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>Residential Design</td><td>34 %</td></tr><tr><td>Contract Furnishing</td><td>22 %</td></tr><tr><td>Gift</td><td>22 %</td></tr><tr><td>Casual Furniture</td><td>8 %</td></tr><tr><td>Apparel</td><td>6 %</td></tr><tr><td>Building Products</td><td>5 %</td></tr><tr><td>Art</td><td>3 %</td></tr><tr><td></td><td>100 %</td></tr></table>

2010 Leasing Activity – Merchandise Mart Properties showroom space:

<table><tr><td rowspan="2"></td><td colspan="2">Average Initial Rent Per</td></tr><tr><td>Square Feet</td><td>Square Foot (1)</td></tr><tr><td>Merchandise Mart</td><td>297,000</td><td>38.83</td></tr><tr><td>L.A. Mart</td><td>105,000</td><td>21.95</td></tr><tr><td>7 West 34th Street</td><td>89,000</td><td>41.09</td></tr><tr><td>Boston Design Center</td><td>81,000</td><td>39.07</td></tr><tr><td>Washington Design Center</td><td>24,000</td><td>38.20</td></tr><tr><td>350 West Mart Center</td><td>14,000</td><td>29.18</td></tr><tr><td>Total</td><td>610,000</td><td>36.03</td></tr></table>

(1) Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased.



Lease expirations for the Merchandise Mart Properties showroom space as of December 31, 2010, assuming none of the tenants exercise renewal options:

<table><tr><td rowspan="2">Year</td><td rowspan="2">Number of Expiring Leases</td><td rowspan="2">Square Feet of Expiring Leases</td><td rowspan="2">Percentage of Merchandise Mart Properties&#x27; Showroom Square Feet</td><td colspan="2">Annual Escalated Rent of Expiring Leases</td></tr><tr><td>Total</td><td>Per Square Foot</td></tr><tr><td>2011</td><td>125</td><td>390,000</td><td>9.2%</td><td>12,655,000</td><td>32.45</td></tr><tr><td>2012</td><td>116</td><td>300,000</td><td>7.1%</td><td>10,635,000</td><td>35.47</td></tr><tr><td>2013</td><td>154</td><td>454,000</td><td>10.7%</td><td>16,163,000</td><td>35.58</td></tr><tr><td>2014</td><td>111</td><td>381,000</td><td>9.0%</td><td>14,249,000</td><td>37.43</td></tr><tr><td>2015</td><td>95</td><td>288,000</td><td>6.8%</td><td>10,719,000</td><td>37.20</td></tr><tr><td>2016</td><td>45</td><td>198,000</td><td>4.7%</td><td>6,751,000</td><td>34.12</td></tr><tr><td>2017</td><td>48</td><td>356,000</td><td>8.4%</td><td>12,521,000</td><td>35.19</td></tr><tr><td>2018</td><td>36</td><td>260,000</td><td>6.1%</td><td>9,082,000</td><td>34.97</td></tr><tr><td>2019</td><td>21</td><td>109,000</td><td>2.6%</td><td>3,994,000</td><td>36.62</td></tr><tr><td>2020</td><td>26</td><td>120,000</td><td>2.8%</td><td>4,589,000</td><td>38.19</td></tr></table>

## Retail Space

The Merchandise Mart Properties segment also contains approximately 91,000 square feet of retail space, of which we own 81,000 square feet that was 91.0% occupied at December 31, 2010.

## TOYS “R” US, INC. (“TOYS”)

As of December 31, 2010 we own a 32.7% interest in Toys, a worldwide specialty retailer of toys and baby products, which has a significant real estate component. Toys had $5.9 billion of outstanding debt at October 30, 2010, of which our pro rata share was $1.9 billion, none of which is recourse to us.

The following table sets forth the total number of stores operated by Toys as of December 31, 2010:

<table><tr><td></td><td>Total</td><td>Owned</td><td>Building Owned on Leased Ground</td><td>Leased</td></tr><tr><td>Domestic</td><td>857</td><td>297</td><td>229</td><td>331</td></tr><tr><td>International</td><td>522</td><td>79</td><td>26</td><td>417</td></tr><tr><td>Subtotal</td><td>1,379</td><td>376</td><td>255</td><td>748</td></tr><tr><td>Franchised stores</td><td>210</td><td></td><td></td><td></td></tr><tr><td>Total</td><td>1,589</td><td></td><td></td><td></td></tr></table>



## OTHER INVESTMENTS

## 555 California Street Complex

As of December 31, 2010, we own a 70% controlling interest in a three-building complex containing 1.8 million square feet, known as The Bank of America building, located at California and Montgomery Streets in San Francisco’s financial district (“555 California Street”), which we acquired in 2007.

Occupancy and average annual rent per square foot as of December 31, 2010:

<table><tr><td>As of December 31,</td><td>Rentable Square Feet</td><td>Occupancy Rate</td><td>Average Annual Escalated Rent Per Square Foot</td></tr><tr><td>2010</td><td>1,795,000</td><td>93.0%</td><td>55.97</td></tr><tr><td>2009</td><td>1,794,000</td><td>94.8%</td><td>57.25</td></tr><tr><td>2008</td><td>1,789,000</td><td>94.0%</td><td>57.98</td></tr><tr><td>2007</td><td>1,789,000</td><td>95.0%</td><td>59.84</td></tr></table>

2010 rental revenue by tenants’ industry:

<table><tr><td>Industry</td><td>Percentage</td></tr><tr><td>Banking</td><td>42 %</td></tr><tr><td>Finance</td><td>41 %</td></tr><tr><td>Legal Services</td><td>13 %</td></tr><tr><td>Retail</td><td>1 %</td></tr><tr><td>Others</td><td>3 %</td></tr><tr><td></td><td>100 %</td></tr></table>

Lease terms generally range from five to seven years for smaller tenants to as long as 15 years for major tenants, and may provide for extension options at market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.

Tenants accounting for 2% or more of 555 California Street's revenues:

<table><tr><td>Tenant</td><td>Square Feet Leased</td><td>2010 Revenues</td><td>Percentage of 555 California Street&#x27;s Complex&#x27;s Revenues</td><td>Percentage of Total Company Revenues</td></tr><tr><td>Bank of America</td><td>659,000</td><td>36,673,000</td><td>34.7 %</td><td>1.3 %</td></tr><tr><td>UBS Financial Services</td><td>107,000</td><td>7,007,000</td><td>6.6 %</td><td>0.3 %</td></tr><tr><td>Morgan Stanley &amp; Company, Inc.</td><td>89,000</td><td>6,289,000</td><td>5.9 %</td><td>0.2 %</td></tr><tr><td>Kirkland &amp; Ellis LLP</td><td>125,000</td><td>6,217,000</td><td>5.9 %</td><td>0.2 %</td></tr><tr><td>Goldman, Sachs &amp; Co.</td><td>82,000</td><td>4,229,000</td><td>4.0 %</td><td>0.2 %</td></tr><tr><td>McKinsey &amp; Company Inc.</td><td>54,000</td><td>4,171,000</td><td>3.9 %</td><td>0.2 %</td></tr><tr><td>Dodge &amp; Cox</td><td>62,000</td><td>3,935,000</td><td>3.7 %</td><td>0.1 %</td></tr><tr><td>Jones Day</td><td>81,000</td><td>3,467,000</td><td>3.3 %</td><td>0.1 %</td></tr></table>

2010 leasing activity:

During 2010 we leased 202,000 square feet at a weighted average rent initial rent of $54.81 per square foot.



## Alexander's, Inc. (“Alexander’s”)

As of December 31, 2010, we own 32.4% of the outstanding common stock of Alexander’s, which has seven properties in the greater New York metropolitan area. Alexander’s had $1.2 billion of outstanding debt at December 31, 2010, of which our pro rata share was $404 million, none of which is recourse to us.

## Lexington Realty Trust (“Lexington”)

As of December 31, 2010, we own 12.8% of the outstanding common shares of Lexington, which has interests in 229 properties, encompassing approximately 43.0 million square feet across 42 states, generally net-leased to major corporations. Lexington had approximately $1.9 billion of outstanding debt at September 30, 2010, of which our pro rata share was $265 million, none of which is recourse to us.

## Vornado Capital Partners, L.P. and Vornado Capital Partners Parallel, L.P. (the “Fund”)

On July 6, 2010, we completed an initial closing of the Fund with aggregate equity commitments of $550,000,000, of which we committed $200,000,000. We expect to close on an additional $250,000,000 of equity commitments in the first quarter of 2011. We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund’s investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America. The Fund has a term of eight years.



## OTHER INVESTMENTS – CONTINUED

## Hotel Pennsylvania

We own the Hotel Pennsylvania which is located in New York City on Seventh Avenue opposite Madison Square Garden and consists of a hotel portion containing 1,000,000 square feet of hotel space with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space.

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td><td></td></tr><tr><td>Rental information:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Hotel:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Average occupancy rate</td><td>83.2%</td><td>71.5%</td><td>84.1%</td><td>84.4%</td><td>82.1%</td><td></td></tr><tr><td>Average daily rate</td><td>$ 143.28</td><td>$ 133.20</td><td>$ 171.32</td><td>$ 154.78</td><td>$ 133.33</td><td></td></tr><tr><td>Revenue per available room</td><td>$ 119.23</td><td>$ 95.18</td><td>$ 144.01</td><td>$ 130.70</td><td>$ 109.53</td><td></td></tr><tr><td>Commercial:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Office space:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Average occupancy rate</td><td>33.4%</td><td>30.4%</td><td>30.4%</td><td>57.0%</td><td>41.2%</td><td></td></tr><tr><td>Annual rent per square foot</td><td>$ 7.52</td><td>$ 20.54</td><td>$ 18.78</td><td>$ 22.23</td><td>$ 16.42</td><td></td></tr><tr><td>Retail space:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Average occupancy rate</td><td>62.3%</td><td>70.7%</td><td>69.5%</td><td>73.3%</td><td>79.9%</td><td></td></tr><tr><td>Annual rent per square foot</td><td>$ 31.42</td><td>$ 35.05</td><td>$ 41.75</td><td>$ 33.63</td><td>$ 27.54</td><td></td></tr></table>

## Warehouse/Industrial Properties

As of December 31, 2010, we own 6 warehouse/industrial properties in New Jersey containing approximately 1.2 million square feet. Average lease terms range from three to five years. The following table sets forth the occupancy rate and average annual rent per square foot at the end of each of the past five years.

<table><tr><td>December 31,</td><td>Occupancy Rate</td><td>Average Annual Rent Per Square Foot</td></tr><tr><td>2010</td><td>48.6%</td><td>$ 5.61</td></tr><tr><td>2009</td><td>69.4%</td><td>$ 5.40</td></tr><tr><td>2008</td><td>100.0%</td><td>$ 4.70</td></tr><tr><td>2007</td><td>100.0%</td><td>$ 4.70</td></tr><tr><td>2006</td><td>96.9%</td><td>$ 4.17</td></tr></table>



## ITEM 3. LEGAL PROCEEDINGS

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. Discovery is complete and a trial was held in November 2010, with closing arguments expected in March 2011. We intend to continue to vigorously pursue our claims against Stop & Shop.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P. In April 2007, H Street acquired the remaining 50% interest in that fee. On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court's allocation of our purchase price for H Street. The request for damages and punitive damages was denied. As a result of the Trial Court's decision, we recorded a $10,056,000 loss accrual in the first quarter of 2010. We filed a motion to appeal the Trial Court's decision, which the appeals court refused to hear. Accordingly, in the fourth quarter of 2010, we sold the property to the tenants for $14,992,000 in cash (our reduced carrying amount).



## PART II

## ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”

Quarterly high and low sales prices of the common shares and dividends paid per share for the years ended December 31, 2010 and 2009 were as follows:

<table><tr><td rowspan="2">Quarter</td><td colspan="3">Year Ended December 31, 2010</td><td rowspan="2">Dividends</td><td colspan="3">Year Ended December 31, 2009</td></tr><tr><td>High</td><td>Low</td><td></td><td>High</td><td>Low</td><td>Dividends</td></tr><tr><td>1st</td><td>$ 78.40</td><td>$ 61.25</td><td>$ 0.65</td><td>$ 62.33</td><td>$ 27.01</td><td>$ 0.95</td><td></td></tr><tr><td>2nd</td><td>86.79</td><td>70.06</td><td>0.65</td><td>54.00</td><td>32.00</td><td>0.95</td><td></td></tr><tr><td>3rd</td><td>89.06</td><td>68.59</td><td>0.65</td><td>70.23</td><td>39.65</td><td>0.65</td><td></td></tr><tr><td>4th</td><td>91.67</td><td>78.06</td><td>0.65</td><td>73.96</td><td>56.54</td><td>0.65</td><td></td></tr></table>

On January 12, 2011, we increased our quarterly common dividend to $0.69 per common share (an indicated annual rate of $2.76 per common share). On February 1, 2011, there were 1,277 holders of record of our common shares.

## Recent Sales of Unregistered Securities

During the fourth quarter of 2010, we issued 19,074 common shares upon the redemption of Class A units of the Operating Partnership held by persons who received units, in private placements in earlier periods, in exchange for their interests in limited partnerships that owned real estate. The common shares were issued without registration under the Securities Act of 1933 in reliance on Section 4 (2) of that Act.

Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under Part III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.

## Recent Purchases of Equity Securities

We did not repurchase any of our equity securities during the fourth quarter of 2010.



The following graph is a comparison of the five-year cumulative return of our common shares, the Standard & Poor’s 500 Index (the “S&P 500 Index”) and the National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index (excluding health care real estate investment trusts), a peer group index. The graph assumes that $100 was invested on December 31, 2005 in our common shares, the S&P 500 Index and the NAREIT All Equity Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.

Comparison of Five-Year Cumulative Return



<table><tr><td></td><td>2005</td><td>2006</td><td>2007</td><td>2008</td><td>2009</td><td>2010</td></tr><tr><td>Vornado Realty Trust</td><td>100</td><td>151</td><td>113</td><td>81</td><td>100</td><td>124</td></tr><tr><td>S&amp;P 500 Index</td><td>100</td><td>116</td><td>122</td><td>77</td><td>97</td><td>112</td></tr><tr><td>The NAREIT All Equity Index</td><td>100</td><td>135</td><td>114</td><td>71</td><td>91</td><td>116</td></tr></table>



<table><tr><td rowspan="2">(in thousands, except per share amounts)</td><td colspan="5">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td></tr><tr><td>Operating Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Revenues:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Property rentals</td><td>$ 2,271,357</td><td>$ 2,182,194</td><td>$ 2,160,073</td><td>$ 1,923,622</td><td>$ 1,494,314</td></tr><tr><td>Tenant expense reimbursements</td><td>360,448</td><td>357,186</td><td>353,602</td><td>319,847</td><td>258,641</td></tr><tr><td>Fee and other income</td><td>147,922</td><td>157,312</td><td>126,816</td><td>109,663</td><td>103,312</td></tr><tr><td>Total revenues</td><td>2,779,727</td><td>2,696,692</td><td>2,640,491</td><td>2,353,132</td><td>1,856,267</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Operating</td><td>1,099,478</td><td>1,067,229</td><td>1,048,537</td><td>932,865</td><td>722,405</td></tr><tr><td>Depreciation and amortization</td><td>530,704</td><td>531,637</td><td>529,134</td><td>433,030</td><td>311,230</td></tr><tr><td>General and administrative</td><td>214,225</td><td>231,010</td><td>193,969</td><td>188,777</td><td>179,751</td></tr><tr><td>Impairment losses and acquisition costs</td><td>129,458</td><td>75,963</td><td>81,447</td><td>10,375</td><td>-</td></tr><tr><td>Total expenses</td><td>1,973,865</td><td>1,905,839</td><td>1,853,087</td><td>1,565,047</td><td>1,213,386</td></tr><tr><td>Operating income</td><td>805,862</td><td>790,853</td><td>787,404</td><td>788,085</td><td>642,881</td></tr><tr><td>Income (loss) applicable to Toys &quot;R&quot; Us</td><td>71,624</td><td>92,300</td><td>2,380</td><td>(14,337)</td><td>(47,520)</td></tr><tr><td>Income (loss) from partially owned entities</td><td>22,438</td><td>(19,910)</td><td>(159,207)</td><td>82,480</td><td>45,825</td></tr><tr><td>(Loss) from Real Estate Fund</td><td>(303)</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Interest and other investment income (loss), net</td><td>235,315</td><td>(116,350)</td><td>(2,747)</td><td>226,242</td><td>255,242</td></tr><tr><td>Interest and debt expense</td><td>(560,270)</td><td>(617,994)</td><td>(619,531)</td><td>(583,281)</td><td>(379,753)</td></tr><tr><td>Net gain (loss) on early extinguishment of debt</td><td>94,789</td><td>(25,915)</td><td>9,820</td><td>-</td><td>-</td></tr><tr><td>Net gain on dispositions of wholly owned and partially owned assets</td><td>81,432</td><td>5,641</td><td>7,757</td><td>39,493</td><td>76,073</td></tr><tr><td>Income before income taxes</td><td>750,887</td><td>108,625</td><td>25,876</td><td>538,682</td><td>592,748</td></tr><tr><td>Income tax (expense) benefit</td><td>(22,476)</td><td>(20,642)</td><td>204,644</td><td>(9,057)</td><td>(345)</td></tr><tr><td>Income from continuing operations</td><td>728,411</td><td>87,983</td><td>230,520</td><td>529,625</td><td>592,403</td></tr><tr><td>(Loss) income from discontinued operations</td><td>(20,380)</td><td>40,467</td><td>180,925</td><td>78,208</td><td>40,953</td></tr><tr><td>Net income</td><td>708,031</td><td>128,450</td><td>411,445</td><td>607,833</td><td>633,356</td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(4,920)</td><td>2,839</td><td>3,263</td><td>3,494</td><td>1,363</td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>(25,120)</td><td>(55,411)</td><td>(69,788)</td><td>(79,937)</td></tr><tr><td>Net income attributable to Vornado</td><td>647,883</td><td>106,169</td><td>359,297</td><td>541,539</td><td>554,782</td></tr><tr><td>Preferred share dividends</td><td>(55,534)</td><td>(57,076)</td><td>(57,091)</td><td>(57,177)</td><td>(57,511)</td></tr><tr><td>Discount on preferred share redemptions</td><td>4,382</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Net income attributable to common shareholders</td><td>$ 596,731</td><td>$ 49,093</td><td>$ 302,206</td><td>$ 484,362</td><td>$ 497,271</td></tr><tr><td>Income from continuing operations, net - basic</td><td>3.38</td><td>0.07</td><td>0.89</td><td>2.71</td><td>3.20</td></tr><tr><td>Income from continuing operations, net - diluted</td><td>3.35</td><td>0.07</td><td>0.87</td><td>2.60</td><td>3.04</td></tr><tr><td>Net income per common share - basic</td><td>3.27</td><td>0.28</td><td>1.96</td><td>3.18</td><td>3.49</td></tr><tr><td>Net income per common share - diluted</td><td>3.24</td><td>0.28</td><td>1.91</td><td>3.05</td><td>3.31</td></tr><tr><td>Dividends per common share</td><td>2.60</td><td>3.20 (1)</td><td>3.65</td><td>3.45</td><td>3.79</td></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total assets</td><td>20,517,471</td><td>20,185,472</td><td>21,418,048</td><td>22,478,717</td><td>17,954,384</td></tr><tr><td>Real estate, at cost</td><td>17,674,922</td><td>17,574,245</td><td>17,432,906</td><td>16,622,740</td><td>11,216,340</td></tr><tr><td>Accumulated depreciation</td><td>(2,763,997)</td><td>(2,441,344)</td><td>(2,117,643)</td><td>(1,765,443)</td><td>(1,409,317)</td></tr><tr><td>Debt</td><td>10,893,639</td><td>10,685,703</td><td>12,180,835</td><td>11,461,067</td><td>8,164,062</td></tr><tr><td>Total equity</td><td>6,830,405</td><td>6,649,406</td><td>6,214,652</td><td>6,011,240</td><td>5,006,596</td></tr></table>

(1) Paid in a combination of cash and Vornado common shares.



<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td><td></td></tr><tr><td>Other Data:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Funds From Operations (“FFO”)(1):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net income attributable to Vornado</td><td>$   647,883</td><td>$   106,169</td><td>$   359,297</td><td>$   541,539</td><td>$   554,782</td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>505,806</td><td>508,572</td><td>509,367</td><td>451,313</td><td>337,730</td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>(57,248)</td><td>(45,282)</td><td>(57,523)</td><td>(60,811)</td><td>(33,769)</td><td></td></tr><tr><td>Proportionate share of adjustments to equity in net income of Toys to arrive at FFO:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>70,174</td><td>65,358</td><td>66,435</td><td>85,244</td><td>60,445</td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>-</td><td>(164)</td><td>(719)</td><td>(3,012)</td><td>(2,178)</td><td></td></tr><tr><td>Income tax effect of above adjustments</td><td>(24,561)</td><td>(22,819)</td><td>(23,223)</td><td>(28,781)</td><td>(21,038)</td><td></td></tr><tr><td>Proportionate share of adjustments to equity in net income of partially owned entities, excluding Toys, to arrive at FFO:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>78,151</td><td>75,200</td><td>49,513</td><td>48,770</td><td>45,184</td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>(5,784)</td><td>(1,188)</td><td>(8,759)</td><td>(12,451)</td><td>(10,988)</td><td></td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>(39,565)</td><td>(45,344)</td><td>(49,683)</td><td>(46,664)</td><td>(39,809)</td><td></td></tr><tr><td>FFO</td><td>1,174,856</td><td>640,502</td><td>844,705</td><td>975,147</td><td>890,359</td><td></td></tr><tr><td>Preferred share dividends</td><td>(55,534)</td><td>(57,076)</td><td>(57,091)</td><td>(57,177)</td><td>(57,511)</td><td></td></tr><tr><td>Discount on preferred share redemptions</td><td>4,382</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>FFO attributable to common shareholders</td><td>1,123,704</td><td>583,426</td><td>787,614</td><td>917,970</td><td>832,848</td><td></td></tr><tr><td>Interest on 3.875% exchangeable senior debentures</td><td>25,917</td><td>-</td><td>25,261</td><td>24,958</td><td>24,671</td><td></td></tr><tr><td>Convertible preferred share dividends</td><td>160</td><td>170</td><td>189</td><td>277</td><td>631</td><td></td></tr><tr><td>FFO attributable to common shareholders</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>plus assumed conversions(1)</td><td>$   1,149,781</td><td>$   583,596</td><td>$   813,064</td><td>$   943,205</td><td>$   858,150</td><td></td></tr></table>

(1) FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flows as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies.



## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

<table><tr><td></td><td>Page</td></tr><tr><td>Overview</td><td>66</td></tr><tr><td>Overview - Leasing activity</td><td>72</td></tr><tr><td>Critical Accounting Policies</td><td>74</td></tr><tr><td>Results of Operations:</td><td></td></tr><tr><td>Years Ended December 31, 2010 and 2009</td><td>81</td></tr><tr><td>Years Ended December 31, 2009 and 2008</td><td>87</td></tr><tr><td>Supplemental Information:</td><td></td></tr><tr><td>Net Income and EBITDA by Segment for the Three Months Ended December 31, 2010 and 2009</td><td>93</td></tr><tr><td>Changes in EBITDA by segment for the Three Months Ended December 31, 2010 as compared to December 31, 2009</td><td>96</td></tr><tr><td>Changes in EBITDA by segment for the Three Months Ended December 31, 2010 as compared to September 30, 2010</td><td>97</td></tr><tr><td>Related Party Transactions</td><td>98</td></tr><tr><td>Liquidity and Capital Resources</td><td>99</td></tr><tr><td>Certain Future Cash Requirements</td><td>100</td></tr><tr><td>Financing Activities and Contractual Obligations</td><td>102</td></tr><tr><td>Cash Flows for the Year Ended December 31, 2010</td><td>105</td></tr><tr><td>Cash Flows for the Year Ended December 31, 2009</td><td>107</td></tr><tr><td>Cash Flows for the Year Ended December 31, 2008</td><td>109</td></tr><tr><td>Funds From Operations for the Years Ended December 31, 2010 and 2009</td><td>111</td></tr></table>



## Overview

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 93.2% of the common limited partnership interest in the Operating Partnership at December 31, 2010. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

We own and operate office, retail and showroom properties (our “core” operations) with large concentrations of office and retail properties in the New York City metropolitan area and in the Washington, DC / Northern Virginia area. In addition, we have a 32.7% interest in Toys “R” Us, Inc. (“Toys”) which has a significant real estate component, a 32.4% interest in Alexander’s, Inc. (NYSE: ALX) (“Alexander’s”), which has seven properties in the greater New York metropolitan area, as well as interests in other real estate and related investments.

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ended December 31, 2010:

<table><tr><td rowspan="2"></td><td colspan="3">Total Return \( ^{(1)} \)</td></tr><tr><td>Vornado</td><td>RMS</td><td>SNL</td></tr><tr><td>One-year</td><td>23.2%</td><td>28.5%</td><td>28.9%</td></tr><tr><td>Three-year</td><td>5.3%</td><td>2.5%</td><td>5.4%</td></tr><tr><td>Five-year</td><td>15.1%</td><td>13.5%</td><td>17.6%</td></tr><tr><td>Ten-year</td><td>255.7%</td><td>174.9%</td><td>191.1%</td></tr></table>

(1) Past performance is not necessarily indicative of how we will perform in the future.

We intend to achieve our business objective by continuing to pursue our investment philosophy and executing our operating strategies through:

• Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;

- Investing in properties in select markets, such as New York City and Washington, DC, where we believe there is a high likelihood of capital appreciation;

• Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;

• Investing in retail properties in select under-stored locations such as the New York City metropolitan area;

• Developing and redeveloping existing properties to increase returns and maximize value ; and

• Investing in operating companies that have a significant real estate component.

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire our shares or any other securities in the future.

We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends. See “Risk Factors” in Item 1A for additional information regarding these factors.

Substantially all businesses, including ours, were negatively affected by the 2008/2009 economic recession and illiquidity and volatility in the capital and financial markets. Although there are signs of an economic recovery and greater stability in the capital and financial markets, it is not possible for us to predict whether these trends will continue in the future or quantify the impact of these or any other trends on our financial results.



## Overview - continued

## Year Ended December 31, 2010 Financial Results Summary

Net income attributable to common shareholders for the year ended December 31, 2010 was $596,731,000, or $3.24 per diluted share, compared to $49,093,000, or $0.28 per diluted share, for the year ended December 31, 2009. Net income for the years ended December 31, 2010 and 2009 include $63,032,000 and $46,634,000, respectively, for our share of net gains on sale of real estate. In addition, the years ended December 31, 2010 and 2009 include certain items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the year ended December 31, 2010 by $175,844,000, or $0.95 per diluted share, and decreased net income attributable to common shareholders for the year ended December 31, 2009 by $235,965,000, or $1.36 per diluted share.

Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the year ended December 31, 2010 was $1,149,781,000, or $6.05 per diluted share, compared to $583,596,000, or $3.36 per diluted share, for the prior year. FFO for the years ended December 31, 2010 and 2009 includes certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO for the year ended December 31, 2010 by $127,722,000, or $0.67 per diluted share, and decreased FFO for the year ended December 31, 2009 by $265,007,000, or $1.53 per diluted share.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td></td></tr><tr><td>Items that affect comparability (income) expense:</td><td></td><td></td><td></td></tr><tr><td>(Income) from the mark-to-market of derivative positions in marketable equity securities</td><td>$ (130,153)</td><td>$ -</td><td></td></tr><tr><td>Net (gain) loss on early extinguishment of debt</td><td>(92,150)</td><td>25,915</td><td></td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td><td></td></tr><tr><td>Real estate - development related</td><td>94,513</td><td>80,834</td><td></td></tr><tr><td>Other real estate assets</td><td>33,000</td><td>6,989</td><td></td></tr><tr><td>Partially owned entities</td><td>11,481</td><td>36,941</td><td></td></tr><tr><td>Marketable equity securities</td><td>-</td><td>3,361</td><td></td></tr><tr><td>Non-cash mezzanine loans receivable loss accrual (reversal)</td><td>(53,100)</td><td>190,738</td><td></td></tr><tr><td>Litigation loss accrual and acquisitions costs</td><td>17,001</td><td>-</td><td></td></tr><tr><td>Default interest and fees accrued on three loans in special servicing</td><td>15,079</td><td>-</td><td></td></tr><tr><td>Net (gain) resulting from Lexington&#x27;s stock issuance</td><td>(13,710)</td><td>-</td><td></td></tr><tr><td>Discount on redemption of preferred units and shares</td><td>(11,354)</td><td>-</td><td></td></tr><tr><td>Real Estate Fund organization costs</td><td>6,482</td><td>-</td><td></td></tr><tr><td>Our share of partially owned entities:</td><td></td><td></td><td></td></tr><tr><td>Toys - purchase accounting adjustments and litigation settlement income</td><td>-</td><td>(24,146)</td><td></td></tr><tr><td>Alexander&#x27;s - income tax benefit and stock appreciation rights</td><td>(641)</td><td>(24,773)</td><td></td></tr><tr><td>Income from terminated sale of land</td><td>-</td><td>(27,089)</td><td></td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>-</td><td>32,588</td><td></td></tr><tr><td>FFO attributable to discontinued operations</td><td>(11,086)</td><td>(21,240)</td><td></td></tr><tr><td>Other, net</td><td>(2,492)</td><td>8,063</td><td></td></tr><tr><td></td><td>(137,130)</td><td>288,181</td><td></td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>9,408</td><td>(23,174)</td><td></td></tr><tr><td>Items that affect comparability, net (income) expense</td><td>$ (127,722)</td><td>$ 265,007</td><td></td></tr></table>

The percentage increase (decrease) in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the year ended December 31, 2010 over the year ended December 31, 2009 is summarized below.

<table><tr><td>Same Store EBITDA:</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>December 31, 2010 vs. December 31, 2009</td><td></td><td></td><td></td><td></td></tr><tr><td>GAAP basis</td><td>1.7%</td><td>5.2%</td><td>8.6%</td><td>(3.3%)</td></tr><tr><td>Cash Basis</td><td>2.3%</td><td>10.0%</td><td>9.6%</td><td>(2.3%)</td></tr></table>



## Overview - continued

## Quarter Ended December 31, 2010 Financial Results Summary

Net income attributable to common shareholders for the quarter ended December 31, 2010 was $243,414,000, or $1.31 per diluted share, compared to a net loss of $151,192,000, or $0.84 per diluted share, for the quarter ended December 31, 2009. Net income for the quarter ended December 31, 2010 and net loss for the quarter ended December 31, 2009 include $62,718,000 and $2,632,000, respectively, of net gains on sale of real estate. In addition, the quarters ended December 31, 2010 and 2009 include certain other items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the quarter ended December 31, 2010 by $169,634,000, or $0.89 and increased net loss attributable to common shareholders for the quarter ended December 31, 2009 by $184,253,000, or $1.02 per diluted share.

FFO for the quarter ended December 31, 2010 was $335,759,000, or $1.76 per diluted share, compared to $20,000, or $0.00 per diluted share, for the prior year’s quarter. FFO for the quarter ended December 31, 2010 and 2009 include certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO for the quarter ended December 31, 2010 by $111,589,000, or $0.59 per diluted share and decreased FFO for the quarter ended December 31, 2009 by $186,105,000, or $1.02 per diluted share.

For the Three Months Ended

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2009</td></tr><tr><td>Items that affect comparability (income) expense:</td><td></td><td></td></tr><tr><td>(Income) from the mark-to-market of derivative positions in marketable equity securities</td><td>$ (97,904)</td><td>$ -</td></tr><tr><td>Net (gain) loss on early extinguishment of debt</td><td>(93,946)</td><td>52,911</td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td></tr><tr><td>Real estate - development related</td><td>94,513</td><td>80,834</td></tr><tr><td>Other real estate assets</td><td>28,000</td><td>6,989</td></tr><tr><td>Partially owned entities</td><td>11,481</td><td>17,820</td></tr><tr><td>Marketable equity securities</td><td>-</td><td>3,361</td></tr><tr><td>Non-cash mezzanine loans receivable loss accrual (reversal)</td><td>(60,000)</td><td>68,000</td></tr><tr><td>Net (gain) resulting from Lexington&#x27;s stock issuance</td><td>(7,712)</td><td>-</td></tr><tr><td>Acquisition costs</td><td>4,094</td><td>-</td></tr><tr><td>Income from terminated sale of land</td><td>-</td><td>(27,089)</td></tr><tr><td>FFO attributable to discontinued operations</td><td>(1,124)</td><td>(3,625)</td></tr><tr><td>Other, net</td><td>3,174</td><td>2,204</td></tr><tr><td></td><td>(119,424)</td><td>201,405</td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>7,835</td><td>(15,300)</td></tr><tr><td>Items that affect comparability, net (income) expense</td><td>$ (111,589)</td><td>$ 186,105</td></tr></table>

The percentage increase in GAAP basis and cash basis same store EBITDA of our operating segments for the quarter ended December 31, 2010 over the quarter ended December 31, 2009 and the trailing quarter ended September 30, 2010 are summarized below.

<table><tr><td>Same Store EBITDA:</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>December 31, 2010 vs. December 31, 2009</td><td></td><td></td><td></td><td></td></tr><tr><td>GAAP basis</td><td>0.1%</td><td>5.4%</td><td>5.8%</td><td>(4.2%)</td></tr><tr><td>Cash Basis</td><td>(0.9%)</td><td>10.0%</td><td>5.6%</td><td>(6.1%)</td></tr><tr><td>December 31, 2010 vs. September 30, 2010</td><td></td><td></td><td></td><td></td></tr><tr><td>GAAP basis</td><td>(0.8%)</td><td>(0.9%)</td><td>2.3%</td><td>11.1% (1)</td></tr><tr><td>Cash Basis</td><td>(3.1%)</td><td>(0.9%)</td><td>4.9%</td><td>7.9% (1)</td></tr></table>

(1) Primarily from the timing of trade shows.

Calculations of same store EBITDA, reconciliations of our net income to EBITDA and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.



## Overview – continued

## 2010 Acquisitions and Investments

Vornado Capital Partners, L.P. and Vornado Capital Partners Parallel, L.P. (the "Fund")

On July 6, 2010, we completed an initial closing of the Fund with aggregate equity commitments of $550,000,000, of which we committed $200,000,000. We expect to close on an additional $250,000,000 of equity commitments in the first quarter of 2011. We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund's investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America. The Fund has a term of eight years. We consolidate the accounts of the Fund into our consolidated financial statements. In 2010, we incurred $6,482,000 for organization costs of the Fund, net of the Fund's reimbursement to us, which are included in "general and administrative" expenses on our consolidated statement of income.

The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. As of December 31, 2010, the Fund received $146,789,000 of capital from partners, including $53,378,000 from us. During the second half of 2010, the Fund made four investments aggregating approximately $145,000,000 and reimbursed us for $1,500,000 of organization costs.

Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)

We own an economic interest in 23,400,000 J.C. Penney common shares, or 9.9% of J.C. Penney’s outstanding common shares. Below are the details of our investment.

We own 18,584,010 common shares at an average price of $25.70 per share, or $477,678,000 in the aggregate. These shares, which have an aggregate fair value of $600,449,000 at December 31, 2010, are included in marketable equity securities on our consolidated balance sheet and are classified as “available for sale.” Of these shares, 15,500,000 were acquired through the exercise of a call option that originated on September 28, 2010 and settled on November 9, 2010. During the period in which the call option was outstanding and classified as a derivative instrument, we recognized $112,537,000 of income from the mark-to-market of the underlying common shares, which is included in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from November 10 through December 31, 2010, we recognized $10,234,000 from the mark-to-market of the common shares classified as available-for-sale, which is included in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet).

We also own an economic interest in 4,815,990 common shares through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.65 per share, or $137,989,000 in the aggregate. The contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012. The counterparty may accelerate settlement, in whole or in part, upon one year's notice to us. The strike price per share increases at an annual rate of LIBOR plus 80 basis points and decreases for dividends received on the shares. The contract is a derivative instrument that does not qualify for hedge accounting treatment. Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from October 7, 2010 through December 31, 2010, we recognized $17,616,000 of income from the mark-to-market of this position, based on J.C. Penney’s closing share price of $32.31 at December 31, 2010.

As of December 31, 2010, the aggregate economic net gain on our investment in J.C. Penney was $140,387,000, based on J.C. Penney’s closing share price of $32.31 per share and our weighted average cost of $26.31 per share.



## Overview – continued

## 2010 Acquisitions and Investments – continued

## Investment in LNR Property Corporation (“LNR”)

On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco Corp. The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to $425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below. We account for our equity interest in LNR under the equity method on a one-quarter lag basis.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $142 billion as of September 30, 2010, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated income statement.

## 510 Fifth Avenue

On October 8, 2010, we acquired 510 Fifth Avenue, a 59,000 square foot retail property located at 43 \( ^{rd} \)  Street and Fifth Avenue in New York, for 57,000,000, comprised of 24,700,000 in cash and 32,300,000 of existing debt. We consolidate the accounts of this property into our consolidated financial statements from the date of the acquisition.

## San Jose, California

On October 15, 2010, we acquired the 55% interest that we did not already own of a 646,000 square foot retail property located in San Jose, California, for $97,000,000, consisting of $27,000,000 in cash and $70,000,000 of existing debt. We consolidate the accounts of the property into our consolidated financial statements from the date of this acquisition.

## Atlantic City, New Jersey

On November 4, 2010, we acquired 11.3 acres of the land under a portion of the Borgata Hotel and Casino complex for $83,000,000 in cash. The land is leased to the partnership that controls the Borgata Hotel and Casino complex through December 2070. In January 2011, we completed a 10-year $60,000,000 financing of this land. The loan has a fixed interest rate of 5.14% and amortizes beginning in the third year, based on a 30-year schedule.



## Overview – continued

## 2010 Dispositions

On October 20, 2010, we sold a 45% ownership interest in 1299 Pennsylvania Avenue (the Warner Building) and 1101 17 \( ^{th} \)  Street, for 236,700,000, comprised of 91,000,000 in cash and the assumption of existing mortgage debt. We retained the remaining 55% ownership interest and continue to manage and lease the properties. Based on the Warner Building’s implied fair value of 445,000,000, we recognized a net gain of 54,000,000 in the fourth quarter of 2010. The gain on 1101 17 \( ^{th} \)  Street, based on an implied fair value of 81,000,000, will be recognized when we monetize our investment. We share control over major decisions with our joint venture partner. Accordingly, these properties are accounted for under the equity method from the date of the sale.

On January 12, 2011, we sold 1140 Connecticut Avenue and contracted to sell 1227  $ 25^{th} \)  Street, subject to customary closing conditions, for an aggregate price of 127,000,000. We will retain net proceeds of approximately 107,000,000, after repaying an existing mortgage and recognize a net gain of approximately 44,000,000 in the first quarter of 2011.

In March 2010, we ceased making debt service payments on the mortgage loan secured by the High Point Complex in North Carolina as a result of insufficient cash flow and the loan went into default. In November 2010, the property was placed in receivership. While the receivership process is inherently lengthy, we anticipate that the property will be sold in the first half of 2011, at which time the assets and liabilities will be removed from our consolidated balance sheet and we will recognize a net gain of approximately 80,000,000. Accordingly, we have reclassified the results of operations of the property to “(loss) income from discontinued operations,” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.

## 2010 Financing Activities

On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office building. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of 5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately $139,000,000 after repaying the existing loan and closing costs.

On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building located in Crystal City, Arlington, Virginia. The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year schedule beginning in third year. This property was previously unencumbered.

On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip shopping center. The seven-year fixed rate loan bears interest rate at 4.59%, provides for interest only payments during the first five years of the term and amortizes based on a 25-year schedule. This property was previously unencumbered.

In December 2010, we acquired the mortgage loan secured by the Springfield Mall, located in Fairfax County, Virginia for 115,000,000 in cash. The loan had an outstanding balance of 171,500,000. In a separate transaction, we acquired our partner's interest in the partnership that owns the mall in exchange for 25,000,000 in Operating Partnership units. These transactions resulted in a 102,932,000 net gain on early extinguishment of debt.

In August 2010, we sold $660,000,000 of 10-year mortgage notes in a single issuer securitization. The notes are comprised of a $600,000,000 fixed rate component and a $60,000,000 variable rate component and are cross-collateralized by 40 of our strip shopping centers. The $600,000,000 fixed rate portion bears interest at an initial rate of 4.18% and a weighted average rate of 4.31% over the 10-year term and amortizes based on a 30-year schedule. The variable rate portion bears interest at LIBOR plus 1.36%, with a 1% floor (2.36% at December 31, 2010).

In March 2010, we completed a public offering of $500,000,000 aggregate principal amount of 4.25% senior unsecured notes due April 1, 2015 and retained net proceeds of approximately $496,000,000. The notes were sold at 99.834% of their face amount to yield 4.287%. The notes can be redeemed without penalty beginning January 1, 2015.

In 2010, through open market repurchases and tender offers, we purchased $270,491,000 aggregate face amount ($264,476,000 aggregate carrying amount) of our convertible senior debentures and $17,000,000 aggregate face amount ($16,981,000 aggregate carrying amount) of our senior unsecured notes for $274,857,000 and $17,382,000 in cash, respectively, resulting in a net loss of $10,381,000 and $401,000, respectively.



## Overview - continued

## Leasing Activity

The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Tenant improvements and leasing commissions presented below are based on square feet leased during the period.

<table><tr><td rowspan="2">(Square feet in thousands)</td><td rowspan="2">New York Office</td><td rowspan="2">Washington, DC Office</td><td rowspan="2">Retail (3)</td><td colspan="3">Merchandise Mart</td></tr><tr><td>Office</td><td>Showroom</td><td></td></tr><tr><td>As of December 31, 2010:</td><td></td><td></td><td></td><td>Office</td><td></td><td></td></tr><tr><td>Square feet (in service)</td><td>16,194</td><td>17,823</td><td>23,453</td><td>2,608</td><td>4,204</td><td></td></tr><tr><td>Number of properties</td><td>28</td><td>82</td><td>161</td><td>6</td><td>6</td><td></td></tr><tr><td>Occupancy rate</td><td>95.6%</td><td>94.3% (2)</td><td>92.3%</td><td>91.5%</td><td>93.2%</td><td></td></tr><tr><td>Leasing Activity:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Quarter Ended December 31, 2010:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total square feet leased</td><td>243</td><td>408</td><td>187</td><td>35</td><td>117</td><td></td></tr><tr><td>Initial rent (1)</td><td>$ 55.70</td><td>$ 38.77</td><td>$ 25.86</td><td>$ 27.92</td><td>$ 37.32</td><td></td></tr><tr><td>Weighted average lease term (years)</td><td>6.7</td><td>4.1</td><td>6.9</td><td>11.8</td><td>4.6</td><td></td></tr><tr><td>Relet space (included above):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet</td><td>193</td><td>352</td><td>44</td><td>22</td><td>117</td><td></td></tr><tr><td>Initial rent - cash basis (1)</td><td>$ 50.15</td><td>$ 38.83</td><td>$ 30.44</td><td>$ 27.85</td><td>$ 37.32</td><td></td></tr><tr><td>Prior escalated rent - cash basis</td><td>$ 50.81</td><td>$ 39.52</td><td>$ 26.99</td><td>$ 34.82</td><td>$ 38.62</td><td></td></tr><tr><td>Percentage (decrease) increase:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash basis</td><td>(1.3%)</td><td>(1.7%)</td><td>12.8%</td><td>(20.0%)</td><td>(3.4%)</td><td></td></tr><tr><td>GAAP basis</td><td>4.3%</td><td>5.7%</td><td>19.7%</td><td>8.4%</td><td>3.2%</td><td></td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot</td><td>$ 41.49</td><td>$ 16.74</td><td>$ 10.17</td><td>$ 70.17</td><td>$ 3.97</td><td></td></tr><tr><td>Per square foot per annum:</td><td>$ 6.19</td><td>$ 4.08</td><td>$ 1.47</td><td>$ 5.95</td><td>$ 0.86</td><td></td></tr><tr><td>Percentage of initial rent</td><td>11.1%</td><td>10.5%</td><td>5.7%</td><td>21.3%</td><td>2.6%</td><td></td></tr><tr><td>Year Ended December 31, 2010:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total square feet leased</td><td>1,277</td><td>1,697</td><td>1,209</td><td>364</td><td>610</td><td></td></tr><tr><td>Initial rent (1)</td><td>$ 49.81</td><td>$ 38.41</td><td>$ 24.36</td><td>$ 29.04</td><td>$ 36.03</td><td></td></tr><tr><td>Weighted average lease term (years)</td><td>7.5</td><td>4.4</td><td>8.5</td><td>13.4</td><td>4.1</td><td></td></tr><tr><td>Relet space (included above):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet</td><td>1,061</td><td>1,385</td><td>392</td><td>87</td><td>610</td><td></td></tr><tr><td>Initial rent - cash basis (1)</td><td>$ 49.65</td><td>$ 38.51</td><td>$ 18.09</td><td>$ 26.49</td><td>$ 36.03</td><td></td></tr><tr><td>Prior escalated rent - cash basis</td><td>$ 51.91</td><td>$ 36.71</td><td>$ 16.76</td><td>$ 27.32</td><td>$ 36.80</td><td></td></tr><tr><td>Percentage (decrease) increase:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash basis</td><td>(4.4%)</td><td>4.9%</td><td>7.9%</td><td>(3.0%)</td><td>(2.1%)</td><td></td></tr><tr><td>GAAP basis</td><td>(1.9%)</td><td>10.0%</td><td>13.4%</td><td>14.9%</td><td>4.0%</td><td></td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot</td><td>$ 50.29</td><td>$ 12.85</td><td>$ 11.98</td><td>$ 88.22</td><td>$ 4.11</td><td></td></tr><tr><td>Per square foot per annum:</td><td>$ 6.70</td><td>$ 2.92</td><td>$ 1.41</td><td>$ 6.58</td><td>$ 1.00</td><td></td></tr><tr><td>Percentage of initial rent</td><td>13.5%</td><td>7.6%</td><td>5.8%</td><td>22.7%</td><td>3.9%</td><td></td></tr></table>

See notes on the following table



<table><tr><td rowspan="2">(Square feet in thousands) As of December 31, 2009:</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Merchandise Mart</td></tr><tr><td>Office</td><td>Office</td><td>Retail (3)</td><td>Office</td><td>Showroom</td><td></td></tr><tr><td>Square feet (in service)</td><td>16,173</td><td>17,646</td><td>22,553</td><td>2,432</td><td>4,351</td><td></td></tr><tr><td>Number of properties</td><td>28</td><td>82</td><td>162</td><td>6</td><td>6</td><td></td></tr><tr><td>Occupancy rate</td><td>95.5%</td><td>93.3% (2)</td><td>91.6%</td><td>88.8%</td><td>89.4%</td><td></td></tr><tr><td>Leasing Activity:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Year Ended December 31, 2009:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total square feet leased</td><td>1,448</td><td>3,158</td><td>1,139</td><td>203</td><td>754</td><td></td></tr><tr><td>Initial rent (1)</td><td>$ 52.25</td><td>$ 40.26</td><td>$ 23.28</td><td>$ 34.76</td><td>$ 37.04</td><td></td></tr><tr><td>Weighted average lease term (years)</td><td>8.8</td><td>4.3</td><td>9.7</td><td>7.1</td><td>4.2</td><td></td></tr><tr><td>Relet space (included above):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Square feet</td><td>1,304</td><td>2,849</td><td>472</td><td>203</td><td>754</td><td></td></tr><tr><td>Initial rent - cash basis (1)</td><td>$ 52.42</td><td>$ 40.13</td><td>$ 17.99</td><td>$ 34.76</td><td>$ 37.04</td><td></td></tr><tr><td>Prior escalated rent - cash basis</td><td>$ 52.16</td><td>$ 34.56</td><td>$ 16.67</td><td>$ 33.75</td><td>$ 37.29</td><td></td></tr><tr><td>Percentage (decrease) increase:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash basis</td><td>0.5%</td><td>16.1%</td><td>7.9%</td><td>3.0%</td><td>(0.7%)</td><td></td></tr><tr><td>GAAP basis</td><td>4.7%</td><td>18.9%</td><td>16.4%</td><td>18.0%</td><td>8.2%</td><td></td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot</td><td>$ 48.48</td><td>$ 9.03</td><td>$ 8.00</td><td>$ 34.30</td><td>$ 3.15</td><td></td></tr><tr><td>Per square foot per annum:</td><td>$ 5.51</td><td>$ 2.10</td><td>$ 0.82</td><td>$ 4.83</td><td>$ 0.75</td><td></td></tr><tr><td>Percentage of initial rent</td><td>10.5%</td><td>5.2%</td><td>3.5%</td><td>13.9%</td><td>2.7%</td><td></td></tr></table>

(1) Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased.

(2) Excluding residential and other properties, occupancy rates for the office properties were as follows.

December 31, 2010 94.0%

December 31, 2009 94.7%

(3) Mall sales per square foot, including partially owned malls, for the trailing twelve months ended December 31, 2010 and 2009 were $461 and $466, respectively.



## Recently Issued Accounting Literature

In the fourth quarter of 2010, the Financial Accounting Standards Board (“FASB”) issued an update to the guidance contained in Accounting Standards Codification (“ASC”) 310, Receivables. The new guidance requires companies to provide more information about the credit quality of their financing receivables in the disclosures to financial statements including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The adoption of this accounting guidance did not have a significant impact on our consolidated financial statements.

On January 21, 2010, the FASB issued an update to ASC 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements. The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

## Critical Accounting Policies

In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of 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 we believe are critical to the preparation of our consolidated financial statements. The summary should be read in conjunction with the more complete discussion of our accounting policies included in Note 2 to the consolidated financial statements in this Annual Report on Form 10-K.

## Real Estate

Real estate is carried at cost, net of accumulated depreciation and amortization. As of December 31, 2010 and 2009, the carrying amounts of real estate, net of accumulated depreciation, were $14.9 billion and $15.1 billion, respectively. Maintenance and repairs are expensed as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated. As real estate is undergoing development activities, all property operating expenses, including interest expense, are capitalized to the cost of real property to the extent we believe such costs are recoverable through the value of the property.

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and acquired liabilities and we allocate purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known trends and market/economic conditions.

Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.



## Critical Accounting Policies – continued

## Identified Intangibles

As of December 31, 2010 and 2009, the carrying amounts of identified intangible assets (including acquired above-market leases, tenant relationships and acquired in-place leases) were $348,745,000 and $439,549,000, respectively. The carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $528,905,000 and $606,390,000, respectively. Identified intangibles are recorded at their estimated fair value, separate and apart from goodwill. Identified intangibles that are determined to have finite lives are amortized over the period in which they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of the identified intangible over its estimated fair value. If intangible assets are impaired or estimated useful lives change, the impact to our consolidated financial statements could be material.

## Mezzanine Loans Receivable

As of December 31, 2010 and 2009, the carrying amounts of mezzanine loans receivable were $202,412,000 and $203,286,000, respectively, net of valuation allowances of $73,216,000 and $190,738,000, respectively. We invest in mezzanine loans of entities that have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or premium. We accrete or amortize any discount or premium over the life of the related receivable utilizing the effective interest method or straight-line method, if the result is not materially different. We evaluate the collectability of both interest and principal of each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. If our estimates of the collectability of both interest and principal or the fair value of our loans change based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

## Partially Owned Entities

As of December 31, 2010 and 2009, the carrying amounts of investments in partially owned entities, including Alexander’s and Toys “R” Us, were $1.4 billion and $1.2 billion, respectively. In determining whether we have a controlling interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which we have the power over significant activities of the entity and the obligation to absorb losses or receive benefits that could potentially be significant to the entity. We account for investments on the equity method when the requirements for consolidation are not met and we have significant influence over the operations of the investee. Equity method investments are initially recorded at cost and subsequently adjusted for our share of net income or loss and cash contributions and distributions each period. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.

Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available information at the time the analyses are prepared. The ultimate realization of our investments in partially owned entities is dependent on a number of factors, including the performance of each investment and market conditions. If our estimates of the projected future cash flows, the nature of development activities for properties for which such activities are planned and the estimated fair value of the investment change based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.



## Critical Accounting Policies – continued

## Allowance For Doubtful Accounts

We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts ($62,979,000 and $46,708,000 as of December 31, 2010 and 2009) for estimated losses resulting from the inability of tenants to make required payments under their lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents ($7,323,000 and $4,672,000 as of December 31, 2010 and 2009, respectively). This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements.

## Revenue Recognition

We have the following revenue sources and revenue recognition policies:

- Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.

- Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds. These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved).

- Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet revenue are recognized when the services have been rendered.

- Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is recognized when the trade shows have occurred.

- Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred.

- Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially owned entities. This revenue is recognized as the related services are performed under the respective agreements.

Before we recognize revenue, we assess, among other things, its collectibility. If our assessment of the collectibility of revenue changes, the impact on our consolidated financial statements could be material.

## Income Taxes

We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We distribute to our shareholders 100% of our taxable income. Therefore, no provision for Federal income taxes is required. If we fail to distribute the required amount of income to our shareholders, or fail to meet other REIT requirements, we may fail to qualify as a REIT which may result in substantial adverse tax consequences.



## Net Income and EBITDA by Segment for the Years Ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="9">For the Year Ended December 31, 2010</td></tr><tr><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td><td></td></tr><tr><td>Property rentals</td><td>$ 2,129,284</td><td>$ 775,142</td><td>$ 566,041</td><td>$ 398,489</td><td>$ 219,882</td><td>$ -</td><td>$ 169,730</td><td></td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>75,871</td><td>34,212</td><td>5,849</td><td>29,079</td><td>2,756</td><td>-</td><td>3,975</td><td></td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>66,202</td><td>36,081</td><td>2,326</td><td>22,213</td><td>(75)</td><td>-</td><td>5,657</td><td></td><td></td></tr><tr><td>Total rentals</td><td>2,271,357</td><td>845,435</td><td>574,216</td><td>449,781</td><td>222,563</td><td>-</td><td>179,362</td><td></td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>360,448</td><td>137,624</td><td>51,963</td><td>145,905</td><td>13,998</td><td>-</td><td>10,958</td><td></td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>58,053</td><td>88,664</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(30,611)</td><td></td><td></td></tr><tr><td>Management and leasing fees</td><td>20,117</td><td>6,192</td><td>15,934</td><td>1,029</td><td>156</td><td>-</td><td>(3,194)</td><td></td><td></td></tr><tr><td>Lease termination fees</td><td>14,826</td><td>4,270</td><td>1,148</td><td>7,641</td><td>467</td><td>-</td><td>1,300</td><td></td><td></td></tr><tr><td>Other</td><td>54,926</td><td>22,283</td><td>21,427</td><td>4,172</td><td>3,904</td><td>-</td><td>3,140</td><td></td><td></td></tr><tr><td>Total revenues</td><td>2,779,727</td><td>1,104,468</td><td>664,688</td><td>608,528</td><td>241,088</td><td>-</td><td>160,955</td><td></td><td></td></tr><tr><td>Operating expenses</td><td>1,099,478</td><td>470,177</td><td>213,935</td><td>224,340</td><td>125,863</td><td>-</td><td>65,163</td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>530,704</td><td>176,931</td><td>142,720</td><td>110,416</td><td>46,155</td><td>-</td><td>54,482</td><td></td><td></td></tr><tr><td>General and administrative</td><td>214,225</td><td>18,621</td><td>25,464</td><td>29,610</td><td>26,953</td><td>-</td><td>113,577</td><td></td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>129,458</td><td>-</td><td>-</td><td>72,500</td><td>20,000</td><td>-</td><td>36,958</td><td></td><td></td></tr><tr><td>Total expenses</td><td>1,973,865</td><td>665,729</td><td>382,119</td><td>436,866</td><td>218,971</td><td>-</td><td>270,180</td><td></td><td></td></tr><tr><td>Operating income (loss)</td><td>805,862</td><td>438,739</td><td>282,569</td><td>171,662</td><td>22,117</td><td>-</td><td>(109,225)</td><td></td><td></td></tr><tr><td>Income applicable to Toys</td><td>71,624</td><td>-</td><td>-</td><td>-</td><td>-</td><td>71,624</td><td>-</td><td></td><td></td></tr><tr><td>Income (loss) from partially owned entities</td><td>22,438</td><td>(6,354)</td><td>(564)</td><td>9,401</td><td>(179)</td><td>-</td><td>20,134</td><td></td><td></td></tr><tr><td>(Loss) from Real Estate Fund</td><td>(303)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(303)</td><td></td><td></td></tr><tr><td>Interest and other investment income, net</td><td>235,315</td><td>608</td><td>157</td><td>180</td><td>47</td><td>-</td><td>234,323</td><td></td><td></td></tr><tr><td>Interest and debt expense</td><td>(560,270)</td><td>(132,279)</td><td>(130,540)</td><td>(85,281)</td><td>(37,932)</td><td>-</td><td>(174,238)</td><td></td><td></td></tr><tr><td>Net gain (loss) on early extinguishment of debt</td><td>94,789</td><td>-</td><td>-</td><td>105,571</td><td>-</td><td>-</td><td>(10,782)</td><td></td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>81,432</td><td>-</td><td>54,742</td><td>-</td><td>765</td><td>-</td><td>25,925</td><td></td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>750,887</td><td>300,714</td><td>206,364</td><td>201,533</td><td>(15,182)</td><td>71,624</td><td>(14,166)</td><td></td><td></td></tr><tr><td>Income tax expense</td><td>(22,476)</td><td>(2,167)</td><td>(1,816)</td><td>(37)</td><td>(173)</td><td>-</td><td>(18,283)</td><td></td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>728,411</td><td>298,547</td><td>204,548</td><td>201,496</td><td>(15,355)</td><td>71,624</td><td>(32,449)</td><td></td><td></td></tr><tr><td>(Loss) from discontinued operations</td><td>(20,380)</td><td>-</td><td>(4,481)</td><td>(2,637)</td><td>(13,262)</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Net income (loss)</td><td>708,031</td><td>298,547</td><td>200,067</td><td>198,859</td><td>(28,617)</td><td>71,624</td><td>(32,449)</td><td></td><td></td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(4,920)</td><td>(9,559)</td><td>-</td><td>(778)</td><td>-</td><td>-</td><td>5,417</td><td></td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,228)</td><td></td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>647,883</td><td>288,988</td><td>200,067</td><td>198,081</td><td>(28,617)</td><td>71,624</td><td>(82,260)</td><td></td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>828,082</td><td>126,209</td><td>136,174</td><td>92,653</td><td>61,379</td><td>177,272</td><td>234,395</td><td></td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>729,426</td><td>170,505</td><td>159,283</td><td>114,335</td><td>51,064</td><td>131,284</td><td>102,955</td><td></td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(23,036)</td><td>2,167</td><td>2,027</td><td>37</td><td>232</td><td>(45,418)</td><td>17,919</td><td></td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 2,182,355</td><td>$ 587,869</td><td>$ 497,551</td><td>$ 405,106</td><td>$ 84,058</td><td>$ 334,762</td><td>$ 273,009</td><td></td><td></td></tr></table>

See notes on page 80.



## Net Income and EBITDA by Segment for the Years Ended December 31, 2010, 2009 and 2008 - continued

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="8">For the Year Ended December 31, 2009</td></tr><tr><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td></tr><tr><td>Property rentals</td><td>$ 2,021,072</td><td>$ 758,557</td><td>$ 526,683</td><td>$ 362,689</td><td>$ 213,911</td><td>$ -</td><td>$ 159,232</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>89,168</td><td>36,805</td><td>22,683</td><td>27,104</td><td>2,107</td><td>-</td><td>469</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>71,954</td><td>40,129</td><td>3,452</td><td>22,993</td><td>89</td><td>-</td><td>5,291</td><td></td></tr><tr><td>Total rentals</td><td>2,182,194</td><td>835,491</td><td>552,818</td><td>412,786</td><td>216,107</td><td>-</td><td>164,992</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>357,186</td><td>136,541</td><td>60,620</td><td>134,670</td><td>15,517</td><td>-</td><td>9,838</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>53,824</td><td>75,549</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(21,725)</td><td></td></tr><tr><td>Management and leasing fees</td><td>11,456</td><td>4,211</td><td>8,183</td><td>1,731</td><td>88</td><td>-</td><td>(2,757)</td><td></td></tr><tr><td>Lease termination fees</td><td>4,888</td><td>1,840</td><td>2,224</td><td>464</td><td>221</td><td>-</td><td>139</td><td></td></tr><tr><td>Other</td><td>87,144</td><td>18,868</td><td>47,745</td><td>2,619</td><td>9,458</td><td>-</td><td>8,454</td><td></td></tr><tr><td>Total revenues</td><td>2,696,692</td><td>1,072,500</td><td>671,590</td><td>552,270</td><td>241,391</td><td>-</td><td>158,941</td><td></td></tr><tr><td>Operating expenses</td><td>1,067,229</td><td>452,370</td><td>220,333</td><td>204,224</td><td>125,602</td><td>-</td><td>64,700</td><td></td></tr><tr><td>Depreciation and amortization</td><td>531,637</td><td>173,923</td><td>142,415</td><td>101,353</td><td>51,064</td><td>-</td><td>62,882</td><td></td></tr><tr><td>General and administrative</td><td>231,010</td><td>22,820</td><td>26,205</td><td>30,339</td><td>31,017</td><td>-</td><td>120,629</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>75,963</td><td>-</td><td>24,875</td><td>11,789</td><td>-</td><td>-</td><td>39,299</td><td></td></tr><tr><td>Total expenses</td><td>1,905,839</td><td>649,113</td><td>413,828</td><td>347,705</td><td>207,683</td><td>-</td><td>287,510</td><td></td></tr><tr><td>Operating income (loss)</td><td>790,853</td><td>423,387</td><td>257,762</td><td>204,565</td><td>33,708</td><td>-</td><td>(128,569)</td><td></td></tr><tr><td>Income applicable to Toys</td><td>92,300</td><td>-</td><td>-</td><td>-</td><td>-</td><td>92,300</td><td>-</td><td></td></tr><tr><td>(Loss) income from partially owned entities</td><td>(19,910)</td><td>5,817</td><td>4,850</td><td>4,728</td><td>151</td><td>-</td><td>(35,456)</td><td></td></tr><tr><td>Interest and other investment (loss) income, net</td><td>(116,350)</td><td>876</td><td>786</td><td>69</td><td>95</td><td>-</td><td>(118,176)</td><td></td></tr><tr><td>Interest and debt expense</td><td>(617,994)</td><td>(133,647)</td><td>(128,039)</td><td>(89,070)</td><td>(38,009)</td><td>-</td><td>(229,229)</td><td></td></tr><tr><td>Net (loss) gain on early extinguishment of debt</td><td>(25,915)</td><td>-</td><td>-</td><td>769</td><td>-</td><td>-</td><td>(26,684)</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>5,641</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>5,641</td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>108,625</td><td>296,433</td><td>135,359</td><td>121,061</td><td>(4,055)</td><td>92,300</td><td>(532,473)</td><td></td></tr><tr><td>Income tax expense</td><td>(20,642)</td><td>(1,332)</td><td>(1,482)</td><td>(319)</td><td>(2,140)</td><td>-</td><td>(15,369)</td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>87,983</td><td>295,101</td><td>133,877</td><td>120,742</td><td>(6,195)</td><td>92,300</td><td>(547,842)</td><td></td></tr><tr><td>Income (loss) from discontinued operations</td><td>40,467</td><td>-</td><td>52,308</td><td>(6,791)</td><td>(5,050)</td><td>-</td><td>-</td><td></td></tr><tr><td>Net income (loss)</td><td>128,450</td><td>295,101</td><td>186,185</td><td>113,951</td><td>(11,245)</td><td>92,300</td><td>(547,842)</td><td></td></tr><tr><td>Net loss (income) attributable to noncontrolling interests in consolidated subsidiaries</td><td>2,839</td><td>(9,098)</td><td>-</td><td>915</td><td>-</td><td>-</td><td>11,022</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(25,120)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(25,120)</td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>106,169</td><td>286,003</td><td>186,185</td><td>114,866</td><td>(11,245)</td><td>92,300</td><td>(561,940)</td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>826,827</td><td>126,968</td><td>132,610</td><td>95,990</td><td>52,862</td><td>127,390</td><td>291,007</td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>728,815</td><td>168,517</td><td>152,747</td><td>105,903</td><td>56,702</td><td>132,227</td><td>112,719</td><td></td></tr><tr><td>Income tax expense (benefit)(2)</td><td>10,193</td><td>1,332</td><td>1,590</td><td>319</td><td>2,208</td><td>(13,185)</td><td>17,929</td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 1,672,004</td><td>$ 582,820</td><td>$ 473,132</td><td>$ 317,078</td><td>$ 100,527</td><td>$ 338,732</td><td>$ (140,285)</td><td></td></tr></table>

See notes on page 80.



## Net Income and EBITDA by Segment for the Years Ended December 31, 2010, 2009 and 2008 - continued

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="8">For the Year Ended December 31, 2008</td></tr><tr><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td></tr><tr><td>Property rentals</td><td>$ 1,975,838</td><td>$ 722,445</td><td>$ 497,735</td><td>$ 342,714</td><td>$ 215,854</td><td>$ -</td><td>$ 197,090</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>88,703</td><td>42,766</td><td>15,720</td><td>20,384</td><td>8,516</td><td>-</td><td>1,317</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>95,532</td><td>60,355</td><td>3,998</td><td>26,546</td><td>161</td><td>-</td><td>4,472</td><td></td></tr><tr><td>Total rentals</td><td>2,160,073</td><td>825,566</td><td>517,453</td><td>389,644</td><td>224,531</td><td>-</td><td>202,879</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>353,602</td><td>135,788</td><td>57,793</td><td>127,903</td><td>18,055</td><td>-</td><td>14,063</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>56,416</td><td>71,833</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(15,417)</td><td></td></tr><tr><td>Management and leasing fees</td><td>13,397</td><td>6,411</td><td>8,940</td><td>1,673</td><td>349</td><td>-</td><td>(3,976)</td><td></td></tr><tr><td>Lease termination fees</td><td>8,465</td><td>3,088</td><td>2,635</td><td>2,281</td><td>461</td><td>-</td><td>-</td><td></td></tr><tr><td>Other</td><td>48,538</td><td>15,699</td><td>22,350</td><td>2,543</td><td>6,811</td><td>-</td><td>1,135</td><td></td></tr><tr><td>Total revenues</td><td>2,640,491</td><td>1,058,385</td><td>609,171</td><td>524,044</td><td>250,207</td><td>-</td><td>198,684</td><td></td></tr><tr><td>Operating expenses</td><td>1,048,537</td><td>439,012</td><td>211,687</td><td>198,802</td><td>127,437</td><td>-</td><td>71,599</td><td></td></tr><tr><td>Depreciation and amortization</td><td>529,134</td><td>190,925</td><td>135,351</td><td>90,974</td><td>46,823</td><td>-</td><td>65,061</td><td></td></tr><tr><td>General and administrative</td><td>193,969</td><td>20,217</td><td>26,522</td><td>29,836</td><td>29,252</td><td>-</td><td>88,142</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>81,447</td><td>-</td><td>-</td><td>595</td><td>-</td><td>-</td><td>80,852</td><td></td></tr><tr><td>Total expenses</td><td>1,853,087</td><td>650,154</td><td>373,560</td><td>320,207</td><td>203,512</td><td>-</td><td>305,654</td><td></td></tr><tr><td>Operating income (loss)</td><td>787,404</td><td>408,231</td><td>235,611</td><td>203,837</td><td>46,695</td><td>-</td><td>(106,970)</td><td></td></tr><tr><td>Income applicable to Toys</td><td>2,380</td><td>-</td><td>-</td><td>-</td><td>-</td><td>2,380</td><td>-</td><td></td></tr><tr><td>(Loss) income from partially owned entities</td><td>(159,207)</td><td>6,082</td><td>6,173</td><td>10,371</td><td>1,106</td><td>-</td><td>(182,939)</td><td></td></tr><tr><td>Interest and other investment (loss) income, net</td><td>(2,747)</td><td>2,288</td><td>2,108</td><td>464</td><td>329</td><td>-</td><td>(7,936)</td><td></td></tr><tr><td>Interest and debt expense</td><td>(619,531)</td><td>(139,146)</td><td>(125,141)</td><td>(85,895)</td><td>(38,214)</td><td>-</td><td>(231,135)</td><td></td></tr><tr><td>Net gain on early extinguishment of debt</td><td>9,820</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>9,820</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>7,757</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>7,757</td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>25,876</td><td>277,455</td><td>118,751</td><td>128,777</td><td>9,916</td><td>2,380</td><td>(511,403)</td><td></td></tr><tr><td>Income tax benefit (expense)</td><td>204,644</td><td>-</td><td>221,080</td><td>(82)</td><td>(1,206)</td><td>-</td><td>(15,148)</td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>230,520</td><td>277,455</td><td>339,831</td><td>128,695</td><td>8,710</td><td>2,380</td><td>(526,551)</td><td></td></tr><tr><td>Income from discontinued operations</td><td>180,925</td><td>-</td><td>64,849</td><td>3,001</td><td>1,163</td><td>-</td><td>111,912</td><td></td></tr><tr><td>Net income (loss)</td><td>411,445</td><td>277,455</td><td>404,680</td><td>131,696</td><td>9,873</td><td>2,380</td><td>(414,639)</td><td></td></tr><tr><td>Net loss (income) attributable to noncontrolling interests in consolidated subsidiaries</td><td>3,263</td><td>(4,762)</td><td>-</td><td>157</td><td>(125)</td><td>-</td><td>7,993</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,411)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,411)</td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>359,297</td><td>272,693</td><td>404,680</td><td>131,853</td><td>9,748</td><td>2,380</td><td>(462,057)</td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>821,940</td><td>132,406</td><td>130,310</td><td>102,600</td><td>53,072</td><td>147,812</td><td>255,740</td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>710,526</td><td>181,699</td><td>143,989</td><td>98,238</td><td>52,357</td><td>136,634</td><td>97,609</td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(142,415)</td><td>-</td><td>(220,965)</td><td>82</td><td>1,260</td><td>59,652</td><td>17,556</td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 1,749,348</td><td>$ 586,798</td><td>$ 458,014</td><td>$ 332,773</td><td>$ 116,437</td><td>$ 346,478</td><td>$ (91,152)</td><td></td></tr></table>

See notes on the following page.



## Notes to preceding tabular information:

(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize these measures to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) The components of Other EBITDA are summarized below. The totals for each of the columns below agree to the total EBITDA for the “other” column in the preceding EBITDA by segment reconciliations.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Alexander&#x27;s</td><td>$ 57,425</td><td>$ 81,703</td><td>$ 64,683</td><td></td></tr><tr><td>Lexington Realty Trust (&quot;Lexington&quot;)</td><td>55,304</td><td>50,024</td><td>35,150</td><td></td></tr><tr><td>555 California Street</td><td>46,782</td><td>44,757</td><td>48,316</td><td></td></tr><tr><td>Hotel Pennsylvania</td><td>23,763</td><td>15,108</td><td>42,269</td><td></td></tr><tr><td>LNR (acquired in July 2010)</td><td>6,116</td><td>-</td><td>-</td><td></td></tr><tr><td>Industrial warehouses</td><td>2,528</td><td>4,737</td><td>5,264</td><td></td></tr><tr><td>Other investments</td><td>31,587</td><td>6,981</td><td>6,321</td><td></td></tr><tr><td></td><td>223,505</td><td>203,310</td><td>202,003</td><td></td></tr><tr><td>Corporate general and administrative expenses (1)</td><td>(90,343)</td><td>(79,843)</td><td>(91,967)</td><td></td></tr><tr><td>Investment income and other, net (1)</td><td>65,499</td><td>78,593</td><td>109,519</td><td></td></tr><tr><td>Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>(25,120)</td><td>(55,411)</td><td></td></tr><tr><td>Income (loss) from the mark-to-market of derivative positions in marketable equity securities</td><td>130,153</td><td>-</td><td>(33,740)</td><td></td></tr><tr><td>Net (loss) gain on early extinguishment of debt</td><td>(10,782)</td><td>(26,684)</td><td>-</td><td></td></tr><tr><td>Real Estate Fund organization costs</td><td>(5,937)</td><td>-</td><td>-</td><td></td></tr><tr><td>Non-cash mezzanine loans receivable loss (accrual) reversal</td><td>53,100</td><td>(190,738)</td><td>10,300</td><td></td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td><td></td><td></td></tr><tr><td>Investment in Lexington</td><td>-</td><td>(19,121)</td><td>(107,882)</td><td></td></tr><tr><td>Marketable equity securities</td><td>-</td><td>(3,361)</td><td>(76,352)</td><td></td></tr><tr><td>Real estate - primarily development projects:</td><td></td><td></td><td></td><td></td></tr><tr><td>Wholly owned entities (including acquisition costs)</td><td>(36,958)</td><td>(39,299)</td><td>(80,852)</td><td></td></tr><tr><td>Partially owned entities</td><td>-</td><td>(17,820)</td><td>(96,037)</td><td></td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>-</td><td>(20,202)</td><td>-</td><td></td></tr><tr><td>Discontinued operations of Americold (including a $112,690 net gain on sale)</td><td>-</td><td>-</td><td>129,267</td><td></td></tr><tr><td></td><td>$ 273,009</td><td>$ (140,285)</td><td>$ (91,152)</td><td></td></tr></table>

(1) The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting liability.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009

## Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $2,779,727,000 for the year ended December 31, 2010, compared to $2,696,692,000 in the prior year, an increase of $83,035,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)

<table><tr><td>Increase (decrease) due to:</td><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Other</td></tr><tr><td>Property rentals:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions and other</td><td>$ (1,713)</td><td>$ -</td><td>$ (6,890)</td><td>$ 4,161</td><td>$ 2,064</td><td>$ (1,048)</td></tr><tr><td>Development/redevelopment</td><td>12,716</td><td>-</td><td>10,316</td><td>2,400</td><td>-</td><td>-</td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>(5,752)</td><td>(4,048)</td><td>(1,126)</td><td>(780)</td><td>(164)</td><td>366</td></tr><tr><td>Hotel Pennsylvania</td><td>15,622</td><td>-</td><td>-</td><td>-</td><td>-</td><td>15,622 (1)</td></tr><tr><td>Trade shows</td><td>5,044</td><td>-</td><td>-</td><td>-</td><td>5,044</td><td>-</td></tr><tr><td>Leasing activity (see page 72)</td><td>63,246</td><td>13,992</td><td>19,098</td><td>31,214</td><td>(488)</td><td>(570)</td></tr><tr><td></td><td>89,163</td><td>9,944</td><td>21,398</td><td>36,995</td><td>6,456</td><td>14,370</td></tr><tr><td>Tenant expense reimbursements:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions/development</td><td>1,079</td><td>-</td><td>(3,236)</td><td>4,564</td><td>-</td><td>(249)</td></tr><tr><td>Operations</td><td>2,183</td><td>1,083</td><td>(5,421)</td><td>6,671</td><td>(1,519)</td><td>1,369</td></tr><tr><td></td><td>3,262</td><td>1,083</td><td>(8,657)</td><td>11,235</td><td>(1,519)</td><td>1,120</td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Lease cancellation fee income</td><td>9,938</td><td>2,430</td><td>(1,076)</td><td>7,177</td><td>246</td><td>1,161</td></tr><tr><td>Management and leasing fees</td><td>8,661</td><td>1,981</td><td>7,751 (2)</td><td>(702)</td><td>68</td><td>(437)</td></tr><tr><td>BMS cleaning fees</td><td>4,229</td><td>13,115</td><td>-</td><td>-</td><td>-</td><td>(8,886) (3)</td></tr><tr><td>Other</td><td>(32,218)</td><td>3,415</td><td>(26,318) (4)</td><td>1,553</td><td>(5,554) (5)</td><td>(5,314) (6)</td></tr><tr><td></td><td>(9,390)</td><td>20,941</td><td>(19,643)</td><td>8,028</td><td>(5,240)</td><td>(13,476)</td></tr><tr><td>Total increase (decrease) in revenues</td><td>$ 83,035</td><td>$ 31,968</td><td>$ (6,902)</td><td>$ 56,258</td><td>$ (303)</td><td>$ 2,014</td></tr></table>

(1) Primarily from higher REVPAR.

(2) Primarily from leasing fees in connection with our management of a development project.

(3) Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (3) on page 82.

(4) Primarily from income in the prior year resulting from a forfeited non-refundable purchase deposit. See note (5) on page 87.

(5) Primarily from income in the prior year resulting from the surrender and build-out of tenant space.

(6) Primarily from $5,402 of income in the prior year resulting from the termination of a lease with a partially owned entity.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued

## Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $1,973,865,000 for the year ended December 31, 2010, compared to $1,905,839,000 in the prior year, an increase of $68,026,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)

<table><tr><td rowspan="2">Increase (decrease) due to:</td><td rowspan="2">Total</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Merchandise</td><td rowspan="2">Other</td></tr><tr><td>Office</td><td>Office</td><td>Office</td><td>Retail</td><td>Mart</td><td></td></tr><tr><td>Operating:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions and other</td><td>$ (6,291)</td><td>$ (4,688)</td><td>$ (3,890)</td><td>$ 1,213</td><td>$ 1,170</td><td>$ (696)</td><td></td><td></td></tr><tr><td>Development/redevelopment</td><td>3,425</td><td>-</td><td>2,941</td><td>484</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Hotel activity</td><td>11,041</td><td>-</td><td>-</td><td>-</td><td>-</td><td>11,041</td><td></td><td></td></tr><tr><td>Trade shows activity</td><td>(1,063)</td><td>-</td><td>-</td><td>-</td><td>(1,063)</td><td>-</td><td></td><td></td></tr><tr><td>Operations</td><td>25,137</td><td>22,495</td><td>(5,449)</td><td>18,419</td><td>(446)</td><td>(9,882)</td><td>(3)</td><td></td></tr><tr><td></td><td>32,249</td><td>17,807</td><td>(6,398)</td><td>20,116</td><td>261</td><td>463</td><td></td><td></td></tr><tr><td>Depreciation and amortization:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions/development</td><td>(682)</td><td>-</td><td>(2,207)</td><td>2,132</td><td>-</td><td>(607)</td><td></td><td></td></tr><tr><td>Operations</td><td>(251)</td><td>3,008</td><td>2,512</td><td>6,931</td><td>(4,909)</td><td>(7,793)</td><td></td><td></td></tr><tr><td></td><td>(933)</td><td>3,008</td><td>305</td><td>9,063</td><td>(4,909)</td><td>(8,400)</td><td></td><td></td></tr><tr><td>General and administrative:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>(32,588)</td><td>(3,451)</td><td>(3,131)</td><td>(4,793)</td><td>(1,011)</td><td>(20,202)</td><td></td><td></td></tr><tr><td>Mark-to-market of deferred compensation plan liability</td><td>(1,457)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(1,457)</td><td></td><td></td></tr><tr><td>Real Estate Fund organization costs</td><td>5,937</td><td>-</td><td>-</td><td>-</td><td>-</td><td>5,937</td><td></td><td></td></tr><tr><td>Operations</td><td>11,323</td><td>(748)</td><td>2,390</td><td>4,064</td><td>(3,053)</td><td>(6)</td><td>8,670</td><td>(7)</td></tr><tr><td></td><td>(16,785)</td><td>(4,199)</td><td>(741)</td><td>(729)</td><td>(4,064)</td><td>(7,052)</td><td></td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>53,495</td><td>-</td><td>(24,875)</td><td>60,711</td><td>(8)</td><td>20,000</td><td>(2,341)</td><td></td></tr><tr><td>Total increase (decrease) in expenses</td><td>$ 68,026</td><td>$ 16,616</td><td>$ (31,709)</td><td>$ 89,161</td><td>$ 11,288</td><td>$ (17,330)</td><td></td><td></td></tr></table>

(1) Results from increases in (i) BMS operating expenses of $13,459, (ii) reimbursable operating expenses of $5,953 and (iii) non-reimbursable operating expenses of $3,083.

(2) Results from increases in (i) reimbursable operating expenses of $8,604, (ii) bad debt reserves of $8,505, of which $5,300 results from a true-up of prior year's billings and (iii) non-reimbursable operating expenses of $1,310.

(3) Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (3) on page 81.

(4) On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-performance plan awards. Accordingly, we recognized $32,588 of expense in the first quarter of 2009, representing the unamortized portion of these awards.

(5) This decrease in expense is entirely offset by a corresponding decrease in income from the mark-to-market of the deferred compensation plan assets, a component of “interest and other investment income (loss), net” on our consolidated statements of income.

(6) Primarily due to $2,800 of pension plan termination costs in 2009.

(7) Primarily from higher payroll costs and stock-based compensation expense as a result of awards granted in March 2010.

(8) Results from a $64,500 non-cash impairment loss on the Springfield Mall.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued

## Income Applicable to Toys

In the year ended December 31, 2010, we recognized net income of $71,624,000 from our investment in Toys, comprised of $61,819,000 for our 32.7% share of Toys' net income ($16,401,000 before our share of Toys' income tax benefit) and $9,805,000 of interest and other income.

In the year ended December 31, 2009, we recognized net income of $92,300,000 from our investment in Toys, comprised of (i) $71,601,000 for our 32.7% share of Toys' net income ($58,416,000 before our share of Toys' income tax benefit), (ii) $13,946,000 for our share of income from previously recognized deferred financing cost amortization expense, which we initially recorded as a reduction of the basis of our investment in Toys, and (iii) $6,753,000 of interest and other income.

## Income (Loss) from Partially Owned Entities

Summarized below are the components of income (loss) from partially owned entities for the year ended December 31, 2010 and 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td></td></tr><tr><td>Equity in Net Income (Loss):</td><td></td><td></td><td></td></tr><tr><td>Alexander&#x27;s - 32.4% share of equity in net income (1)</td><td>$ 29,184</td><td>$ 53,529</td><td></td></tr><tr><td>Lexington - 12.8% share in 2010 and 15.2% share in 2009 of equity in net income (loss) (2)</td><td>11,018</td><td>(25,665)</td><td></td></tr><tr><td>LNR - 26.2% share of equity in net income (acquired in July 2010)</td><td>1,973</td><td>-</td><td></td></tr><tr><td>India real estate ventures - 4% to 36.5% range in our share of equity in net income (loss)</td><td>2,581</td><td>(1,636)</td><td></td></tr><tr><td>Other, net (3)</td><td>(22,318)</td><td>(46,138)</td><td></td></tr><tr><td></td><td>$ 22,438</td><td>$ (19,910)</td><td></td></tr></table>

(1) 2009 includes an aggregate of $24,773 of income for our share of an income tax benefit and the reversal of stock appreciation rights compensation expense.

(2) 2010 includes a $13,710 net gain resulting from Lexington's 2010 stock issuance and 2009 includes $19,121 of expense for our share of impairment losses recorded by Lexington.

(3) Represents our equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others. 2010 includes $11,481 of impairment losses related to our investment in properties on West 57th Street. 2009 includes $17,820 of impairment losses, substantially all of which relates to our investment in Verde, and $7,650 of expense for our share of the Downtown Crossing, Boston lease termination payment.

## Loss from Real Estate Fund

In the year ended December 31, 2010, we recognized a $303,000 loss from our Real Estate Fund.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued

## Interest and Other Investment Income (Loss), net

Interest and other investment income (loss), net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was income of $235,315,000 in the year ended December 31, 2010, compared to a loss of $116,350,000 in the prior year, an increase in income of $351,665,000. This increase resulted from:

<table><tr><td colspan="3">(Amounts in thousands)</td></tr><tr><td>Mezzanine loans ($53,100 loss reversal in 2010, compared to $190,738 loss accrual in 2009)</td><td>$ 243,838</td><td></td></tr><tr><td>Mark-to-market of derivative positions in marketable equity securities</td><td>130,153</td><td></td></tr><tr><td>Lower average mezzanine loan investments ($136,795 in 2010, compared to $345,000 in 2009)</td><td>(21,862)</td><td></td></tr><tr><td>Marketable securities - impairment losses in 2009</td><td>3,361</td><td></td></tr><tr><td>Decrease in the value of investments in our deferred compensation plan (offset by a corresponding decrease in the liability for plan assets in general and administrative expenses)</td><td>(1,457)</td><td></td></tr><tr><td>Other, net (primarily lower average yields on investments)</td><td>(2,368)</td><td></td></tr><tr><td></td><td>$ 351,665</td><td></td></tr></table>

## Interest and Debt Expense

Interest and debt expense was $560,270,000 for the year ended December 31, 2010, compared to $617,994,000 in the prior year, a decrease of $57,724,000. This decrease was primarily due to savings of (i) $93,765,000 from the acquisition, retirement and repayment of an aggregate of $2.1 billion of our convertible senior debentures and senior unsecured notes in 2009 and (ii) $30,639,000 from the repayment of $400,000,000 of cross-collateralized debt secured by 42 of our strip shopping centers, partially offset by (iii) $43,515,000 from the issuance of $460,000,000 and 500,000,000 of senior unsecured notes in September 2009 and March 2010, respectively, (iv) $16,392,000 of lower capitalized interest, and (v) $9,813,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers.

## Net Gain (Loss) on Early Extinguishment of Debt

In the year ended December 31, 2010, we recognized a $94,789,000 net gain on the early extinguishment of debt (primarily from our acquisition of the mortgage loan secured by the Springfield Mall), compared to a $25,915,000 net loss in the prior year (primarily from the acquisition of our convertible senior debentures and related write-off of the unamortized debt discount).

## Net Gain on Disposition of Wholly Owned and Partially Owned Assets

In the year ended December 31, 2010, we recognized an $81,432,000 net gain on disposition of wholly owned and partially owned assets (primarily from the sale of a 45% interest in the Warner Building and sales of marketable securities), compared to a $5,641,000 net gain in the prior year (primarily from the sales of marketable securities and residential condominiums).

## Income Tax Expense

Income tax expense was $22,476,000 in the year ended December 31, 2010, compared to $20,642,000 in the prior year, an increase of $1,834,000. This increase resulted primarily from higher income at 1290 Avenue of Americas and 555 California Street, which are subject to federal withholding taxes on dividends paid to foreign corporations.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued

## (Loss) Income from Discontinued Operations

The table below sets forth the combined results of discontinued operations for the years ended December 31, 2010 and 2009 which include (i) four properties in our Washington, DC Office segment, (ii) 20 properties in our Retail segment and (iii) the High Point Complex in North Carolina, which is in receivership.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td></td></tr><tr><td>Total revenues</td><td>$ 43,871</td><td>$ 55,752</td><td></td></tr><tr><td>Total expenses</td><td>51,701</td><td>48,709</td><td></td></tr><tr><td></td><td>(7,830)</td><td>7,043</td><td></td></tr><tr><td>Litigation loss accrual and impairment losses</td><td>(15,056)</td><td>(11,860)</td><td></td></tr><tr><td>Net gain on sale of 1999 K Street</td><td>-</td><td>41,211</td><td></td></tr><tr><td>Net gain on sales of other real estate</td><td>2,506</td><td>4,073</td><td></td></tr><tr><td>(Loss) income from discontinued operations</td><td>$ (20,380)</td><td>$ 40,467</td><td></td></tr></table>

## Net (Income) Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries

In the year ended December 31, 2010, we had $4,920,000 of net income attributable to noncontrolling interests in consolidated subsidiaries, compared to $2,839,000 of a net loss in the prior year, an increase in income of 7,759,000. This increase resulted primarily from higher income at 1290 Avenue of the Americas and 555 California Street.

## Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions

Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the year ended December 31, 2010 and 2009 is comprised of (i) allocations of income to redeemable noncontrolling interests of $44,033,000 and $5,834,000, respectively, (ii) preferred unit distributions of the Operating Partnership of $18,167,000 and $19,286,000, respectively and (iii) a net gain of $6,972,000 on the redemption of all of the Series D-12 perpetual preferred units in the current year. The increase of $38,199,000 in allocations of income to redeemable noncontrolling interests resulted primarily from higher net income subject to allocation to unitholders.

## Preferred Share Dividends

Preferred share dividends were $55,534,000 for the year ended December 31, 2010, compared to $57,076,000 for the prior year, a decrease of $1,542,000. This decrease resulted from the redemption of Series D-10 preferred shares in the current year.

## Discount on Preferred Share Redemptions

Discount on preferred share redemptions of $4,382,000 in the year ended December 31, 2010 resulted from the redemption of Series D-10 preferred shares.



## Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued

## Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods. Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses, as well as other non-operating items. We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31, 2010, compared to the year ended December 31, 2009.

<table><tr><td>(Amounts in thousands)</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>EBITDA for the year ended December 31, 2010</td><td>$ 587,869</td><td>$ 497,551</td><td>$ 405,106</td><td>$ 84,058</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>18,621</td><td>25,464</td><td>29,610</td><td>26,953</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>6,578</td><td>(58,001)</td><td>(55,339)</td><td>14,036</td></tr><tr><td>GAAP basis same store EBITDA for the year ended December 31, 2010</td><td>613,068</td><td>465,014</td><td>379,377</td><td>125,047</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(62,962)</td><td>(5,184)</td><td>(40,362)</td><td>(2,681)</td></tr><tr><td>Cash basis same store EBITDA for the year ended December 31, 2010</td><td>$ 550,106</td><td>$ 459,830</td><td>$ 339,015</td><td>$ 122,366</td></tr><tr><td>EBITDA for the year ended December 31, 2009</td><td>$ 582,820</td><td>$ 473,132</td><td>$ 317,078</td><td>$ 100,527</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>22,820</td><td>26,205</td><td>30,339</td><td>31,017</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>(2,741)</td><td>(57,302)</td><td>1,774</td><td>(2,203)</td></tr><tr><td>GAAP basis same store EBITDA for the year ended December 31, 2009</td><td>602,899</td><td>442,035</td><td>349,191</td><td>129,341</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(65,069)</td><td>(23,940)</td><td>(39,871)</td><td>(4,036)</td></tr><tr><td>Cash basis same store EBITDA for the year ended December 31, 2009</td><td>$ 537,830</td><td>$ 418,095</td><td>$ 309,320</td><td>$ 125,305</td></tr><tr><td>Increase (decrease) in GAAP basis same store EBITDA for the year ended December 31, 2010 over the year ended December 31, 2009</td><td>$ 10,169</td><td>$ 22,979</td><td>$ 30,186</td><td>$ (4,294)</td></tr><tr><td>Increase (decrease) in Cash basis same store EBITDA for the year ended December 31, 2010 over the year ended December 31, 2009</td><td>$ 12,276</td><td>$ 41,735</td><td>$ 29,695</td><td>$ (2,939)</td></tr><tr><td>% increase (decrease) in GAAP basis same store EBITDA</td><td>1.7%</td><td>5.2%</td><td>8.6%</td><td>(3.3%)</td></tr><tr><td>% increase (decrease) in Cash basis same store EBITDA</td><td>2.3%</td><td>10.0%</td><td>9.6%</td><td>(2.3%)</td></tr></table>



## Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008

## Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $2,696,692,000 for the year ended December 31, 2009, compared to $2,640,491,000 for the year ended December 31, 2008, an increase of $56,201,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)

<table><tr><td rowspan="2">Increase (decrease) due to:</td><td rowspan="2">Total</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Merchandise</td></tr><tr><td>Office</td><td>Office</td><td>Office</td><td>Retail</td><td>Mart</td><td>Other</td></tr><tr><td>Property rentals:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions and other</td><td>$ 13,135</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ 11,309</td><td>$ 5,430</td><td>$ (3,604)</td></tr><tr><td>Development/redevelopment</td><td>2,805</td><td>-</td><td>1,333</td><td>1,472</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>(23,578)</td><td>(20,226) (1)</td><td>(546)</td><td>(3,553)</td><td>(72)</td><td>819</td><td></td></tr><tr><td>Hotel Pennsylvania</td><td>(32,248)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(32,248) (2)</td><td></td></tr><tr><td>Trade shows</td><td>(6,606)</td><td>-</td><td>-</td><td>-</td><td>(6,606) (3)</td><td>-</td><td></td></tr><tr><td>Leasing activity (see page 72)</td><td>68,613</td><td>30,151</td><td>34,578</td><td>13,914</td><td>(7,176)</td><td>(2,854)</td><td></td></tr><tr><td></td><td>22,121</td><td>9,925</td><td>35,365</td><td>23,142</td><td>(8,424)</td><td>(37,887)</td><td></td></tr><tr><td>Tenant expense reimbursements:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions/development</td><td>(7)</td><td>-</td><td>(215)</td><td>1,182</td><td>-</td><td>(974)</td><td></td></tr><tr><td>Operations</td><td>3,591</td><td>753</td><td>3,042</td><td>5,585</td><td>(2,538)</td><td>(3,251)</td><td></td></tr><tr><td></td><td>3,584</td><td>753</td><td>2,827</td><td>6,767</td><td>(2,538)</td><td>(4,225)</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Lease cancellation fee income</td><td>(3,577)</td><td>(1,248)</td><td>(411)</td><td>(1,817)</td><td>(240)</td><td>139</td><td></td></tr><tr><td>Management and leasing fees</td><td>(1,941)</td><td>(2,200)</td><td>(757)</td><td>58</td><td>(261)</td><td>1,219</td><td></td></tr><tr><td>BMS cleaning fees</td><td>2,096</td><td>8,404</td><td>-</td><td>-</td><td>-</td><td>(6,308) (4)</td><td></td></tr><tr><td>Other</td><td>33,918</td><td>(1,519)</td><td>25,395 (5)</td><td>76</td><td>2,647</td><td>7,319 (6)</td><td></td></tr><tr><td></td><td>30,496</td><td>3,437</td><td>24,227</td><td>(1,683)</td><td>2,146</td><td>2,369</td><td></td></tr><tr><td>Total increase (decrease) in revenues</td><td>$ 56,201</td><td>$ 14,115</td><td>$ 62,419</td><td>$ 28,226</td><td>$ (8,816)</td><td>$ (39,743)</td><td></td></tr></table>

(1) Primarily from a lease modification that reduced the term of a portion of AXA Equitable Life Company’s ("AXA") space at 1290 Avenue of the Americas, which resulted in additional amortization of approximately $12,000 in 2008.

(2) Primarily from lower REVPAR.

(3) Primarily from lower exhibitor occupancy.

(4) Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (3) on page 88.

(5) In December 2009, our agreement to sell an 8.6 acre parcel of land in the Pentagon City area of Arlington, Virginia, was terminated by the buyer. Accordingly, we recognized $27,089 of income, representing the buyer’s forfeited non-refundable purchase deposit. In connection therewith, we wrote down the carrying amount of the land to its fair value and recognized a $24,875 impairment loss which is included as a component of “impairment and other losses” on our consolidated statement of income.

(6) 2009 includes $5,402 of income previously deferred resulting from the termination of a lease with a partially owned entity.



## Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 - continued

## Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $1,905,839,000 for the year ended December 31, 2009, compared to $1,853,087,000 for the year ended December 31, 2008, an increase of $52,752,000. Below are the details of the increase (decrease) by segment:

(Amounts in thousands)

<table><tr><td rowspan="2">Increase (decrease) due to:</td><td rowspan="2">Total</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Retail</td><td colspan="2">Merchandise</td><td rowspan="2">Other</td></tr><tr><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td></td></tr><tr><td>Operating:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions and other</td><td>$ 12,883</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ 6,367</td><td>$ 5,226</td><td>$ 1,290</td><td></td><td></td><td></td></tr><tr><td>Development/redevelopment</td><td>4,433</td><td>-</td><td>2,114</td><td>2,319</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td></tr><tr><td>Hotel activity</td><td>(5,734)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(5,734)</td><td></td><td></td><td></td></tr><tr><td>Trade shows activity</td><td>(3,484)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(3,484)</td><td>-</td><td></td><td></td><td></td></tr><tr><td>Operations</td><td>10,594</td><td>13,358</td><td>(1)</td><td>6,532</td><td>(3,264)</td><td>(2)</td><td>(3,577)</td><td>(2,455)</td><td>(3)</td><td></td></tr><tr><td></td><td>18,692</td><td>13,358</td><td>8,646</td><td>5,422</td><td>(1,835)</td><td>(6,899)</td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions/development</td><td>4,693</td><td>-</td><td>(2,374)</td><td>9,306</td><td>-</td><td>(2,239)</td><td></td><td></td><td></td><td></td></tr><tr><td>Operations (due to additions to buildings and improvements)</td><td>(2,190)</td><td>(17,002)</td><td>(4)</td><td>9,438</td><td>1,073</td><td>4,241</td><td>60</td><td></td><td></td><td></td></tr><tr><td></td><td>2,503</td><td>(17,002)</td><td>7,064</td><td>10,379</td><td>4,241</td><td>(2,179)</td><td></td><td></td><td></td><td></td></tr><tr><td>General and administrative:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>(5)</td><td>32,588</td><td>3,451</td><td>3,131</td><td>4,793</td><td>1,011</td><td>20,202</td><td></td><td></td><td></td></tr><tr><td>Mark-to-market of deferred compensation plan liability</td><td>(6)</td><td>23,710</td><td>-</td><td>-</td><td>-</td><td>-</td><td>23,710</td><td></td><td></td><td></td></tr><tr><td>Operations</td><td>(19,257)</td><td>(848)</td><td>(3,448)</td><td>(4,290)</td><td>754</td><td>(11,425)</td><td>(7)</td><td></td><td></td><td></td></tr><tr><td></td><td>37,041</td><td>2,603</td><td>(317)</td><td>503</td><td>1,765</td><td>32,487</td><td></td><td></td><td></td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>(5,484)</td><td>-</td><td>24,875</td><td>11,194</td><td>-</td><td>(41,553)</td><td></td><td></td><td></td><td></td></tr><tr><td>Total increase (decrease) in expenses</td><td>$ 52,752</td><td>$ (1,041)</td><td>$ 40,268</td><td>$ 27,498</td><td>$ 4,171</td><td>$ (18,144)</td><td></td><td></td><td></td><td></td></tr></table>

(1) Results from a $7,025 increase in BMS operating expenses and a $6,333 increase in property level operating expenses, primarily due to higher real estate taxes.

(2) Primarily from a $8,190 decrease in bad debt expense partially offset by an increase in real estate taxes which are reimbursed by tenants.

(3) Results primarily from an increase in the elimination of inter-company fees of our operating segments upon consolidation.

(4) Primarily from a lease modification that reduced the term of a portion of AXA’s space at 1290 Avenue of the Americas, which resulted in additional depreciation of approximately $16,000 in 2008.

(5) On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 outperformance plan awards. Accordingly, we recognized $32,588 of expense in the first quarter of 2009, representing the unamortized portion of these awards.

(6) This increase in expense is entirely offset by a corresponding increase in income from the mark-to-market of the deferred compensation plan assets, a component of “interest and other investment income (loss), net” on our consolidated statement of income.

(7) Primarily from lower payroll and stock-based compensation expense.



## Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 - continued

## Income Applicable to Toys

In the year ended December 31, 2009, we recognized net income of $92,300,000 from our investment in Toys, comprised of (i) $71,601,000 for our 32.7% share of Toys' net income ($58,416,000 before our share of Toys' income tax benefit), (ii) $13,946,000 for our share of income from the reversal of previously recognized deferred financing cost amortization expense, which we initially recorded as a reduction of the basis of our investment in Toys, and (iii) $6,753,000 of interest and other income.

In the year ended December 31, 2008, we recognized $2,380,000 of income from our investment in Toys, comprised of (i) $9,115,000 for our 32.7% share of Toys' net income ($53,867,000 before our share of Toys' income tax expense), (ii) $8,165,000 of interest and other income, partially offset by (iii) $14,900,000 for our share of a non-cash charge adjusting Toys purchase accounting basis income tax expense resulting from the audit of Toys fiscal 2006 and 2007 purchase accounting financial statements.

## Loss from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the year ended December 31, 2009 and 2008.

<table><tr><td rowspan="2"></td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2009</td><td>2008</td><td></td></tr><tr><td>(Amounts in thousands)</td><td></td><td></td><td></td></tr><tr><td>Equity in Net Income (Loss):</td><td></td><td></td><td></td></tr><tr><td>Alexander&#x27;s - 32.4% share of equity in net income (1)</td><td>$ 53,529</td><td>$ 36,671</td><td></td></tr><tr><td>Lexington (2)</td><td>(25,665)</td><td>(105,630)</td><td></td></tr><tr><td>India real estate ventures - 4% to 36.5% range in our share of equity in net loss</td><td>(1,636)</td><td>(3,336)</td><td></td></tr><tr><td>Other, net (3)</td><td>(46,138)</td><td>(86,912)</td><td></td></tr><tr><td></td><td>$ (19,910)</td><td>$ (159,207)</td><td></td></tr></table>

(1) 2009 includes an aggregate of $24,773 of income for our share of an income tax benefit and the reversal of stock appreciation rights compensation expense compared to $6,583 for our share of such income in 2008.

(2) 2009 includes $19,121 for our share of impairment losses recorded by Lexington on its investment in Concord Debt Holdings LLC. 2008 includes $107,882 of impairment losses on our investment in Lexington.

(3) Represents our equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others. 2009 includes $17,820 of impairment losses, substantially all of which relates to our investment in Verde, and $7,650 of expense for our share of Downtown Crossing, Boston lease termination payment. 2008 includes $96,037 of non-cash charges for the write-off of our share of certain partially owned entities' development costs, including $37,000 for Downtown Crossing, Boston and $23,000 for the "arena move"/Moynihan East portions of the Farley project.



## Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 - continued

## Interest and Other Investment (Loss) Income, net

Interest and other investment (loss) income, net was a loss of $116,350,000 for the year ended December 31, 2009, compared to a loss of $2,747,000 for the year ended December 31, 2008, an increase in loss of $113,603,000. This increase resulted primarily from:

<table><tr><td>(Amounts in thousands)</td><td></td></tr><tr><td>Mezzanine loans - $190,738 loss accrual in 2009, compared to $100,300 of loss reversal in 2008</td><td>$ (201,038)</td></tr><tr><td>Marketable equity securities - impairment losses of $3,361 in 2009, compared to $76,742 in 2008</td><td>73,381</td></tr><tr><td>Derivative positions in marketable equity securities in 2008</td><td>33,602</td></tr><tr><td>Lower average yield on investments (0.4% in 2009 compared to 2.3% in 2008)</td><td>(22,306)</td></tr><tr><td>Increase in value of investments in the deferred compensation plan (offset by a corresponding increase in the liability for plan assets in general and administrative expenses)</td><td>23,710</td></tr><tr><td>Lower average mezzanine loan investments - $345,000 in 2009, compared to $481,000 in 2008</td><td>(12,540)</td></tr><tr><td>Other, net</td><td>(8,412)</td></tr><tr><td></td><td>$ (113,603)</td></tr></table>

## Interest and Debt Expense

Interest and debt expense was $617,994,000 for the year ended December 31, 2009, compared to $619,531,000 for the year ended December 31, 2008, a decrease of $1,537,000. This decrease resulted primarily from savings of (i) $17,561,000 from a decrease in outstanding debt of approximately $1.5 billion, the full year effect of which is approximately $100,000,000, (ii) $27,830,000 from lower average interest rates on variable rate debt (1.61% in 2009 as compared to 3.88% in 2008), (iii) $1,953,000 from other items, partially offset by (iv) a decrease in capitalized interest of $45,807,000.

## Net (Loss) Gain on Early Extinguishment of Debt

In the year ended December 31, 2009, we recognized a $25,915,000 net loss on early extinguishment of debt (primarily from the acquisition of our convertible senior debentures and related write-off of the unamortized debt discount), compared to a $9,820,000 net gain in the prior year (primarily from the acquisition of our senior unsecured notes and convertible senior debentures).

## Net Gain on Disposition of Wholly Owned and Partially Owned Assets

In the year ended December 31, 2009, we recognized a $5,641,000 net gain on disposition of wholly owned and partially owned assets, compared to a $7,757,000 net gain in the prior year. The current year and prior year net gain resulted primarily from the sales of marketable securities and residential condominiums.

## Income Tax Expense

Income tax expense was $20,642,000 for the year ended December 31, 2009, compared to an income tax benefit of $204,644,000 for the year ended December 31, 2008. The income tax benefit for the year ended December 31, 2008 was the result of a $222,174,000 reversal of deferred taxes recorded in connection with our acquisition of H Street. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008 and reversed the deferred tax liabilities.



## Income from Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the years ended December 31, 2009 and 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2009</td><td>2008</td><td></td></tr><tr><td>Total revenues</td><td>$ 55,752</td><td>$ 278,986</td><td></td></tr><tr><td>Total expenses</td><td>48,709</td><td>268,274</td><td></td></tr><tr><td></td><td>7,043</td><td>10,712</td><td></td></tr><tr><td>Net gain on sale of 1999 K Street</td><td>41,211</td><td>-</td><td></td></tr><tr><td>Net gain on sales of other real estate</td><td>4,073</td><td>692</td><td></td></tr><tr><td>Net gain on sale of Americold</td><td>-</td><td>112,690</td><td></td></tr><tr><td>Net gain on sale of Tyson Dulles Plaza</td><td>-</td><td>56,831</td><td></td></tr><tr><td>Impairment losses</td><td>(11,860)</td><td>-</td><td></td></tr><tr><td>Income from discontinued operations</td><td>$ 40,467</td><td>$ 180,925</td><td></td></tr></table>

## Net Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries

Net loss attributable to noncontrolling interests in consolidated subsidiaries was $2,839,000 in the year ended December 31, 2009, compared to $3,263,000 for the year ended December 31, 2008.

## Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions

Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the year ended December 31, 2009 and 2008 is comprised of allocations of income to redeemable noncontrolling interests of $5,834,000 and $33,327,000, respectively, and preferred unit distributions of the Operating Partnership of $19,286,000 and $22,084,000, respectively. The decrease of $27,493,000 in allocations of income to redeemable noncontrolling interests resulted primarily from lower net income subject to allocation to unitholders. The decrease of $2,798,000 in preferred unit distributions was primarily due to a write-off of unit issuance costs in 2008.

## Preferred Share Dividends

Preferred share dividends were $57,076,000 for the year ended December 31, 2009, compared to $57,091,000 for the year ended December 31, 2008.



## Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 - continued

## Same Store EBITDA

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31, 2009, compared to the year ended December 31, 2008.

<table><tr><td>(Amounts in thousands)</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>EBITDA for the year ended December 31, 2009</td><td>$ 582,820</td><td>$ 473,132</td><td>$ 317,078</td><td>$ 100,527</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>22,820</td><td>26,205</td><td>30,339</td><td>31,017</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>(2,278)</td><td>(52,613)</td><td>(1,169)</td><td>(2,369)</td></tr><tr><td>GAAP basis same store EBITDA for the year ended December 31, 2009</td><td>603,362</td><td>446,724</td><td>346,248</td><td>129,175</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(65,069)</td><td>(25,931)</td><td>(38,396)</td><td>(4,340)</td></tr><tr><td>Cash basis same store EBITDA for the year ended December 31, 2009</td><td>$ 538,293</td><td>$ 420,793</td><td>$ 307,852</td><td>$ 124,835</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA for the year ended December 31, 2008</td><td>$ 586,798</td><td>$ 458,014</td><td>$ 332,773</td><td>$ 116,437</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>20,217</td><td>26,522</td><td>29,836</td><td>29,252</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>(8,431)</td><td>(65,820)</td><td>(28,814)</td><td>276</td></tr><tr><td>GAAP basis same store EBITDA for the year ended December 31, 2008</td><td>598,584</td><td>418,716</td><td>333,795</td><td>145,965</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(88,163)</td><td>(20,354)</td><td>(37,267)</td><td>(9,408)</td></tr><tr><td>Cash basis same store EBITDA for the year ended December 31, 2008</td><td>$ 510,421</td><td>$ 398,362</td><td>$ 296,528</td><td>$ 136,557</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Increase (decrease) in GAAP basis same store EBITDA for the year ended December 31, 2009 over the year ended December 31, 2008</td><td>$ 4,778</td><td>$ 28,008</td><td>$ 12,453</td><td>$ (16,790)</td></tr><tr><td>Increase (decrease) in Cash basis same store EBITDA for the year ended December 31, 2009 over the year ended December 31, 2008</td><td>$ 27,872</td><td>$ 22,431</td><td>$ 11,324</td><td>$ (11,722)</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>% increase (decrease) in GAAP basis same store EBITDA</td><td>0.8%</td><td>6.7%</td><td>3.7%</td><td>(11.5%)</td></tr><tr><td>% increase (decrease) in Cash basis same store EBITDA</td><td>5.5%</td><td>5.6%</td><td>3.8%</td><td>(8.6%)</td></tr></table>



## Supplemental Information

## Net Income and EBITDA by Segment for the Three Months Ended December 31, 2010 and 2009

Below is a summary of net income and a reconciliation of net income to EBITDA \( ^{(1)} \)  by segment for the three months ended December 31, 2010 and 2009.

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="8">For the Three Months Ended December 31, 2010</td></tr><tr><td rowspan="2">Total</td><td>New York</td><td>Washington, DC</td><td colspan="2">Merchandise</td><td rowspan="2">Toys</td><td rowspan="2">Other(3)</td><td></td></tr><tr><td>Office</td><td>Office</td><td>Retail</td><td>Mart</td><td></td></tr><tr><td>Property rentals</td><td>$ 546,557</td><td>$ 192,185</td><td>$ 139,824</td><td>$ 107,341</td><td>$ 59,629</td><td>$ -</td><td>$ 47,578</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>21,272</td><td>11,596</td><td>330</td><td>7,059</td><td>842</td><td>-</td><td>1,445</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>17,231</td><td>8,831</td><td>490</td><td>6,759</td><td>16</td><td>-</td><td>1,135</td><td></td></tr><tr><td>Total rentals</td><td>585,060</td><td>212,612</td><td>140,644</td><td>121,159</td><td>60,487</td><td>-</td><td>50,158</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>85,350</td><td>31,498</td><td>9,371</td><td>36,741</td><td>2,587</td><td>-</td><td>5,153</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>17,320</td><td>25,886</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(8,566)</td><td></td></tr><tr><td>Management and leasing fees</td><td>4,042</td><td>1,914</td><td>2,682</td><td>270</td><td>125</td><td>-</td><td>(949)</td><td></td></tr><tr><td>Lease termination fees</td><td>4,714</td><td>25</td><td>(108)</td><td>3,459</td><td>38</td><td>-</td><td>1,300</td><td></td></tr><tr><td>Other</td><td>16,471</td><td>7,855</td><td>4,975</td><td>1,401</td><td>383</td><td>-</td><td>1,857</td><td></td></tr><tr><td>Total revenues</td><td>712,957</td><td>279,790</td><td>157,564</td><td>163,030</td><td>63,620</td><td>-</td><td>48,953</td><td></td></tr><tr><td>Operating expenses</td><td>283,653</td><td>119,750</td><td>50,838</td><td>62,013</td><td>30,739</td><td>-</td><td>20,313</td><td></td></tr><tr><td>Depreciation and amortization</td><td>130,883</td><td>44,718</td><td>33,726</td><td>28,207</td><td>11,443</td><td>-</td><td>12,789</td><td></td></tr><tr><td>General and administrative</td><td>60,791</td><td>4,761</td><td>7,385</td><td>7,019</td><td>6,534</td><td>-</td><td>35,092</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>126,607</td><td>-</td><td>-</td><td>72,500</td><td>20,000</td><td>-</td><td>34,107</td><td></td></tr><tr><td>Total expenses</td><td>601,934</td><td>169,229</td><td>91,949</td><td>169,739</td><td>68,716</td><td>-</td><td>102,301</td><td></td></tr><tr><td>Operating income (loss)</td><td>111,023</td><td>110,561</td><td>65,615</td><td>(6,709)</td><td>(5,096)</td><td>-</td><td>(53,348)</td><td></td></tr><tr><td>(Loss) applicable to Toys</td><td>(30,685)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(30,685)</td><td>-</td><td></td></tr><tr><td>Income (loss) from partially owned entities</td><td>8,638</td><td>(10,699)</td><td>535</td><td>6,048</td><td>(418)</td><td>-</td><td>13,172</td><td></td></tr><tr><td>Income from Real Estate Fund</td><td>1,107</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1,107</td><td></td></tr><tr><td>Interest and other investment income, net</td><td>169,639</td><td>142</td><td>27</td><td>37</td><td>12</td><td>-</td><td>169,421</td><td></td></tr><tr><td>Interest and debt expense</td><td>(136,752)</td><td>(33,253)</td><td>(28,948)</td><td>(23,070)</td><td>(9,549)</td><td>-</td><td>(41,932)</td><td></td></tr><tr><td>Net gain (loss) on early extinguishment of debt</td><td>96,585</td><td>-</td><td>-</td><td>105,571</td><td>-</td><td>-</td><td>(8,986)</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>68,673</td><td>-</td><td>54,742</td><td>-</td><td>-</td><td>-</td><td>13,931</td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>288,228</td><td>66,751</td><td>91,971</td><td>81,877</td><td>(15,051)</td><td>(30,685)</td><td>93,365</td><td></td></tr><tr><td>Income tax expense</td><td>(6,483)</td><td>(497)</td><td>(724)</td><td>-</td><td>(291)</td><td>-</td><td>(4,971)</td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>281,745</td><td>66,254</td><td>91,247</td><td>81,877</td><td>(15,342)</td><td>(30,685)</td><td>88,394</td><td></td></tr><tr><td>Income (loss) from discontinued operations</td><td>399</td><td>-</td><td>1,295</td><td>2,953</td><td>(3,849)</td><td>-</td><td>-</td><td></td></tr><tr><td>Net income (loss)</td><td>282,144</td><td>66,254</td><td>92,542</td><td>84,830</td><td>(19,191)</td><td>(30,685)</td><td>88,394</td><td></td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(3,430)</td><td>(2,269)</td><td>-</td><td>(1,673)</td><td>-</td><td>-</td><td>512</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(21,741)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(21,741)</td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>256,973</td><td>63,985</td><td>92,542</td><td>83,157</td><td>(19,191)</td><td>(30,685)</td><td>67,165</td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>216,089</td><td>31,805</td><td>31,819</td><td>24,378</td><td>16,009</td><td>53,481</td><td>58,597</td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>180,026</td><td>43,164</td><td>38,354</td><td>29,000</td><td>12,015</td><td>31,434</td><td>26,059</td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(36,589)</td><td>497</td><td>866</td><td>-</td><td>291</td><td>(43,504)</td><td>5,261</td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 616,499</td><td>$ 139,451</td><td>$ 163,581</td><td>$ 136,535</td><td>$ 9,124</td><td>$ 10,726</td><td>$ 157,082</td><td></td></tr></table>

See notes on page 95.



## Supplemental Information – continued

## Net Income and EBITDA by Segment for the Three Months Ended December 31, 2010 and 2009 - continued

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="9">For the Three Months Ended December 31, 2009</td></tr><tr><td colspan="2">New York Office</td><td colspan="2">Washington, DC Office</td><td colspan="2">Retail</td><td colspan="2">Merchandise Mart</td><td>Toys</td></tr><tr><td>Total</td><td>Office</td><td>Office</td><td>Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td></tr><tr><td>Property rentals</td><td>$ 518,897</td><td>$ 189,673</td><td>$ 135,746</td><td>$ 96,188</td><td>$ 54,241</td><td>$ -</td><td>$ 43,049</td><td></td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>21,939</td><td>10,281</td><td>4,672</td><td>6,369</td><td>247</td><td>-</td><td>-</td><td>370</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>16,076</td><td>9,611</td><td>664</td><td>4,694</td><td>18</td><td>-</td><td>-</td><td>1,089</td><td></td></tr><tr><td>Total rentals</td><td>556,912</td><td>209,565</td><td>141,082</td><td>107,251</td><td>54,506</td><td>-</td><td>-</td><td>44,508</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>89,711</td><td>32,932</td><td>15,572</td><td>35,551</td><td>2,378</td><td>-</td><td>-</td><td>3,278</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>16,790</td><td>22,970</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(6,180)</td><td></td></tr><tr><td>Management and leasing fees</td><td>3,201</td><td>848</td><td>2,247</td><td>483</td><td>63</td><td>-</td><td>-</td><td>(440)</td><td></td></tr><tr><td>Lease termination fees</td><td>1,169</td><td>316</td><td>308</td><td>364</td><td>181</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Other</td><td>38,769</td><td>2,607</td><td>32,637</td><td>381</td><td>3,319</td><td>-</td><td>-</td><td>(175)</td><td></td></tr><tr><td>Total revenues</td><td>706,552</td><td>269,238</td><td>191,846</td><td>144,030</td><td>60,447</td><td>-</td><td>-</td><td>40,991</td><td></td></tr><tr><td>Operating expenses</td><td>267,672</td><td>111,818</td><td>57,480</td><td>50,037</td><td>32,630</td><td>-</td><td>-</td><td>15,707</td><td></td></tr><tr><td>Depreciation and amortization</td><td>138,639</td><td>44,039</td><td>38,684</td><td>26,111</td><td>14,107</td><td>-</td><td>-</td><td>15,698</td><td></td></tr><tr><td>General and administrative</td><td>51,083</td><td>4,232</td><td>5,668</td><td>5,425</td><td>6,336</td><td>-</td><td>-</td><td>29,422</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>75,963</td><td>-</td><td>24,875</td><td>11,789</td><td>-</td><td>-</td><td>-</td><td>39,299</td><td></td></tr><tr><td>Total expenses</td><td>533,357</td><td>160,089</td><td>126,707</td><td>93,362</td><td>53,073</td><td>-</td><td>-</td><td>100,126</td><td></td></tr><tr><td>Operating income (loss)</td><td>173,195</td><td>109,149</td><td>65,139</td><td>50,668</td><td>7,374</td><td>-</td><td>-</td><td>(59,135)</td><td></td></tr><tr><td>(Loss) applicable to Toys</td><td>(26,597)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(26,597)</td><td>-</td><td></td></tr><tr><td>(Loss) income from partially owned entities</td><td>(16,830)</td><td>1,332</td><td>(654)</td><td>1,564</td><td>(35)</td><td>-</td><td>-</td><td>(19,037)</td><td></td></tr><tr><td>Interest and other investment (loss) income, net</td><td>(52,726)</td><td>164</td><td>216</td><td>19</td><td>12</td><td>-</td><td>-</td><td>(53,137)</td><td></td></tr><tr><td>Interest and debt expense</td><td>(155,152)</td><td>(33,529)</td><td>(34,636)</td><td>(22,710)</td><td>(9,569)</td><td>-</td><td>-</td><td>(54,708)</td><td></td></tr><tr><td>Net (loss) on early extinguishment of debt</td><td>(52,911)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(52,911)</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>1,209</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1,209</td><td></td></tr><tr><td>(Loss) income before income taxes</td><td>(129,812)</td><td>77,116</td><td>30,065</td><td>29,541</td><td>(2,218)</td><td>(26,597)</td><td>(237,719)</td><td></td><td></td></tr><tr><td>Income tax expense</td><td>(4,935)</td><td>(487)</td><td>(316)</td><td>(3)</td><td>(385)</td><td>-</td><td>-</td><td>(3,744)</td><td></td></tr><tr><td>(Loss) income from continuing operations</td><td>(134,747)</td><td>76,629</td><td>29,749</td><td>29,538</td><td>(2,603)</td><td>(26,597)</td><td>(241,463)</td><td></td><td></td></tr><tr><td>(Loss) income from discontinued operations</td><td>(8,703)</td><td>-</td><td>1,870</td><td>(9,800)</td><td>(773)</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Net (loss) income</td><td>(143,450)</td><td>76,629</td><td>31,619</td><td>19,738</td><td>(3,376)</td><td>(26,597)</td><td>(241,463)</td><td></td><td></td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(603)</td><td>(2,660)</td><td>-</td><td>285</td><td>-</td><td>-</td><td>-</td><td>1,772</td><td></td></tr><tr><td>Net loss attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>7,130</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>7,130</td><td></td></tr><tr><td>Net (loss) income attributable to Vornado</td><td>(136,923)</td><td>73,969</td><td>31,619</td><td>20,023</td><td>(3,376)</td><td>(26,597)</td><td>(232,561)</td><td></td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>214,411</td><td>31,910</td><td>35,792</td><td>24,494</td><td>13,299</td><td>37,493</td><td>71,423</td><td></td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>189,261</td><td>42,686</td><td>42,484</td><td>27,179</td><td>15,499</td><td>30,859</td><td>30,554</td><td></td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(13,611)</td><td>487</td><td>348</td><td>3</td><td>388</td><td>(20,520)</td><td>5,683</td><td></td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 253,138</td><td>$ 149,052</td><td>$ 110,243</td><td>$ 71,699</td><td>$ 25,810</td><td>$ 21,235</td><td>$ (124,901)</td><td></td><td></td></tr></table>

See notes on the following page.



## Supplemental Information – continued

Net Income and EBITDA by Segment for the Three Months Ended December 31, 2010 and 2009 - continued

## Notes to preceding tabular information:

(1) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize their measures to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) The tables below provide information about EBITDA from certain investments that are included in the “other” column of the preceding EBITDA by segment reconciliations. The totals for each of the columns below agree to the total EBITDA for the “other” column in the preceding EBITDA by segment reconciliations.

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="2">For the Three Months Ended December 31,</td></tr><tr><td>2010</td><td>2009</td></tr><tr><td>$ 17,929</td><td>$ 15,774</td></tr><tr><td>Lexington</td><td>15,478</td><td>16,474</td></tr><tr><td>Alexander&#x27;s</td><td>12,361</td><td>12,872</td></tr><tr><td>555 California Street</td><td>9,514</td><td>7,285</td></tr><tr><td>Hotel Pennsylvania</td><td>6,116</td><td>-</td></tr><tr><td>LNR (acquired in July 2010)</td><td>461</td><td>835</td></tr><tr><td>Industrial warehouses</td><td>8,205</td><td>5,077</td></tr><tr><td>Other investments</td><td>70,064</td><td>58,317</td></tr><tr><td>Corporate general and administrative expenses (1)</td><td>(29,675)</td><td>(23,190)</td></tr><tr><td>Investment income and other, net (1)</td><td>23,623</td><td>14,233</td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(21,741)</td><td>7,130</td></tr><tr><td>Income from the mark-to-market of derivative positions in marketable equity securities</td><td>97,904</td><td>-</td></tr><tr><td>Net (loss) on early extinguishment of debt</td><td>(8,986)</td><td>(52,911)</td></tr><tr><td>Non-cash mezzanine loans receivable loss (accrual) reversal</td><td>60,000</td><td>(68,000)</td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td></tr><tr><td>Marketable equity securities</td><td>-</td><td>(3,361)</td></tr><tr><td>Real estate - primarily development projects:</td><td></td><td></td></tr><tr><td>Wholly owned entities (including acquisition costs)</td><td>(34,107)</td><td>(39,299)</td></tr><tr><td>Partially owned entities</td><td>-</td><td>(17,820)</td></tr><tr><td></td><td>$ 157,082</td><td>$ (124,901)</td></tr></table>



## Results of Operations – Three Months Ended December 31, 2010 Compared to December 31, 2009 - continued

## Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods. Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses, as well as other non-operating items. We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended December 31, 2010, compared to the three months ended December 31, 2009.

<table><tr><td>(Amounts in thousands)</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>EBITDA for the three months ended December 31, 2010</td><td>$ 139,451</td><td>$ 163,581</td><td>$ 136,535</td><td>$ 9,124</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>4,761</td><td>7,385</td><td>7,019</td><td>6,534</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>8,975</td><td>(55,271)</td><td>(44,793)</td><td>15,973</td></tr><tr><td>GAAP basis same store EBITDA for the three months ended December 31, 2010</td><td>153,187</td><td>115,695</td><td>98,761</td><td>31,631</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(17,930)</td><td>(47)</td><td>(9,212)</td><td>(858)</td></tr><tr><td>Cash basis same store EBITDA for the three months ended December 31, 2010</td><td>$ 135,257</td><td>$ 115,648</td><td>$ 89,549</td><td>$ 30,773</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA for the three months ended December 31, 2009</td><td>$ 149,052</td><td>$ 110,243</td><td>$ 71,699</td><td>$ 25,810</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>4,232</td><td>5,668</td><td>5,425</td><td>6,336</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>(325)</td><td>(6,104)</td><td>16,213</td><td>880</td></tr><tr><td>GAAP basis same store EBITDA for the three months ended December 31, 2009</td><td>152,959</td><td>109,807</td><td>93,337</td><td>33,026</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(16,414)</td><td>(4,628)</td><td>(8,568)</td><td>(265)</td></tr><tr><td>Cash basis same store EBITDA for the three months ended December 31, 2009</td><td>$ 136,545</td><td>$ 105,179</td><td>$ 84,769</td><td>$ 32,761</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Increase (decrease) increase in GAAP basis same store EBITDA for the three months ended December 31, 2010 over the three months ended December 31, 2009</td><td>$ 228</td><td>$ 5,888</td><td>$ 5,424</td><td>$ (1,395)</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>(Decrease) increase in Cash basis same store EBITDA for the three months ended December 31, 2010 over the three months ended December 31, 2009</td><td>$ (1,288)</td><td>$ 10,469</td><td>$ 4,780</td><td>$ (1,988)</td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td>% increase (decrease) in GAAP basis same store EBITDA</td><td>0.1%</td><td>5.4%</td><td>5.8%</td><td>(4.2%)</td></tr><tr><td>% (decrease) increase in Cash basis same store EBITDA</td><td>(0.9%)</td><td>10.0%</td><td>5.6%</td><td>(6.1%)</td></tr></table>



## Supplemental Information – continued

Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings, cash flows and funds from operations, and therefore impacts comparisons of the current quarter to the previous quarter. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for more than 80% of Toys’ fiscal year net income. The Office and Merchandise Mart segments have historically experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart segment also has experienced higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail segment revenue in the fourth quarter is typically higher due to the recognition of percentage rental income.

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended December 31, 2010, compared to the three months ended September 30, 2010.

<table><tr><td>(Amounts in thousands)</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>EBITDA for the three months ended December 31, 2010</td><td>$ 139,451</td><td>$ 163,581</td><td>$ 136,535</td><td>$ 9,124</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>4,761</td><td>7,385</td><td>7,019</td><td>6,534</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>9,229</td><td>(55,271)</td><td>(44,793)</td><td>15,973</td></tr><tr><td>GAAP basis same store EBITDA for the three months ended December 31, 2010</td><td>153,441</td><td>115,695</td><td>98,761</td><td>31,631</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(17,930)</td><td>(67)</td><td>(9,212)</td><td>(858)</td></tr><tr><td>Cash basis same store EBITDA for the three months ended December 31, 2010</td><td>$ 135,511</td><td>$ 115,628</td><td>$ 89,549</td><td>$ 30,773</td></tr><tr><td>EBITDA for the three months ended September 30, 2010(1)</td><td>$ 149,285</td><td>$ 113,205</td><td>$ 88,431</td><td>$ 21,330</td></tr><tr><td>Add-back: non-property level overhead expenses included above</td><td>4,514</td><td>5,984</td><td>8,843</td><td>6,064</td></tr><tr><td>Less: EBITDA from acquisitions, dispositions and other non-operating income or expenses</td><td>839</td><td>(2,494)</td><td>(732)</td><td>1,083</td></tr><tr><td>GAAP basis same store EBITDA for the three months ended September 30, 2010</td><td>154,638</td><td>116,695</td><td>96,542</td><td>28,477</td></tr><tr><td>Less: Adjustments for straight-line rents, amortization of below-market leases, net and other non-cash adjustments</td><td>(14,845)</td><td>18</td><td>(11,136)</td><td>44</td></tr><tr><td>Cash basis same store EBITDA for the three months ended September 30, 2010</td><td>$ 139,793</td><td>$ 116,713</td><td>$ 85,406</td><td>$ 28,521</td></tr><tr><td>(Decrease) increase in GAAP basis same store EBITDA for the three months ended December 31, 2010 over the three months ended September 30, 2010</td><td>$ (1,197)</td><td>$ (1,000)</td><td>$ 2,219</td><td>$ 3,154</td></tr><tr><td>(Decrease) increase in Cash basis same store EBITDA for the three months ended December 31, 2010 over the three months ended September 30, 2010</td><td>$ (4,282)</td><td>$ (1,085)</td><td>$ 4,143</td><td>$ 2,252</td></tr><tr><td>% (decrease) increase in GAAP basis same store EBITDA</td><td>(0.8%)</td><td>(0.9%)</td><td>2.3%</td><td>11.1%</td></tr><tr><td>% (decrease) increase in Cash basis same store EBITDA</td><td>(3.1%)</td><td>(0.9%)</td><td>4.9%</td><td>7.9%</td></tr></table>

(1) Below is the reconciliation of net income (loss) to EBITDA for the three months ended September 30, 2010

<table><tr><td>(Amounts in thousands)</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td></tr><tr><td>Net income (loss) attributable to Vornado for the three months ended September 30, 2010</td><td>$ 74,076</td><td>$ 36,516</td><td>$ 34,010</td><td>$ (6,621)</td></tr><tr><td>Interest and debt expense</td><td>31,817</td><td>34,241</td><td>26,395</td><td>15,883</td></tr><tr><td>Depreciation and amortization</td><td>42,531</td><td>41,394</td><td>28,024</td><td>12,782</td></tr><tr><td>Income tax expense (benefit)</td><td>861</td><td>1,054</td><td>2</td><td>(714)</td></tr><tr><td>EBITDA for the three months ended September 30, 2010</td><td>$ 149,285</td><td>$ 113,205</td><td>$ 88,431</td><td>$ 21,330</td></tr></table>



## Related Party Transactions

Transactions with Affiliates and Officers and Trustees

## Alexander's

We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with management, development and leasing agreements. These agreements are described in Note 5 - Investments in Partially Owned Entities to our consolidated financial statements in this Annual Report on Form 10-K.

On March 2, 2009, Mr. Roth and Mr. Fascitelli each exercised 150,000 stock appreciation rights which were scheduled to expire on March 4, 2009 and each received gross proceeds of $11,419,000.

## Interstate Properties (“Interstate”)

Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B. Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2010, Interstate and its partners beneficially owned approximately 7.0% of the common shares of beneficial interest of Vornado and 27.2% of Alexander’s common stock.

We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on 60 days' notice at the end of the term. We believe, based upon comparable fees charged by other real estate companies, that the management agreement terms are fair to us.



## Liquidity and Capital Resources

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and recurring capital expenditures. Capital requirements for development expenditures and acquisitions (excluding Fund acquisitions as described below) may require funding from borrowings and/or equity offerings. We may from time to time purchase or retire outstanding debt securities. Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements.

We have raised, and may continue to raise, capital for future Real Estate acquisitions through our real estate Fund. We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle for all investments that fit within the Fund’s investment parameters during its three-year investment period.

## Acquisitions and Investments

Details of 2010 acquisitions and investments are provided in the “Overview” of Management’s Discussion and Analysis of Financial Conditions and Results of Operations. There were no significant acquisitions or investments during 2009.

## Dispositions

Details of 2010 dispositions are provided in the “Overview” of Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

On September 1, 2009, we sold 1999 K Street, a newly developed 250,000 square foot office building in Washington’s Central Business District, for $207,800,000 in cash, which resulted in a net gain of $41,211,000, which is included as a component of “(loss) income from discontinued operations” on our consolidated statement of income.

During 2009, we sold 15 retail properties in separate transactions for an aggregate of $55,000,000 in cash, which resulted in net gains aggregating $4,073,000, which is included as a component of “(loss) income from discontinued operations” on our consolidated statement of income.

## Mezzanine Loans

On January 28, 2010, we were repaid the entire $99,314,000 balance of the Equinox loan including accrued interest. This loan, which we acquired in 2006 for $57,500,000, was scheduled to mature in February 2013.

On June 1, 2009, we were repaid the entire $41,758,000 balance of the Charles Square Hotel loan including accrued interest. This loan was scheduled to mature in September 2009.

## Financing Activities

Details of 2010 financings are provided in the “Overview” of Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

In April 2009, we sold 17,250,000 common shares, including underwriters' over-allotment, in an underwritten public offering pursuant to an effective registration statement at an initial public offering price of $43.00 per share. We received net proceeds of $710,226,000, after underwriters' discount and offering expenses and contributed the net proceeds to the Operating Partnership in exchange for 17,250,000 Class A units of the Operating Partnership.

On September 30, 2009, we completed a public offering of $460,000,000 principal amount of 7.875% callable senior unsecured 30-year notes (NYSE: VNOD) due October 1, 2039. The notes were sold to the public at par and may be redeemed at our option, in whole or in part, beginning in October 2014 at a price equal to the principal amount plus accrued and unpaid interest. We received net proceeds of approximately $446,000,000 from the offering which were used to repay debt and for general corporate purposes.

During 2009, we purchased $1,912,724,000 (aggregate face amount) of our convertible senior debentures and $352,740,000 (aggregate face amount) of our senior unsecured notes for $1,877,510,000 and $343,694,000 in cash, respectively. This debt was acquired through tender offers and in the open market and has been retired. We also repaid $650,285,000 of existing property level debt and completed $277,000,000 of property level financings. In connection with the above, we recognized an aggregate net loss of $25,915,000 from the early extinguishment of debt on our consolidated statement of income.



## Liquidity and Capital Resources – continued

## Certain Future Cash Requirements

## Development and Redevelopment Expenditures

We expended $156,775,000 in 2010 to complete development projects.

On October 1, 2010, Arlington County adopted a new Sector Plan for Crystal City that provides for additional density and increased building heights which would permit us to grow our assets in Crystal City from 8.0 million square feet currently to as much as 11.5 million square feet.

During 2010, we entered into agreements with Cuyahoga County, Ohio (the “County”) to develop and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and conference center in Cleveland’s central business district. The County will fund the development of the Facility, using proceeds from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and maintain effective control of the property. During the 17-year development and operating period, we will receive net settled payments of approximately $10,000,000 per year, which is net of our $36,000,000 annual obligation to the County. Our obligation has been pledged by the County to the bondholders, but is payable by us only to the extent that we first receive at least an equal payment from the County. We engaged a contractor to construct the Facility pursuant to a guaranteed maximum price contract. Although we are ultimately responsible for cost overruns, the contractor is responsible for all costs incurred in excess of its contract and has provided a completion guaranty. Construction of the Facility is expected to be completed in 2013. Subsequent thereto, we are required to fund $11,500,000, primarily for tenant improvements, are responsible for all operating expenses and are entitled to the net operating income, if any, of the Facility. The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if we fail to achieve certain performance thresholds. We plan to account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as we are providing development, marketing, leasing, and other property management related services over the 17-year term. We plan to recognize development fees using the percentage of completion method of accounting.

We are also evaluating other development and redevelopment opportunities for which final plans, budgeted costs and financing have yet to be determined. These projects include the Springfield Mall in Springfield, Virginia and the Hotel Pennsylvania and 220 Central Park South in Manhattan.

There can be no assurance that any of our development projects will commence, or if commenced, be completed on schedule or within budget.



## Liquidity and Capital Resources – continued

## Other Capital Expenditures

The following table summarizes other anticipated 2011 capital expenditures.

<table><tr><td rowspan="2">(Amounts in millions, except square foot data)</td><td rowspan="2">Total</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Merchandise</td><td rowspan="2">Other (1)</td></tr><tr><td>Office</td><td>Office</td><td>Office</td><td>Retail</td><td>Mart</td><td></td></tr><tr><td>Expenditures to maintain assets</td><td>$ 71.0</td><td>$ 25.0</td><td>$ 18.0</td><td>$ 5.0</td><td>$ 10.0</td><td>$ 13.0</td><td></td><td></td></tr><tr><td>Tenant improvements</td><td>135.0</td><td>40.0</td><td>45.0</td><td>11.0</td><td>37.0</td><td>2.0</td><td></td><td></td></tr><tr><td>Leasing commissions</td><td>34.0</td><td>12.0</td><td>10.0</td><td>4.0</td><td>7.0</td><td>1.0</td><td></td><td></td></tr><tr><td>Total tenant improvements and leasing commissions</td><td>169.0</td><td>52.0</td><td>55.0</td><td>15.0</td><td>44.0</td><td>3.0</td><td></td><td></td></tr><tr><td>Per square foot</td><td></td><td>$ 52.00</td><td>$ 36.50</td><td>$ 15.00</td><td>$ 44.00  \( ^{(2)} \)</td><td>$ 50.00</td><td></td><td></td></tr><tr><td>Per square foot per annum</td><td></td><td>$ 5.75</td><td>$ 5.33</td><td>$ 2.24</td><td>$ 4.40  \)  \( ^{(2)} \)</td><td>$ 5.60</td><td></td><td></td></tr><tr><td>Total capital expenditures and leasing commissions</td><td>$ 240.0</td><td>$ 77.0</td><td>$ 73.0</td><td>$ 20.0</td><td>$ 54.0</td><td>$ 16.0</td><td></td><td></td></tr><tr><td>Square feet budgeted to be leased (in thousands)</td><td></td><td>1,000</td><td>1,500</td><td>1,000</td><td>1,000</td><td></td><td></td><td></td></tr><tr><td>Weighted average lease term</td><td></td><td>9</td><td>7</td><td>7</td><td>10</td><td></td><td></td><td></td></tr></table>

(1) Primarily 555 California Street, Hotel Pennsylvania and Warehouses.

(2) Tenant improvements and leasing commissions per square foot budgeted for 2011 leasing activity are $74 ($5.00 per annum) and $21 ($4.00 per annum) for Merchandise Mart office and showroom space, respectively.

The table above excludes anticipated capital expenditures of each of our partially owned non-consolidated subsidiaries, as these entities fund their capital expenditures without additional equity contributions from us.



## Liquidity and Capital Resources – continued

## Dividends

On January 12, 2011, we increased our quarterly common dividend to $0.69 per common share (an indicated annual rate of $2.76 per common share. This dividend policy, if continued for all of 2011, would require us to pay out approximately $507,000,000 of cash for common share dividends. In addition, during 2011, we expect to pay approximately $57,000,000 of cash dividends on outstanding preferred shares and approximately $53,000,000 of cash distributions to unitholders of the Operating Partnership.

## Financing Activities and Contractual Obligations

We believe that we have complied with the financial covenants required by our revolving credit facilities and our senior unsecured notes and that as of December 31, 2010 we have the ability to incur a substantial amount of additional indebtedness. We have an effective shelf registration for the offering of our equity securities and debt securities that is not limited in amount due to our status as a “well-known seasoned issuer.”

Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provides for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

Below is a schedule of our contractual obligations and commitments at December 31, 2010.

<table><tr><td colspan="7">(Amounts in thousands)</td></tr><tr><td>Contractual cash obligations (principal and interest \( ^{(1)} \) ):</td><td>Total</td><td>Less than 1 Year</td><td>1 - 3 Years</td><td>3 - 5 Years</td><td>Thereafter</td><td></td></tr><tr><td>Mortgages and notes payable</td><td>$ 9,885,682</td><td>$ 2,226,459</td><td>$ 2,939,211</td><td>$ 1,246,902</td><td>$ 3,473,110</td><td></td></tr><tr><td>Senior unsecured notes due 2039 (PINES)</td><td>1,501,469</td><td>36,225</td><td>72,450</td><td>72,450</td><td>1,320,344</td><td></td></tr><tr><td>Operating leases</td><td>1,193,361</td><td>30,542</td><td>62,263</td><td>61,732</td><td>1,038,824</td><td></td></tr><tr><td>Revolving credit facilities</td><td>884,313</td><td>211,249</td><td>673,064</td><td>-</td><td>-</td><td></td></tr><tr><td>Exchangeable senior debentures due 2025</td><td>525,007</td><td>19,374</td><td>505,633</td><td>-</td><td>-</td><td></td></tr><tr><td>Senior unsecured notes due 2015</td><td>606,250</td><td>21,250</td><td>42,500</td><td>542,500</td><td>-</td><td></td></tr><tr><td>Convertible senior debentures due 2026</td><td>184,731</td><td>184,731</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Senior unsecured notes due 2011</td><td>124,820</td><td>124,820</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Purchase obligations, primarily construction commitments</td><td>129,109</td><td>117,609</td><td>-</td><td>11,500</td><td>-</td><td></td></tr><tr><td>Capital lease obligations</td><td>20,253</td><td>706</td><td>1,413</td><td>1,413</td><td>16,721</td><td></td></tr><tr><td>Convertible senior debentures due 2027</td><td>10,598</td><td>292</td><td>10,306</td><td>-</td><td>-</td><td></td></tr><tr><td>Total contractual cash obligations</td><td>$ 15,065,593</td><td>$ 2,973,257</td><td>$ 4,306,840</td><td>$ 1,936,497</td><td>$ 5,848,999</td><td></td></tr><tr><td colspan="7">Commitments:</td></tr><tr><td>Capital commitments to partially owned entities</td><td>$ 199,953</td><td>$ 199,953</td><td>$ -</td><td>$ -</td><td>$ -</td><td></td></tr><tr><td>Standby letters of credit</td><td>30,015</td><td>28,080</td><td>1,935</td><td>-</td><td>-</td><td></td></tr><tr><td>Other guarantees</td><td>146</td><td>146</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Total commitments</td><td>$ 230,114</td><td>$ 228,179</td><td>$ 1,935</td><td>$ -</td><td>$ -</td><td></td></tr></table>

(1) Interest on variable rate debt is computed using rates in effect December 31, 2010.



## Liquidity and Capital Resources – continued

## Financing Activities and Contractual Obligations – continued

## Insurance

We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, up to a $150,000,000 annual aggregate.

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Our coverage for NBCR losses is up to $2 billion per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.

## Other Commitments and Contingencies

Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans. As of December 31, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $263,178,000.

At December 31, 2010, $12,198,000 of letters of credit were outstanding under one of our revolving credit facilities. Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $199,953,000, of which $146,622,000 is committed to our real estate Fund. In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

As part of the process of obtaining the required approvals to demolish and develop our 220 Central Park South property into a new residential tower, we have committed to fund the estimated project cost of approximately $400,000,000 to $425,000,000.



## Liquidity and Capital Resources – continued

## Litigation

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. Discovery is complete and a trial was held in November 2010, with closing arguments expected in March 2011. We intend to continue to vigorously pursue our claims against Stop & Shop.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as “Pentagon Row,” leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P. In April 2007, H Street acquired the remaining 50% interest in that fee. On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street. The request for damages and punitive damages was denied. As a result of the Trial Court’s decision, we recorded a $10,056,000 loss accrual in the first quarter of 2010. We filed a motion to appeal the Trial Court’s decision, which the appeals court refused to hear. Accordingly, in the fourth quarter of 2010, we sold the property to the tenants for $14,992,000 in cash (our reduced carrying amount) and reclassified the results of operations of this property to “(loss) income from discontinued operations,” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.



## LIQUIDITY AND CAPITAL RESOURCES – continued

Cash Flows for the Year Ended December 31, 2010

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales. Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, distributions to common and preferred shareholders, as well as acquisition and development costs. Our cash and cash equivalents were $690,789,000 at December 31, 2010, a $155,310,000 increase over the balance at December 31, 2009. This increase was primarily due to cash flows from operating activities as discussed below, partially offset by our investment in J.C. Penney Company, Inc.

Our consolidated outstanding debt was $10,893,639,000 at December 31, 2010, a $207,936,000 increase over the balance at December 31, 2009. As of December 31, 2010 and December 31, 2009, $874,000,000 and $852,218,000, respectively, was outstanding under our revolving credit facilities. During 2011 and 2012, $2,070,534,000 and $2,102,531,000 of our outstanding debt matures, respectively. We may refinance our maturing debt as it comes due or choose to repay it.

Cash flows provided by operating activities of $771,086,000 was comprised of (i) net income of $708,031,000, (ii) $127,922,000 of non-cash adjustments, including depreciation and amortization expense, the effect of straight-lining of rental income, equity in net income of partially owned entities, income from the mark-to-market of derivative positions in marketable equity securities, litigation loss accrual and impairment losses, net gain on early extinguishment of debt, (iii) distributions of income from partially owned entities of $61,037,000, (iv) interest received on repayment on mezzanine loan of $40,467,000, partially offset by (v) the net change in operating assets and liabilities of $166,371,000, of which $144,423,000 relates to Real Estate Fund investments.

Net cash used in investing activities of $520,361,000 was comprised of (i) purchases of marketable equity securities, including J.C. Penney Company, Inc. common shares, of $504,096,000, (ii) acquisitions of real estate of $173,413,000, (iii) investments in partially owned entities of $165,170,000, (iv) development and redevelopment expenditures of $156,775,000, (v) additions to real estate of $144,794,000, (vi) investments in mezzanine loans receivable and other of $85,336,000, partially offset by (vi) proceeds from the sale of real estate and related investments of $280,462,000, (viii) restricted cash of $138,586,000, (ix) proceeds from sales of real estate and related investments of $127,736,000, (x) proceeds received from repayment of mezzanine loans receivable of $70,762,000, (xi) distributions of capital from investments in partially owned entities of $51,677,000, and (xii) proceeds from maturing short-term investments of $40,000,000.

Net cash used in financing activities of $95,415,000 was comprised of (i) repayments of borrowing, including the purchase of our senior unsecured notes, of $2,004,718,000, (ii) dividends paid on common shares of $474,299,000 (iii) purchases of outstanding preferred units of $78,954,000, (iv) dividends paid on preferred shares of $55,669,000, (v) distributions to noncontrolling interests of $53,842,000, (vi) repurchase of shares related to stock compensation agreements and related tax withholdings of $25,660,000, (vii) debt issuance costs of $14,980,000 partially offset by (viii) proceeds from borrowings of $2,481,883,000, (ix) contributions from noncontrolling interests of $103,831,000 and (x) proceeds received from exercise of employee share options of $26,993,000.



## LIQUIDITY AND CAPITAL RESOURCES - continued

## Capital Expenditures

Our capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions. Recurring capital improvements include expenditures to maintain a property’s competitive position within the market and tenant improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital improvements include expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition as well as tenant improvements and leasing commissions for space that was vacant at the time of acquisition of a property. Our development and redevelopment expenditures include all hard and soft costs associated with the development or redevelopment of a property, including tenant improvements, leasing commissions, capitalized interest and operating costs until the property is substantially complete and ready for its intended use.

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2010.

<table><tr><td>(Amounts in thousands)</td><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Other</td></tr><tr><td>Capital Expenditures (accrual basis):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures to maintain assets</td><td>$ 53,051</td><td>$ 20,472</td><td>$ 17,532</td><td>$ 4,838</td><td>$ 6,099</td><td>$ 4,110</td></tr><tr><td>Tenant improvements</td><td>116,939</td><td>50,387</td><td>17,464</td><td>9,827</td><td>31,742</td><td>7,519</td></tr><tr><td>Leasing commissions</td><td>30,351</td><td>15,325</td><td>6,044</td><td>2,215</td><td>4,761</td><td>2,006</td></tr><tr><td>Non-recurring capital expenditures</td><td>5,381</td><td>-</td><td>-</td><td>915</td><td>-</td><td>4,466</td></tr><tr><td>Total capital expenditures and leasing commissions (accrual basis)</td><td>205,722</td><td>86,184</td><td>41,040</td><td>17,795</td><td>42,602</td><td>18,101</td></tr><tr><td>Adjustments to reconcile to cash basis:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures in the current year applicable to prior periods</td><td>64,216</td><td>35,080</td><td>13,296</td><td>6,698</td><td>4,825</td><td>4,317</td></tr><tr><td>Expenditures to be made in future periods for the current period</td><td>(87,289)</td><td>(35,051)</td><td>(13,989)</td><td>(11,358)</td><td>(20,580)</td><td>(6,311)</td></tr><tr><td>Total capital expenditures and leasing commissions (cash basis)</td><td>$ 182,649</td><td>$ 86,213</td><td>$ 40,347</td><td>$ 13,135</td><td>$ 26,847</td><td>$ 16,107</td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot per annum</td><td>$ 3.89</td><td>$ 6.70</td><td>$ 2.92</td><td>$ 1.41</td><td>$ 4.69</td><td>$ -</td></tr><tr><td>Percentage of initial rent</td><td>10.5%</td><td>13.5%</td><td>7.6%</td><td>5.8%</td><td>14.0%</td><td>-</td></tr><tr><td>Development and Redevelopment Expenditures:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>220 Central Park South</td><td>$ 46,769</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ 46,769</td></tr><tr><td>Bergen Town Center</td><td>18,783</td><td>-</td><td>-</td><td>18,783</td><td>-</td><td>-</td></tr><tr><td>Residential condominiums</td><td>15,600</td><td>-</td><td>-</td><td>-</td><td>-</td><td>15,600</td></tr><tr><td>West End 25</td><td>9,997</td><td>-</td><td>9,997</td><td>-</td><td>-</td><td>-</td></tr><tr><td>1540 Broadway</td><td>8,091</td><td>-</td><td>-</td><td>8,091</td><td>-</td><td>-</td></tr><tr><td>Green Acres Mall</td><td>7,679</td><td>-</td><td>-</td><td>7,679</td><td>-</td><td>-</td></tr><tr><td>220 20th Street</td><td>4,097</td><td>-</td><td>4,097</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Beverly Connection</td><td>3,695</td><td>-</td><td>-</td><td>3,695</td><td>-</td><td>-</td></tr><tr><td>Poughkeepsie, New York</td><td>3,054</td><td>-</td><td>-</td><td>3,054</td><td>-</td><td>-</td></tr><tr><td>Other</td><td>39,010</td><td>5,705</td><td>12,495</td><td>12,621</td><td>2,667</td><td>5,522</td></tr><tr><td></td><td>$ 156,775</td><td>$ 5,705</td><td>$ 26,589</td><td>$ 53,923</td><td>$ 2,667</td><td>$ 67,891</td></tr></table>



## LIQUIDITY AND CAPITAL RESOURCES – continued

## Cash Flows for the Year Ended December 31, 2009

Our cash and cash equivalents were $535,479,000 at December 31, 2009, a $991,374,000 decrease over the balance at December 31, 2008. This decrease was the result of the acquisition of our convertible senior debentures and senior unsecured notes during 2009, partially offset by cash flows from operating activities as discussed below.

Our consolidated outstanding debt was $10,685,703,000 at December 31, 2009, a $1,495,132,000 decrease from the balance at December 31, 2008. This decrease resulted primarily from the acquisition of our convertible senior debentures and senior unsecured notes during 2009. As of December 31, 2009 and December 31, 2008, $852,218,000 and $358,468,000, respectively, was outstanding under our revolving credit facilities.

Our share of debt of unconsolidated subsidiaries was $3,149,640,000 at December 31, 2009, a $46,945,000 decrease from the balance at December 31, 2008.

Cash flows provided by operating activities of $633,579,000 was comprised of (i) net income of $128,450,000, (ii) $620,523,000 of non-cash adjustments, including depreciation and amortization expense, non-cash impairment losses, the effect of straight-lining of rental income, equity in net income of partially owned entities and (iii) distributions of income from partially owned entities of $30,473,000, partially offset by (iv) the net change in operating assets and liabilities of $145,867,000.

Net cash used in investing activities of $242,201,000 was comprised of (i) development and redevelopment expenditures of $465,205,000, (ii) additions to real estate of $216,669,000, (iii) purchases of marketable equity securities of $90,089,000, (iv) purchases of short-term investments of $55,000,000, (v) investments in partially owned entities of $38,266,000, partially offset by, (vi) proceeds from the sale of real estate (primarily 1999 K Street) of $367,698,000, (vii) proceeds from restricted cash of $111,788,000, (viii) proceeds from the sale of marketable securities of $64,355,000, (ix) proceeds received from repayments on mezzanine loans receivable of $47,397,000, (x) proceeds from maturing short-term investments of $15,000,000 and (xi) distributions of capital from partially owned entities of $16,790,000.

Net cash used in financing activities of $1,382,752,000 was primarily comprised of (i) acquisition and retirement of convertible senior debentures and senior unsecured notes of $2,221,204,000, (ii) repayment of borrowings of $2,075,236,000, (iii) dividends paid on common shares of $262,397,000, (iv) dividends paid on preferred shares of $57,076,000, (v) distributions to noncontrolling interests of $42,451,000, (vi) repurchase of shares related to stock compensation arrangements and related tax withholdings of $32,203,000, (vii) redemption of redeemable noncontrolling interests of $24,330,000, (viii) debt issuance and other costs of $30,186,000, partially offset by, (ix) proceeds from borrowings of $2,648,175,000 and (xi) proceeds from issuance of common shares of $710,226,000.



## LIQUIDITY AND CAPITAL RESOURCES - continued

## Capital Expenditures

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Total</td><td colspan="2">New York</td><td colspan="2">Washington, DC</td><td colspan="2">Merchandise</td><td rowspan="2">Other</td></tr><tr><td>Office</td><td>Office</td><td>Retail</td><td>Mart</td><td></td></tr><tr><td>Capital Expenditures (accrual basis):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures to maintain assets</td><td>$ 41,858</td><td>$ 15,559</td><td>$ 17,185</td><td>$ 3,406</td><td>$ 5,708</td><td>$</td><td>-</td><td></td></tr><tr><td>Tenant improvements</td><td>76,514</td><td>44,808</td><td>18,348</td><td>4,190</td><td>9,168</td><td>-</td><td></td><td></td></tr><tr><td>Leasing commissions</td><td>28,913</td><td>15,432</td><td>10,040</td><td>1,710</td><td>1,731</td><td>-</td><td></td><td></td></tr><tr><td>Non-recurring capital expenditures</td><td>35,917</td><td>20,741</td><td>-</td><td>53</td><td>-</td><td>15,123</td><td></td><td></td></tr><tr><td>Total capital expenditures and leasing commissions (accrual basis)</td><td>183,202</td><td>96,540</td><td>45,573</td><td>9,359</td><td>16,607</td><td>15,123</td><td></td><td></td></tr><tr><td>Adjustments to reconcile to cash basis:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures in the current year applicable to prior periods</td><td>138,590</td><td>67,903</td><td>60,208</td><td>4,293</td><td>5,224</td><td>962</td><td></td><td></td></tr><tr><td>Expenditures to be made in future periods for the current period</td><td>(75,397)</td><td>(40,516)</td><td>(21,627)</td><td>(5,244)</td><td>(5,900)</td><td>(2,110)</td><td></td><td></td></tr><tr><td>Total capital expenditures and leasing commissions (cash basis)</td><td>$ 246,395</td><td>$ 123,927</td><td>$ 84,154</td><td>$ 8,408</td><td>$ 15,931</td><td>$ 13,975</td><td></td><td></td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot per annum</td><td>$ 2.79</td><td>$ 5.51</td><td>$ 2.10</td><td>$ 0.82</td><td>$ 2.03</td><td>$</td><td>-</td><td></td></tr><tr><td>Percentage of initial rent</td><td>7.1%</td><td>10.5%</td><td>5.2%</td><td>3.5%</td><td>5.5%</td><td>-</td><td></td><td></td></tr><tr><td>Development and Redevelopment Expenditures:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>West End 25</td><td>$ 64,865</td><td>$ -</td><td>$ 64,865</td><td>$ -</td><td>$ -</td><td>$ -</td><td></td><td></td></tr><tr><td>Bergen Town Center</td><td>57,843</td><td>-</td><td>-</td><td>57,843</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Residential condominiums</td><td>49,586</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>49,586</td><td></td></tr><tr><td>220 20th Street</td><td>39,256</td><td>-</td><td>39,256</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>1999 K Street (sold in September 2009)</td><td>31,874</td><td>-</td><td>31,874</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>North Bergen, New Jersey</td><td>25,764</td><td>-</td><td>-</td><td>25,764</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Manhattan Mall</td><td>21,459</td><td>-</td><td>-</td><td>21,459</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Poughkeepsie, New York</td><td>20,280</td><td>-</td><td>-</td><td>20,280</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Garfield, New Jersey</td><td>16,577</td><td>-</td><td>-</td><td>16,577</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>1540 Broadway</td><td>15,544</td><td>-</td><td>-</td><td>15,544</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>2101 L Street</td><td>12,923</td><td>-</td><td>12,923</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Beverly Connection</td><td>12,854</td><td>-</td><td>-</td><td>12,854</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>40 East 66th Street</td><td>10,520</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>10,520</td><td></td></tr><tr><td>One Penn Plaza</td><td>9,839</td><td>9,839</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Other</td><td>76,021</td><td>11,790</td><td>22,849</td><td>28,438</td><td>6,409</td><td>6,535</td><td></td><td></td></tr><tr><td></td><td>$ 465,205</td><td>$ 21,629</td><td>$ 171,767</td><td>$ 198,759</td><td>$ 6,409</td><td>$ 66,641</td><td></td><td></td></tr></table>



## LIQUIDITY AND CAPITAL RESOURCES – continued

## Cash Flow for the Year Ended December 31, 2008

Cash and cash equivalents were $1,526,853,000 at December 31, 2008, a $372,258,000 increase over the balance at December 31, 2007. This increase resulted from $817,812,000 of net cash provided by operating activities and $7,677,000 of net cash provided by financing activities, partially offset by $453,231,000 of net cash used in investing activities.

Our consolidated outstanding debt was $12,180,835,000 at December 31, 2008, a $719,768,000 increase over the balance at December 31, 2007. This increase resulted primarily from debt associated with property refinancings. As of December 31, 2008 and December 31, 2007, $358,468,000 and $405,656,000, respectively, was outstanding under our revolving credit facilities.

Our share of debt of unconsolidated subsidiaries was $3,196,585,000 at December 31, 2008, a $93,288,000 decrease from the balance at December 31, 2007.

Cash flows provided by operating activities of $817,812,000 was comprised of (i) net income of $411,445,000, (ii) $401,571,000 of non-cash adjustments, including depreciation and amortization expense, non-cash impairment losses, the effect of straight-lining of rental income, equity in net income of partially owned entities, and (iii) distributions of income from partially owned entities of $44,690,000, partially offset by (iv) the net change in operating assets and liabilities of $39,894,000.

Net cash used in investing activities of $453,231,000 was primarily comprised of (i) development and redevelopment expenditures of $598,688,000, (ii) additions to real estate of $207,885,000, (iii) investments in partially owned entities of $156,227,000, (iv) purchases of marketable equity securities of $164,886,000, partially offset by, (v) proceeds from the sale of real estate (primarily Americold and Tysons Dulles Plaza) of $390,468,000, (vi) distributions of capital from partially owned entities of $218,367,000, (vii) proceeds received from repayments on mezzanine loans receivable of $52,470,000 and (viii) proceeds from the sale of marketable securities of $51,185,000.

Net cash provided by financing activities of $7,677,000 was primarily comprised of (i) proceeds from borrowings of $1,721,974,000 and (ii) proceeds received from exercises of employee share options of $29,377,000, partially offset by, (iii) repayments of borrowings of $993,665,000, (iv) dividends paid on common shares of $561,981,000, (v) distributions to noncontrolling interests of $85,419,000 and (vi) dividends paid on preferred shares of $57,112,000.



## LIQUIDITY AND CAPITAL RESOURCES - continued

## Capital Expenditures

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Total</td><td colspan="3">New York Office</td><td colspan="3">Washington, DC Office</td><td colspan="3">Merchandise Mart</td><td colspan="2">Other</td></tr><tr><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td>Office</td><td></td><td></td><td></td><td></td></tr><tr><td>Capital Expenditures (accrual basis):</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures to maintain assets</td><td>$   50,137</td><td>$   23,380</td><td>$   10,341</td><td>$   4,024</td><td>$   10,730</td><td>$   1,662</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant improvements</td><td>57,573</td><td>23,433</td><td>17,223</td><td>7,881</td><td>9,036</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Leasing commissions</td><td>29,642</td><td>16,037</td><td>6,385</td><td>3,145</td><td>4,075</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Non-recurring capital expenditures</td><td>70,860</td><td>28,773</td><td>20,888</td><td>4,109</td><td>11,146</td><td>5,944</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total capital expenditures and leasing commissions (accrual basis)</td><td>208,212</td><td>91,623</td><td>54,837</td><td>19,159</td><td>34,987</td><td>7,606</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Adjustments to reconcile to cash basis:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures in the current year applicable to prior periods</td><td>114,778</td><td>57,001</td><td>15,539</td><td>9,590</td><td>28,576</td><td>4,072</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Expenditures to be made in future periods for the current period</td><td>(78,614)</td><td>(33,571)</td><td>(22,076)</td><td>(15,135)</td><td>(7,729)</td><td>(103)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total capital expenditures and leasing commissions (cash basis)</td><td>$   244,376</td><td>$   115,053</td><td>$   48,300</td><td>$   13,614</td><td>$   55,834</td><td>$   11,575</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant improvements and leasing commissions:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Per square foot per annum</td><td>$   3.12</td><td>$   5.35</td><td>$   2.16</td><td>$   2.03</td><td>$   3.07</td><td>$    -</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Percentage of initial rent</td><td>7.0%</td><td>7.5%</td><td>5.6%</td><td>5.3%</td><td>9.7%</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Development and Redevelopment Expenditures:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Bergen Town Center</td><td>$   126,673</td><td>$    -</td><td>$    -</td><td>$   126,673</td><td>$    -</td><td>$    -</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Residential condominiums</td><td>61,867</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>61,867</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Manhattan Mall</td><td>51,474</td><td>-</td><td>-</td><td>51,474</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1999 K Street (sold in September 2009)</td><td>45,742</td><td>-</td><td>45,742</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>40 East 66th Street</td><td>41,827</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>41,827</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>220 20th Street</td><td>36,014</td><td>-</td><td>36,014</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>220 Central Park South</td><td>30,533</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>30,533</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>West End 25</td><td>24,002</td><td>-</td><td>24,002</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>478-486 Broadway</td><td>17,182</td><td>-</td><td>-</td><td>17,182</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Hotel Pennsylvania</td><td>15,591</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>15,591</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2101 L Street</td><td>14,992</td><td>-</td><td>14,992</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Springfield Mall</td><td>12,948</td><td>-</td><td>-</td><td>12,948</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Garfield, New Jersey</td><td>12,775</td><td>-</td><td>-</td><td>12,775</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>North Bergen, New Jersey</td><td>10,749</td><td>-</td><td>-</td><td>10,749</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Poughkeepsie, New York</td><td>10,404</td><td>-</td><td>-</td><td>10,404</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Green Acres Mall</td><td>3,914</td><td>-</td><td>-</td><td>3,914</td><td>-</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Other</td><td>82,001</td><td>25,959</td><td>27,106</td><td>20,226</td><td>8,710</td><td>-</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td>$   598,688</td><td>$   25,959</td><td>$   147,856</td><td>$   266,345</td><td>$   8,710</td><td>$   149,818</td><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>



## Funds From Operations (“FFO”)

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flows as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. The calculations of both the numerator and denominator used in the computation of income per share are disclosed in Note 16 – Income per Share, in the notes to our consolidated financial statements on page 156 of this Annual Report on Form 10-K.

FFO attributable to common shareholders plus assumed conversions was $1,149,781,000, or $6.05 per diluted share for the year ended December 31, 2010, compared to $583,596,000 or $3.36 per diluted share for the year ended December 31, 2009. FFO attributable to common shareholders plus assumed conversions was $335,759,000 or $1.76 per diluted share for the three months ended December 31, 2010 compared to $20,000, or $0.00 per diluted share for the three months ended December 31, 2009. Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.”

<table><tr><td rowspan="2">(Amounts in thousands, except per share amounts)</td><td colspan="3">For The Year</td><td colspan="3">For The Three Months</td></tr><tr><td colspan="3">Ended December 31,</td><td colspan="3">Ended December 31,</td></tr><tr><td>Reconciliation of our net income (loss) to FFO:</td><td>2010</td><td>2009</td><td>2010</td><td>2009</td><td></td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>$   647,883</td><td>$   106,169</td><td>$   256,973</td><td>$   136,923</td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>505,806</td><td>508,572</td><td>124,024</td><td>133,023</td><td></td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>(57,248)</td><td>(45,282)</td><td>(57,248)</td><td>(2,629)</td><td></td><td></td></tr><tr><td>Proportionate share of adjustments to equity in net income of Toys, to arrive at FFO:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>70,174</td><td>65,358</td><td>16,878</td><td>15,527</td><td></td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>-</td><td>(164)</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Income tax effect of above adjustments</td><td>(24,561)</td><td>(22,819)</td><td>(5,907)</td><td>(5,435)</td><td></td><td></td></tr><tr><td>Proportionate share of adjustments to equity in net income of partially owned entities, excluding Toys, to arrive at FFO:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of real property</td><td>78,151</td><td>75,200</td><td>19,596</td><td>22,692</td><td></td><td></td></tr><tr><td>Net gain on sales of real estate</td><td>(5,784)</td><td>(1,188)</td><td>(5,470)</td><td>(3)</td><td></td><td></td></tr><tr><td>Noncontrolling interests&#x27; share of above adjustments</td><td>(39,565)</td><td>(45,344)</td><td>(6,080)</td><td>(11,963)</td><td></td><td></td></tr><tr><td>FFO</td><td>1,174,856</td><td>640,502</td><td>342,766</td><td>14,289</td><td></td><td></td></tr><tr><td>Preferred share dividends</td><td>(55,534)</td><td>(57,076)</td><td>(13,559)</td><td>(14,269)</td><td></td><td></td></tr><tr><td>Discount on preferred share redemptions</td><td>4,382</td><td>-</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>FFO attributable to common shareholders</td><td>1,123,704</td><td>583,426</td><td>329,207</td><td>20</td><td></td><td></td></tr><tr><td>Interest on 3.875% exchangeable senior debentures</td><td>25,917</td><td>-</td><td>6,512</td><td>-</td><td></td><td></td></tr><tr><td>Convertible preferred share dividends</td><td>160</td><td>170</td><td>40</td><td>-</td><td></td><td></td></tr><tr><td>FFO attributable to common shareholders plus assumed conversions</td><td>$   1,149,781</td><td>$   583,596</td><td>$   335,759</td><td>$   20</td><td></td><td></td></tr><tr><td>Reconciliation of Weighted Average Shares</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Weighted average common shares outstanding</td><td>182,340</td><td>171,595</td><td>183,308</td><td>179,832</td><td></td><td></td></tr><tr><td>Effect of dilutive securities:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>3.875% exchangeable senior debentures</td><td>5,736</td><td>-</td><td>5,736</td><td>-</td><td></td><td></td></tr><tr><td>Employee stock options and restricted share awards</td><td>1,747</td><td>1,908</td><td>1,735</td><td>2,627</td><td></td><td></td></tr><tr><td>Convertible preferred shares</td><td>71</td><td>75</td><td>70</td><td>-</td><td></td><td></td></tr><tr><td>Denominator for FFO per diluted share</td><td>189,894</td><td>173,578</td><td>190,849</td><td>182,459</td><td></td><td></td></tr><tr><td>FFO attributable to common shareholders plus assumed conversions per diluted share</td><td>$   6.05</td><td>$   3.36</td><td>$   1.76</td><td>$    -</td><td></td><td></td></tr></table>



## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates on our consolidated and non-consolidated debt (all of which arises out of non-trading activity) is as follows:

<table><tr><td rowspan="2">(Amounts in thousands, except per share amounts)</td><td colspan="3">2010</td><td colspan="3">2009</td></tr><tr><td>December 31, Balance</td><td>Weighted Average Interest Rate</td><td>Effect of 1% Change In Base Rates</td><td>December 31, Balance</td><td>Weighted Average Interest Rate</td><td></td></tr><tr><td>Consolidated debt:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Variable rate</td><td>$ 2,903,510</td><td>1.76%</td><td>$ 29,035</td><td>$ 2,657,972</td><td>1.67%</td><td></td></tr><tr><td>Fixed rate</td><td>7,990,129</td><td>5.66%</td><td>-</td><td>8,027,731</td><td>5.87%</td><td></td></tr><tr><td></td><td>$ 10,893,639</td><td>4.62%</td><td>29,035</td><td>$ 10,685,703</td><td>4.83%</td><td></td></tr><tr><td>Pro-rata share of debt of non-consolidated entities (non-recourse):</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Variable rate - excluding Toys</td><td>$ 345,308</td><td>1.39%</td><td>3,453</td><td>$ 331,980</td><td>2.87%</td><td></td></tr><tr><td>Variable rate - Toys</td><td>501,623</td><td>4.95%</td><td>5,016</td><td>852,040</td><td>3.45%</td><td></td></tr><tr><td>Fixed rate (including $1,421,820 and $1,077,919 of Toys debt in 2010 and 2009)</td><td>2,428,986 (1)</td><td>6.86%</td><td>-</td><td>1,965,620</td><td>7.16%</td><td></td></tr><tr><td></td><td>$ 3,275,917</td><td>5.99%</td><td>8,469</td><td>$ 3,149,640</td><td>5.70%</td><td></td></tr><tr><td>Redeemable noncontrolling interests&#x27; share of above</td><td></td><td></td><td>(2,682)</td><td></td><td></td><td></td></tr><tr><td>Total change in annual net income</td><td></td><td></td><td>$ 34,822</td><td></td><td></td><td></td></tr><tr><td>Per share-diluted</td><td></td><td></td><td>$ 0.19</td><td></td><td></td><td></td></tr></table>

(1) Excludes $37 billion for our 26.2% pro rata shares of liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us.

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of December 31, 2010, variable rate debt with an aggregate principal amount of $564,707,181 and a weighted average interest rate of 2.84% was subject to LIBOR caps. These caps are based on a notional amount of $558,844,181 and cap LIBOR at a weighted average rate of 5.68%.

As of December 31, 2010, we have investments in mezzanine loans with an aggregate carrying amount of $138,434,000 that are based on variable interest rates which partially mitigate our exposure to a change in interest rates on our variable rate debt.

## Fair Value of Debt

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of December 31, 2010, the estimated fair value of our consolidated debt was $11,190,189,000.

## Derivative Instruments

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our economic interest in J.C. Penney common shares. Because these derivatives do not qualify for hedge accounting treatment, the gains or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our investment income or expense in any given period. During the year ended December 31, 2010 we recognized $130,153,000 of income from derivative instruments.



## INDEX TO FINANCIAL STATEMENTS

<table><tr><td></td><td>Page</td></tr><tr><td>Report of Independent Registered Public Accounting Firm</td><td>114</td></tr><tr><td>Consolidated Balance Sheets at December 31, 2010 and 2009</td><td>115</td></tr><tr><td>Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008</td><td>116</td></tr><tr><td>Consolidated Statements of Changes in Equity for the years ended December 31, 2010, 2009 and 2008</td><td>117</td></tr><tr><td>Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008</td><td>120</td></tr><tr><td>Notes to Consolidated Financial Statements</td><td>122</td></tr></table>



# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York

We have audited the accompanying consolidated balance sheets of Vornado Realty Trust (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty Trust at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. 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.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
February 23, 2011



## VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS

<table><tr><td>(Amounts in thousands, except share and per share amounts)</td><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>Real estate, at cost:</td><td></td><td></td></tr><tr><td>Land</td><td>$ 4,598,303</td><td>$ 4,472,655</td></tr><tr><td>Buildings and improvements</td><td>12,733,487</td><td>12,660,987</td></tr><tr><td>Development costs and construction in progress</td><td>218,156</td><td>313,184</td></tr><tr><td>Leasehold improvements and equipment</td><td>124,976</td><td>127,419</td></tr><tr><td>Total</td><td>17,674,922</td><td>17,574,245</td></tr><tr><td>Less accumulated depreciation and amortization</td><td>(2,763,997)</td><td>(2,441,344)</td></tr><tr><td>Real estate, net</td><td>14,910,925</td><td>15,132,901</td></tr><tr><td>Cash and cash equivalents</td><td>690,789</td><td>535,479</td></tr><tr><td>Restricted cash</td><td>200,822</td><td>293,950</td></tr><tr><td>Short-term investments</td><td>-</td><td>40,000</td></tr><tr><td>Marketable securities</td><td>766,116</td><td>380,652</td></tr><tr><td>Accounts receivable, net of allowance for doubtful accounts of $62,979 and $46,708</td><td>157,146</td><td>157,325</td></tr><tr><td>Investments in partially owned entities</td><td>927,672</td><td>799,832</td></tr><tr><td>Investment in Toys &quot;R&quot; Us</td><td>447,334</td><td>409,453</td></tr><tr><td>Mezzanine loans receivable, net of allowance of $73,216 and $190,738</td><td>202,412</td><td>203,286</td></tr><tr><td>Real Estate Fund investments</td><td>144,423</td><td>-</td></tr><tr><td>Receivable arising from the straight-lining of rents, net of allowance of $7,323 and $4,672</td><td>720,806</td><td>670,225</td></tr><tr><td>Deferred leasing and financing costs, net of accumulated amortization of $223,131 and $182,106</td><td>368,314</td><td>310,884</td></tr><tr><td>Identified intangible assets, net of accumulated amortization of $338,508 and $311,118</td><td>348,745</td><td>439,549</td></tr><tr><td>Assets related to discontinued operations</td><td>234,464</td><td>337,711</td></tr><tr><td>Due from officers</td><td>13,187</td><td>13,150</td></tr><tr><td>Other assets</td><td>384,316</td><td>461,075</td></tr><tr><td></td><td>$ 20,517,471</td><td>$ 20,185,472</td></tr><tr><td>LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY</td><td></td><td></td></tr><tr><td>Notes and mortgages payable</td><td>$ 8,259,298</td><td>$ 8,191,854</td></tr><tr><td>Senior unsecured notes</td><td>1,082,928</td><td>711,716</td></tr><tr><td>Exchangeable senior debentures</td><td>491,000</td><td>484,457</td></tr><tr><td>Convertible senior debentures</td><td>186,413</td><td>445,458</td></tr><tr><td>Revolving credit facility debt</td><td>874,000</td><td>852,218</td></tr><tr><td>Accounts payable and accrued expenses</td><td>438,479</td><td>475,242</td></tr><tr><td>Deferred compensation plan</td><td>91,549</td><td>80,443</td></tr><tr><td>Deferred credit</td><td>583,369</td><td>655,283</td></tr><tr><td>Deferred tax liabilities</td><td>13,278</td><td>16,495</td></tr><tr><td>Liabilities related to discontinued operations</td><td>255,922</td><td>282,770</td></tr><tr><td>Other liabilities</td><td>82,856</td><td>88,502</td></tr><tr><td>Total liabilities</td><td>12,359,092</td><td>12,284,438</td></tr><tr><td>Commitments and contingencies</td><td></td><td></td></tr><tr><td>Redeemable noncontrolling interests:</td><td></td><td></td></tr><tr><td>Class A units - 12,804,202 and 13,892,313 units outstanding</td><td>1,066,974</td><td>971,628</td></tr><tr><td>Series D cumulative redeemable preferred units - 10,400,001 and 11,200,000 units outstanding</td><td>261,000</td><td>280,000</td></tr><tr><td>Total redeemable noncontrolling interests</td><td>1,327,974</td><td>1,251,628</td></tr><tr><td>Vornado shareholders&#x27; equity:</td><td></td><td></td></tr><tr><td>Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 32,340,009 and 33,952,324 shares</td><td>783,088</td><td>823,686</td></tr><tr><td>Common shares of beneficial interest: $0.04 par value per share; authorized, 250,000,000 shares; issued and outstanding 183,661,875 and 181,214,161 shares</td><td>7,317</td><td>7,218</td></tr><tr><td>Additional capital</td><td>6,932,728</td><td>6,961,007</td></tr><tr><td>Earnings less than distributions</td><td>(1,480,876)</td><td>(1,577,591)</td></tr><tr><td>Accumulated other comprehensive income</td><td>73,453</td><td>28,449</td></tr><tr><td>Total Vornado shareholders&#x27; equity</td><td>6,315,710</td><td>6,242,769</td></tr><tr><td>Noncontrolling interest in consolidated subsidiaries</td><td>514,695</td><td>406,637</td></tr><tr><td>Total equity</td><td>6,830,405</td><td>6,649,406</td></tr><tr><td></td><td>$ 20,517,471</td><td>$ 20,185,472</td></tr></table>



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME

<table><tr><td rowspan="2"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>(Amounts in thousands, except per share amounts)</td><td></td><td></td><td></td><td></td></tr><tr><td>REVENUES:</td><td></td><td></td><td></td><td></td></tr><tr><td>Property rentals</td><td>$ 2,271,357</td><td>$ 2,182,194</td><td>$ 2,160,073</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>360,448</td><td>357,186</td><td>353,602</td><td></td></tr><tr><td>Fee and other income</td><td>147,922</td><td>157,312</td><td>126,816</td><td></td></tr><tr><td>Total revenues</td><td>2,779,727</td><td>2,696,692</td><td>2,640,491</td><td></td></tr><tr><td>EXPENSES:</td><td></td><td></td><td></td><td></td></tr><tr><td>Operating</td><td>1,099,478</td><td>1,067,229</td><td>1,048,537</td><td></td></tr><tr><td>Depreciation and amortization</td><td>530,704</td><td>531,637</td><td>529,134</td><td></td></tr><tr><td>General and administrative</td><td>214,225</td><td>231,010</td><td>193,969</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>129,458</td><td>75,963</td><td>81,447</td><td></td></tr><tr><td>Total expenses</td><td>1,973,865</td><td>1,905,839</td><td>1,853,087</td><td></td></tr><tr><td>Operating income</td><td>805,862</td><td>790,853</td><td>787,404</td><td></td></tr><tr><td>Income applicable to Toys &quot;R&quot; Us</td><td>71,624</td><td>92,300</td><td>2,380</td><td></td></tr><tr><td>Income (loss) from partially owned entities</td><td>22,438</td><td>(19,910)</td><td>(159,207)</td><td></td></tr><tr><td>(Loss) from Real Estate Fund (includes $805 of expenses that are attributable to noncontrolling interests)</td><td>(303)</td><td>-</td><td>-</td><td></td></tr><tr><td>Interest and other investment income (loss), net</td><td>235,315</td><td>(116,350)</td><td>(2,747)</td><td></td></tr><tr><td>Interest and debt expense (including amortization of deferred financing costs of $18,542, $17,593 and $17,409 respectively)</td><td>(560,270)</td><td>(617,994)</td><td>(619,531)</td><td></td></tr><tr><td>Net gain (loss) on early extinguishment of debt</td><td>94,789</td><td>(25,915)</td><td>9,820</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>81,432</td><td>5,641</td><td>7,757</td><td></td></tr><tr><td>Income before income taxes</td><td>750,887</td><td>108,625</td><td>25,876</td><td></td></tr><tr><td>Income tax (expense) benefit</td><td>(22,476)</td><td>(20,642)</td><td>204,644</td><td></td></tr><tr><td>Income from continuing operations</td><td>728,411</td><td>87,983</td><td>230,520</td><td></td></tr><tr><td>(Loss) income from discontinued operations</td><td>(20,380)</td><td>40,467</td><td>180,925</td><td></td></tr><tr><td>Net income</td><td>708,031</td><td>128,450</td><td>411,445</td><td></td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(4,920)</td><td>2,839</td><td>3,263</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>(25,120)</td><td>(55,411)</td><td></td></tr><tr><td>Net income attributable to Vornado</td><td>647,883</td><td>106,169</td><td>359,297</td><td></td></tr><tr><td>Preferred share dividends</td><td>(55,534)</td><td>(57,076)</td><td>(57,091)</td><td></td></tr><tr><td>Discount on preferred share redemptions</td><td>4,382</td><td>-</td><td>-</td><td></td></tr><tr><td>NET INCOME attributable to common shareholders</td><td>$ 596,731</td><td>$ 49,093</td><td>$ 302,206</td><td></td></tr><tr><td>INCOME PER COMMON SHARE - BASIC:</td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations, net</td><td>$ 3.38</td><td>$ 0.07</td><td>$ 0.89</td><td></td></tr><tr><td>(Loss) income from discontinued operations, net</td><td>(0.11)</td><td>0.21</td><td>1.07</td><td></td></tr><tr><td>Net income per common share</td><td>$ 3.27</td><td>$ 0.28</td><td>$ 1.96</td><td></td></tr><tr><td>Weighted average shares</td><td>182,340</td><td>171,595</td><td>153,900</td><td></td></tr><tr><td>INCOME PER COMMON SHARE - DILUTED:</td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations, net</td><td>$ 3.35</td><td>$ 0.07</td><td>$ 0.87</td><td></td></tr><tr><td>(Loss) income from discontinued operations, net</td><td>(0.11)</td><td>0.21</td><td>1.04</td><td></td></tr><tr><td>Net income per common share</td><td>$ 3.24</td><td>$ 0.28</td><td>$ 1.91</td><td></td></tr><tr><td>Weighted average shares</td><td>184,159</td><td>173,503</td><td>158,119</td><td></td></tr></table>

See notes to consolidated financial statements.



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="3">Preferred Shares</td><td colspan="3">Common Shares</td><td rowspan="3">Additional Capital</td><td rowspan="3">Earnings Less Than Distributions</td><td rowspan="3">Accumulated Other Comprehensive Income (Loss)</td><td rowspan="3">Non-controlling Interests</td><td rowspan="3">Total Equity</td></tr><tr><td colspan="2">Shares</td><td>Amount</td><td>Shares</td><td>Amount</td></tr><tr><td>33,980</td><td>$ 825,095</td><td>153,077</td><td>$ 6,140</td><td>$ 5,491,112</td><td>$ (757,177)</td><td>$ 29,772</td><td>$ 416,298</td></tr><tr><td>Balance, December 31, 2007</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>359,297</td><td>-</td><td>3,263</td><td>362,560</td></tr><tr><td>Net income</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(561,981)</td><td>-</td><td>-</td><td>(561,981)</td></tr><tr><td>Dividends paid on common shares</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(57,091)</td><td>-</td><td>-</td><td>(57,091)</td></tr><tr><td>Dividends paid on preferred shares</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(57,091)</td><td>-</td><td>-</td><td>(57,091)</td></tr><tr><td>Conversion of Series A preferred shares to common shares</td><td>(26)</td><td>(1,312)</td><td>36</td><td>2</td><td>1,310</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Deferred compensation shares and options</td><td>-</td><td>-</td><td>(5)</td><td>1</td><td>11,410</td><td>-</td><td>-</td><td>-</td><td>-</td><td>11,411</td><td></td></tr><tr><td>Common shares issued:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Upon redemption of Class A units, at redemption value</td><td>-</td><td>-</td><td>1,012</td><td>40</td><td>82,290</td><td>-</td><td>-</td><td>-</td><td>-</td><td>82,330</td><td></td></tr><tr><td>Under employees&#x27; share option plan</td><td>-</td><td>-</td><td>1,025</td><td>7</td><td>26,897</td><td>(30,345)</td><td>-</td><td>-</td><td>-</td><td>(3,441)</td><td></td></tr><tr><td>In connection with dividend reinvestment plan</td><td>-</td><td>-</td><td>34</td><td>1</td><td>2,373</td><td>-</td><td>-</td><td>-</td><td>-</td><td>2,374</td><td></td></tr><tr><td>Change in unrealized net gain or loss on securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(20,150)</td><td>-</td><td>(20,150)</td><td></td></tr><tr><td>Sale of securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>6,128</td><td>-</td><td>6,128</td><td></td></tr><tr><td>Change in pension plans</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>3,251</td><td>-</td><td>3,251</td><td></td></tr><tr><td>Adjustments to carry redeemable Class A units at redemption value</td><td>-</td><td>-</td><td>-</td><td>-</td><td>400,647</td><td>-</td><td>-</td><td>-</td><td>-</td><td>400,647</td><td></td></tr><tr><td>Conversion of Series F-1 preferred units</td><td>-</td><td>-</td><td>107</td><td>4</td><td>9,996</td><td>-</td><td>-</td><td>-</td><td>-</td><td>10,000</td><td></td></tr><tr><td>Other</td><td>-</td><td>24</td><td>-</td><td>-</td><td>(59)</td><td>(43)</td><td>(25,900)</td><td>(6,648)</td><td>(32,626)</td><td></td><td></td></tr><tr><td>Balance, December 31, 2008</td><td>33,954</td><td>$ 823,807</td><td>155,286</td><td>$ 6,195</td><td>$ 6,025,976</td><td>$ (1,047,340)</td><td>$ (6,899)</td><td>$ 412,913</td><td>$ 6,214,652</td><td></td><td></td></tr></table>

See notes to consolidated financial statements.



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="2">Preferred Shares</td><td colspan="2">Common Shares</td><td colspan="2">Additional Capital</td><td rowspan="3">Earnings Less Than Distributions</td><td rowspan="3">Accumulated Other Comprehensive Income (Loss)</td><td rowspan="3">Non-controlling Interests</td><td rowspan="3">Total Equity</td></tr><tr><td>Shares</td><td>Amount</td><td>Shares</td><td>Amount</td><td></td><td></td></tr><tr><td>33,954</td><td>$ 823,807</td><td>155,286</td><td>$ 6,195</td><td>$ 6,025,976</td><td>$ (1,047,340)</td><td>$ (6,899)</td></tr><tr><td>Balance, December 31, 2008</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>106,169</td><td>-</td><td>(2,839)</td><td>103,330</td></tr><tr><td>Net income (loss)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(57,076)</td><td>-</td><td>(57,076)</td></tr><tr><td>Dividends paid on common shares</td><td>-</td><td>-</td><td>6,441</td><td>258</td><td>285,338</td><td>(547,993)</td><td>-</td><td>-</td><td>-</td><td>(262,397)</td></tr><tr><td>Dividends paid on preferred shares</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(57,076)</td><td>-</td><td>-</td><td>-</td><td>(57,076)</td></tr><tr><td>Common shares issued:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>In connection with April 2009 public offering</td><td>-</td><td>-</td><td>17,250</td><td>690</td><td>709,536</td><td>-</td><td>-</td><td>-</td><td>-</td><td>710,226</td></tr><tr><td>Upon redemption of Class A units, at redemption value</td><td>-</td><td>-</td><td>1,768</td><td>70</td><td>90,885</td><td>-</td><td>-</td><td>-</td><td>-</td><td>90,955</td></tr><tr><td>Under employees&#x27; share option plan</td><td>-</td><td>-</td><td>468</td><td>4</td><td>1,713</td><td>(31,355)</td><td>-</td><td>-</td><td>-</td><td>(29,638)</td></tr><tr><td>Conversion of Series A preferred shares to common shares</td><td>(2)</td><td>(89)</td><td>2</td><td>-</td><td>89</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Deferred compensation shares and options</td><td>-</td><td>-</td><td>(1)</td><td>1</td><td>13,091</td><td>-</td><td>-</td><td>-</td><td>-</td><td>13,092</td></tr><tr><td>Change in unrealized net gain or loss on securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>6,147</td><td>-</td><td>-</td><td>6,147</td></tr><tr><td>Sale of securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>7,715</td><td>-</td><td>-</td><td>7,715</td></tr><tr><td>Our share of partially owned entities OCI adjustments</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>22,052</td><td>-</td><td>-</td><td>22,052</td></tr><tr><td>Voluntary surrender of equity awards on March 31, 2009</td><td>-</td><td>-</td><td>-</td><td>-</td><td>32,588</td><td>-</td><td>-</td><td>-</td><td>-</td><td>32,588</td></tr><tr><td>Adjustments to carry redeemable Class A units at redemption value</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(167,049)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(167,049)</td></tr><tr><td>Allocation of cash paid to the equity component upon repurchase of convertible senior debentures</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(30,159)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(30,159)</td></tr><tr><td>Other</td><td>-</td><td>(32)</td><td>-</td><td>-</td><td>(1,001)</td><td>4</td><td>(566)</td><td>(3,437)</td><td>(5,032)</td><td></td></tr><tr><td>Balance, December 31, 2009</td><td>33,952</td><td>$ 823,686</td><td>181,214</td><td>$ 7,218</td><td>$ 6,961,007</td><td>$ (1,577,591)</td><td>$ 28,449</td><td>$ 406,637</td><td>$ 6,649,406</td><td></td></tr></table>

See notes to consolidated financial statements.



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="2">Preferred Shares</td><td colspan="2">Common Shares</td><td colspan="2">Additional Capital</td><td rowspan="3">Earnings Less Than Distributions</td><td rowspan="3">Accumulated Other Comprehensive Income (Loss)</td><td rowspan="3">Non-controlling Interests</td><td rowspan="3">Total Equity</td></tr><tr><td>Shares</td><td>Amount</td><td>Shares</td><td>Amount</td><td></td><td></td></tr><tr><td>33,952</td><td>$ 823,686</td><td>181,214</td><td>$ 7,218</td><td>$ 6,961,007</td><td>$ (1,577,591)</td><td>$ 28,449</td></tr><tr><td>Balance, December 31, 2009</td><td></td><td></td><td></td><td></td><td></td><td></td><td>647,883</td><td>-</td><td>4,920</td><td>652,803</td></tr><tr><td>Net income</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(474,299)</td><td>-</td><td>-</td></tr><tr><td>Dividends paid on common shares</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,669)</td><td>-</td><td>-</td></tr><tr><td>Dividends paid on preferred shares</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>4,382</td><td>-</td><td>-</td></tr><tr><td>Redemption of preferred shares</td><td>(1,600)</td><td>(39,982)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,669)</td></tr><tr><td>Common shares issued:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Upon redemption of Class A units, at redemption value</td><td>-</td><td>-</td><td>1,548</td><td>62</td><td>126,702</td><td>-</td><td>-</td><td>-</td><td>-</td><td>126,764</td></tr><tr><td>Under employees&#x27; share option plan</td><td>-</td><td>-</td><td>812</td><td>33</td><td>25,290</td><td>(25,584)</td><td>-</td><td>-</td><td>-</td><td>(261)</td></tr><tr><td>Under dividend reinvestment plan</td><td>-</td><td>-</td><td>22</td><td>1</td><td>1,656</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1,657</td></tr><tr><td>Limited partners&#x27; contributions:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Real Estate Fund</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>93,583</td><td>93,583</td><td></td></tr><tr><td>Other</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>8,783</td><td>8,783</td><td></td></tr><tr><td>Conversion of Series A preferred shares to common shares</td><td>(12)</td><td>(616)</td><td>18</td><td>1</td><td>615</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Deferred compensation shares and options</td><td>-</td><td>-</td><td>48</td><td>2</td><td>9,345</td><td>-</td><td>-</td><td>-</td><td>-</td><td>9,347</td></tr><tr><td>Change in unrealized net gain or loss on securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>46,447</td><td>-</td><td>46,447</td><td></td></tr><tr><td>Sale of securities available-for-sale</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(13,160)</td><td>-</td><td>(13,160)</td><td></td></tr><tr><td>Our share of partially owned entities OCI adjustments</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>11,853</td><td>-</td><td>11,853</td><td></td></tr><tr><td>Adjustments to carry redeemable Class A units at redemption value</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(191,826)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(191,826)</td></tr><tr><td>Other</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(61)</td><td>2</td><td>(136)</td><td>772</td><td>577</td><td></td></tr><tr><td>Balance, December 31, 2010</td><td>32,340</td><td>$ 783,088</td><td>183,662</td><td>$ 7,317</td><td>$ 6,932,728</td><td>$ (1,480,876)</td><td>$ 73,453</td><td>$ 514,695</td><td>$ 6,830,405</td><td></td></tr></table>

See notes to consolidated financial statements.



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS

<table><tr><td rowspan="2"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>(Amounts in thousands)</td><td></td><td></td><td></td><td></td></tr><tr><td>Cash Flows from Operating Activities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$     708,031</td><td>$     128,450</td><td>$     411,445</td><td></td></tr><tr><td>Adjustments to reconcile net income to net cash provided by operating activities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization (including amortization of deferred financing costs)</td><td>556,312</td><td>559,053</td><td>577,338</td><td></td></tr><tr><td>(Income) loss from the mark-to-market of derivative positions in marketable securities</td><td>(130,153)</td><td>-</td><td>33,740</td><td></td></tr><tr><td>Litigation loss accrual and impairment losses</td><td>137,367</td><td>91,184</td><td>157,799</td><td></td></tr><tr><td>Net (gain) loss on early extinguishment of debt</td><td>(97,728)</td><td>25,915</td><td>(9,820)</td><td></td></tr><tr><td>Equity in net (income) loss of partially owned entities, including Toys &quot;R&quot; Us</td><td>(94,062)</td><td>(72,390)</td><td>156,459</td><td></td></tr><tr><td>Straight-lining of rental income</td><td>(76,926)</td><td>(98,355)</td><td>(91,060)</td><td></td></tr><tr><td>Amortization of below-market leases, net</td><td>(66,202)</td><td>(72,481)</td><td>(96,176)</td><td></td></tr><tr><td>Net gain on sale of real estate</td><td>(2,506)</td><td>(45,284)</td><td>(57,523)</td><td></td></tr><tr><td>Distributions of income from partially owned entities</td><td>61,037</td><td>30,473</td><td>44,690</td><td></td></tr><tr><td>Mezzanine loans loss accrual (reversal)</td><td>(53,100)</td><td>190,738</td><td>(10,300)</td><td></td></tr><tr><td>Interest received on repayment of mezzanine loan</td><td>40,467</td><td>-</td><td>-</td><td></td></tr><tr><td>Other non-cash adjustments</td><td>36,352</td><td>15,196</td><td>83,735</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>(81,432)</td><td>(5,641)</td><td>(7,757)</td><td></td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>-</td><td>32,588</td><td>-</td><td></td></tr><tr><td>Reversal of H Street deferred tax liability</td><td>-</td><td>-</td><td>(222,174)</td><td></td></tr><tr><td>Net gain on sale of Americold Realty Trust</td><td>-</td><td>-</td><td>(112,690)</td><td></td></tr><tr><td>Changes in operating assets and liabilities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Real Estate Fund investments</td><td>(144,423)</td><td>-</td><td>-</td><td></td></tr><tr><td>Other assets</td><td>(66,736)</td><td>(61,878)</td><td>(27,382)</td><td></td></tr><tr><td>Prepaid assets</td><td>6,321</td><td>(90,519)</td><td>(12,449)</td><td></td></tr><tr><td>Accounts payable and accrued expenses</td><td>2,645</td><td>(3,606)</td><td>(5,207)</td><td></td></tr><tr><td>Accounts receivable, net</td><td>2,019</td><td>15,383</td><td>(1,646)</td><td></td></tr><tr><td>Other liabilities</td><td>33,803</td><td>(5,247)</td><td>6,790</td><td></td></tr><tr><td>Net cash provided by operating activities</td><td>771,086</td><td>633,579</td><td>817,812</td><td></td></tr><tr><td>Cash Flows from Investing Activities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Purchases of marketable securities including J.C. Penney Company, Inc. common shares and other</td><td>(504,096)</td><td>(90,089)</td><td>(164,886)</td><td></td></tr><tr><td>Proceeds from sales of, and return of investment in, marketable securities</td><td>280,462</td><td>64,355</td><td>51,185</td><td></td></tr><tr><td>Acquisitions of real estate and other</td><td>(173,413)</td><td>-</td><td>(42,642)</td><td></td></tr><tr><td>Investments in partially owned entities</td><td>(165,170)</td><td>(38,266)</td><td>(156,227)</td><td></td></tr><tr><td>Development costs and construction in progress</td><td>(156,775)</td><td>(465,205)</td><td>(598,688)</td><td></td></tr><tr><td>Additions to real estate</td><td>(144,794)</td><td>(216,669)</td><td>(207,885)</td><td></td></tr><tr><td>Restricted cash</td><td>138,586</td><td>111,788</td><td>12,004</td><td></td></tr><tr><td>Proceeds from sales of real estate and related investments</td><td>127,736</td><td>367,698</td><td>390,468</td><td></td></tr><tr><td>Investments in mezzanine loans receivable and other</td><td>(85,336)</td><td>-</td><td>(7,397)</td><td></td></tr><tr><td>Proceeds from repayment of mezzanine loans receivable</td><td>70,762</td><td>47,397</td><td>52,470</td><td></td></tr><tr><td>Distributions of capital from partially owned entities</td><td>51,677</td><td>16,790</td><td>218,367</td><td></td></tr><tr><td>Proceeds from maturing short-term investments</td><td>40,000</td><td>15,000</td><td>-</td><td></td></tr><tr><td>Purchases of short-term investments</td><td>-</td><td>(55,000)</td><td>-</td><td></td></tr><tr><td>Net cash used in investing activities</td><td>(520,361)</td><td>(242,201)</td><td>(453,231)</td><td></td></tr></table>

See notes to consolidated financial statements.



## VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<table><tr><td rowspan="2"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>(Amounts in thousands)</td><td></td><td></td><td></td></tr><tr><td>Cash Flows from Financing Activities:</td><td></td><td></td><td></td></tr><tr><td>Proceeds from borrowings</td><td>$ 2,481,883</td><td>$ 2,648,175</td><td>$ 1,721,974</td></tr><tr><td>Repayments of borrowings</td><td>(1,564,143)</td><td>(2,075,236)</td><td>(993,665)</td></tr><tr><td>Dividends paid on common shares</td><td>(474,299)</td><td>(262,397)</td><td>(561,981)</td></tr><tr><td>Contributions from noncontrolling interests</td><td>103,831</td><td>2,180</td><td>-</td></tr><tr><td>Purchases of outstanding preferred units and shares</td><td>(78,954)</td><td>(24,330)</td><td>-</td></tr><tr><td>Dividends paid on preferred shares</td><td>(55,669)</td><td>(57,076)</td><td>(57,112)</td></tr><tr><td>Distributions to noncontrolling interests</td><td>(53,842)</td><td>(42,451)</td><td>(85,419)</td></tr><tr><td>Repurchase of shares related to stock compensation agreements and related tax withholdings</td><td>(25,660)</td><td>(32,203)</td><td>(31,198)</td></tr><tr><td>Debt issuance and other costs</td><td>(14,980)</td><td>(30,186)</td><td>(14,299)</td></tr><tr><td>Acquisition of convertible senior debentures and senior unsecured notes</td><td>(440,575)</td><td>(2,221,204)</td><td>-</td></tr><tr><td>Proceeds from issuance of common shares</td><td>-</td><td>710,226</td><td>-</td></tr><tr><td>Proceeds received from exercise of employee share options</td><td>26,993</td><td>1,750</td><td>29,377</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>(95,415)</td><td>(1,382,752)</td><td>7,677</td></tr><tr><td>Net increase (decrease) in cash and cash equivalents</td><td>155,310</td><td>(991,374)</td><td>372,258</td></tr><tr><td>Cash and cash equivalents at beginning of period</td><td>535,479</td><td>1,526,853</td><td>1,154,595</td></tr><tr><td>Cash and cash equivalents at end of period</td><td>$ 690,789</td><td>$ 535,479</td><td>$ 1,526,853</td></tr><tr><td>Supplemental Disclosure of Cash Flow Information:</td><td></td><td></td><td></td></tr><tr><td>Cash payments for interest (including capitalized interest of $864, $17,256 and $63,063)</td><td>$ 549,327</td><td>$ 648,829</td><td>$ 658,376</td></tr><tr><td>Cash payments for income taxes</td><td>$ 23,960</td><td>$ 21,775</td><td>$ 22,005</td></tr><tr><td>Non-Cash Investing and Financing Activities:</td><td></td><td></td><td></td></tr><tr><td>Adjustments to carry redeemable Class A units at redemption value</td><td>$ (191,826)</td><td>$ (167,049)</td><td>$ 400,647</td></tr><tr><td>Redemption of Class A Operating Partnership units for common shares, at redemption value</td><td>126,764</td><td>90,955</td><td>82,330</td></tr><tr><td>Net unrealized gain (loss) on securities available for sale</td><td>46,447</td><td>6,147</td><td>(20,150)</td></tr><tr><td>Dividends paid in common shares</td><td>-</td><td>285,596</td><td>-</td></tr><tr><td>Unit distributions paid in Class A units</td><td>-</td><td>23,876</td><td>-</td></tr><tr><td>Financing assumed in acquisitions</td><td>102,616</td><td>-</td><td>-</td></tr><tr><td>Increase in assets and liabilities resulting from the consolidation of investments previously accounted for on the equity method:</td><td></td><td></td><td></td></tr><tr><td>Real estate, net</td><td>102,804</td><td>-</td><td>197,600</td></tr><tr><td>Notes and mortgages payable</td><td>57,563</td><td>-</td><td>100,000</td></tr><tr><td>Decrease in assets and liabilities resulting from the deconsolidation of investments that were previously consolidated:</td><td></td><td></td><td></td></tr><tr><td>Real estate, net</td><td>(401,857)</td><td>-</td><td>2,069</td></tr><tr><td>Notes and mortgages payable</td><td>(316,490)</td><td>-</td><td>-</td></tr></table>

See notes to consolidated financial statements.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## 1. Organization and Business

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 93.2% of the common limited partnership interest in the Operating Partnership at December 31, 2010. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

As of December 31, 2010, we own:

## Office Properties:

(i) all or portions of 28 properties aggregating 17.4 million square feet in the New York City metropolitan area (primarily Manhattan);

(ii) all or portions of 82 properties aggregating 21.1 million square feet in the Washington, DC / Northern Virginia area;

(iii) a 70% controlling interest in 555 California Street, a three-building complex aggregating 1.8 million square feet in San Francisco’s financial district, known as the Bank of America center;

## Retail Properties:

(iv) 161 properties aggregating 25.6 million square feet primarily in Manhattan, the northeast states, California and Puerto Rico;

## Merchandise Mart Properties:

(v) 6 properties aggregating 6.9 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;

## Toys “R” Us, Inc. (“Toys”):

(vi) a 32.7% interest in Toys which owns and/or operates 1,589 stores worldwide, including 857 stores in the United States and 732 stores internationally;

## Other Investments:

(vii) 32.4% of the common stock of Alexander’s, Inc. (NYSE: ALX), which has seven properties aggregating 3.2 million square feet in the greater New York metropolitan area;

(viii) the Hotel Pennsylvania containing 1.4 million square feet in New York City;

(ix) a 9.9% economic interest in J.C. Penney Company, Inc. (NYSE:JCP), a major retailer that operates 1,108 department stores nationwide;

(x) a 26.2% equity interest in LNR Property Corporation, an industry leading servicer and special servicer of commercial mortgage loans and CMBS and a diversified real estate, investment and finance company;

(xi) a 36.4% interest in our real estate investment fund in which we are the general partner and investment manager with aggregate equity commitments of $550 million, of which we committed $200 million; and

(xii) other real estate and investments, including marketable securities and mezzanine loans on real estate.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 2. Basis of Presentation and Significant Accounting Policies

## Basis of Presentation

The accompanying consolidated financial statements include the accounts of Vornado and the Operating Partnership. All significant inter-company amounts have been eliminated. We account for unconsolidated partially owned entities on the equity method of accounting. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us 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 materially from those estimates.

## Recently Issued Accounting Literature

In the fourth quarter of 2010, the Financial Accounting Standards Board (“FASB”) issued an update to the guidance contained in Accounting Standards Codification (“ASC”) 310, Receivables. The new guidance requires companies to provide more information about the credit quality of their financing receivables in the disclosures to financial statements including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The adoption of this accounting guidance did not have a significant impact on our consolidated financial statements.

On January 21, 2010, the FASB issued an update to ASC 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements. The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

## Significant Accounting Policies

Real Estate: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and certain costs directly related to the improvement and leasing of real estate are capitalized. Maintenance and repairs are expensed as incurred. For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete. If the cost of the redeveloped property, including the undepreciated net book value of the property carried forward, exceeds the estimated fair value of redeveloped property, the excess is charged to expense. Depreciation is provided on a straight-line basis over estimated useful lives which range from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets. Additions to real estate include interest expense capitalized during construction of $864,000 and $17,256,000, for the years ended December 31, 2010 and 2009, respectively.

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and acquired liabilities and we allocate the purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 2. Basis of Presentation and Significant Accounting Policies – continued

Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. The table below summarizes non-cash impairment losses and acquisition costs recognized in the years ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Springfield Mall</td><td>$ 64,500</td><td>$ -</td><td>$ -</td><td></td></tr><tr><td>Condominium units held for sale (see page 126)</td><td>30,013</td><td>13,667</td><td>23,625</td><td></td></tr><tr><td>Other real estate assets</td><td>28,000</td><td>6,989</td><td>1,645</td><td></td></tr><tr><td>Acquisition costs</td><td>6,945</td><td>-</td><td>3,009</td><td></td></tr><tr><td>Undeveloped land</td><td>-</td><td>38,347</td><td>12,500</td><td></td></tr><tr><td>Real estate - development related</td><td>-</td><td>16,960</td><td>40,668</td><td></td></tr><tr><td></td><td>$ 129,458</td><td>$ 75,963</td><td>$ 81,447</td><td></td></tr></table>

Partially Owned Entities: In determining whether we have a controlling interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which we have power over significant activities of the entity and the obligation to absorb losses or receive benefits that could potentially be significant to the entity. We have concluded that we do not control a partially owned entity if the entity is not considered a variable interest entity and the approval of all of the partners/members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the hiring of a chief executive officer, the commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing secured by assets of the venture. We account for investments on the equity method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee. Equity method investments are initially recorded at cost and subsequently adjusted for our share of net income or loss and cash contributions and distributions each period. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method. Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available information at the time the analyses are prepared.

The table below summarizes non-cash impairment losses recognized on investments in partially owned entities in the years ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Investment in Lexington Realty Trust</td><td>$ -</td><td>$ -</td><td>$ 107,882</td><td></td></tr><tr><td>Other</td><td>11,481</td><td>17,820</td><td>96,037</td><td></td></tr><tr><td></td><td>$ 11,481</td><td>$ 17,820</td><td>$ 203,919</td><td></td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 2. Basis of Presentation and Significant Accounting Policies – continued

Identified Intangibles: We record acquired intangible assets (including acquired above-market leases, tenant relationships and acquired in-place leases) and acquired intangible liabilities (including below-market leases) at their estimated fair value separate and apart from goodwill. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is measured based on the excess of carrying amount of the identified intangible over its estimated fair value. As of December 31, 2010 and 2009, the carrying amounts of identified intangible assets were $348,745,000 and $439,549,000, respectively. The carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $528,905,000 and $606,390,000, respectively.

Mezzanine Loans Receivable: We invest in mezzanine loans of entities that have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or premium. We accrete or amortize any discount or premium over the life of the related receivable utilizing the effective interest method or straight-line method, if the result is not materially different. We evaluate the collectability of both interest and principal of each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. Interest on impaired loans is recognized when received in cash. In the year ended December 31, 2009 we recorded a $190,738,000 loss accrual on our portfolio of mezzanine loans, $53,100,000 of which was reversed in 2010. In 2008, upon sale of a sub-participation in a loan, we reversed $10,300,000 of a $57,000,000 loss accrual recognized in 2007.

Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit. To date, we have not experienced any losses on our invested cash.

Restricted Cash: Restricted cash consists of security deposits, cash restricted in connection with our deferred compensation plan and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements.

Allowance for Doubtful Accounts: We periodically evaluate the collectibility of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents. This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. As of December 31, 2010 and 2009, we had $62,979,000 and $46,708,000, respectively, in allowances for doubtful accounts. In addition, as of December 31, 2010 and 2009, we had $7,323,000 and $4,672,000, respectively, in allowances for receivables arising from the straight-lining of rents.

Deferred Charges: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight line basis over the lives of the related leases. All other deferred charges are amortized on a straight line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate.

Stock-Based Compensation: Stock-based compensation consists of awards to certain employees and officers and consists of stock options, restricted stock, restricted Operating Partnership units and out-performance plan awards. We account for all stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 2. Basis of Presentation and Significant Accounting Policies – continued

Revenue Recognition: We have the following revenue sources and revenue recognition policies:

- Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances in which we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.

- Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds. These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved).

- Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet revenue is recognized when the services have been rendered.

- Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is recognized when the trade shows have occurred.

- Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred.

- Management, Leasing and Other Fees – income arising from contractual agreements with third parties or with partially owned entities. This revenue is recognized as the related services are performed under the respective agreements.

Condominium Units Held For Sale: Condominium units held for sale are carried at the lower of cost or expected net sales proceeds. As of December 31, 2010 and 2009, condominiums held for sale, which are included in “other assets” on our consolidated balance sheet, aggregate $84,397,000 and $187,050,000, respectively and consist of substantially completed units at our 40 East 66 \( ^{th} \)  Street property in Manhattan, The Bryant in Boston and Granite Park in Pasadena. Revenue from condominium unit sales is recognized upon closing of the sale (the “completed contract method”), as all conditions for full profit recognition have been met at that time. We use the relative sales value method to allocate costs to individual condominium units. Net gains on sales of condominiums units are included in “net gains on disposition of wholly owned and partially owned assets” on our consolidated statements of income. In the years ended December 31, 2010, 2009 and 2008, we recognized non-cash impairment losses related to certain of these condominiums aggregating $30,013,000, $13,667,000 and $23,625,000, respectively, based on our assessments of the expected net sales proceeds associated with these condominium projects. These losses are included in “impairment losses and acquisition costs” on our consolidated statements of income.

Derivative Instruments and Hedging Activities: ASC 815, Derivatives and Hedging, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As of December 31, 2010 and 2009, our derivative instruments consisted primarily of a portion of our investment in J.C. Penney common shares (see Note 4 – Marketable Securities and Derivative Instruments) and interest rate caps. We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 2. Basis of Presentation and Significant Accounting Policies – continued

Income Per Share: Basic income per share is computed based on weighted average shares outstanding. Diluted income per share considers the effect of all potentially dilutive share equivalents, including outstanding employee stock options, restricted shares and convertible or redeemable securities.

Income Taxes: We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We distribute to shareholders 100% of taxable income and therefore, no provision for Federal income taxes is required. Dividends distributed for the year ended December 31, 2010, were characterized, for federal income tax income tax purposes, as 95.9% ordinary income, 2.8% as long term capital gain and 1.3% as return of capital. Dividend distributions for the year ended December 31, 2009, were characterized, for Federal income tax purposes, as 63.9% ordinary income, 0.9% long-term capital gain and 35.2% return of capital. Dividend distributions for the year ended December 31, 2008 were characterized, for Federal income tax purposes, as 70.8% ordinary income and 29.2% return of capital.

We have elected to treat certain consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable REIT subsidiaries pursuant to an amendment to the Internal Revenue Code that became effective January 1, 2001. Taxable REIT subsidiaries may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to Federal and State income tax at regular corporate tax rates. Our taxable REIT subsidiaries had a combined current income tax liability of approximately $24,858,000 and $20,025,000 for the years ended December 31, 2010 and 2009, respectively, and have immaterial differences between the financial reporting and tax basis of assets and liabilities.

In connection with purchase accounting for H Street, in July 2005 and April 2007 we recorded an aggregate of $222,174,000 of deferred tax liabilities representing the differences between the tax basis and the book basis of the acquired assets and liabilities multiplied by the effective tax rate. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

The following table reconciles net income attributable to common shareholders to estimated taxable income for the years ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Net income attributable to common shareholders</td><td>$ 596,731</td><td>$ 49,093</td><td>$ 302,206</td><td></td></tr><tr><td>Book to tax differences (unaudited):</td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>216,473</td><td>247,023</td><td>233,426</td><td></td></tr><tr><td>Mezzanine loans receivable</td><td>(104,727)</td><td>171,380</td><td>(51,893)</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>(70,606)</td><td>(83,959)</td><td>(82,901)</td><td></td></tr><tr><td>Earnings of partially owned entities</td><td>(62,315)</td><td>(82,382)</td><td>(50,855)</td><td></td></tr><tr><td>Stock options</td><td>(48,399)</td><td>(32,643)</td><td>(71,995)</td><td></td></tr><tr><td>Sale of real estate</td><td>12,899</td><td>3,923</td><td>3,687</td><td></td></tr><tr><td>Reversal of deferred tax liability</td><td>-</td><td>-</td><td>(202,267)</td><td></td></tr><tr><td>Derivatives</td><td>(121,120)</td><td>-</td><td>43,218</td><td></td></tr><tr><td>Other, net</td><td>48,915</td><td>81,936</td><td>171,763</td><td></td></tr><tr><td>Estimable taxable income</td><td>$ 467,851</td><td>$ 354,371</td><td>$ 294,389</td><td></td></tr></table>

The net basis of our assets and liabilities for tax reporting purposes is approximately $3.3 billion lower than its amount reported in our consolidated financial statements.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 3. Acquisitions

Vornado Capital Partners, L.P. and Vornado Capital Partners Parallel, L.P. (the "Fund")

On July 6, 2010, we completed an initial closing of the Fund with aggregate equity commitments of $550,000,000, of which we committed $200,000,000. We expect to close on an additional $250,000,000 of equity commitments in the first quarter of 2011. We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund's investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America. The Fund has a term of eight years. We consolidate the accounts of the Fund into our consolidated financial statements. In 2010, we incurred $6,482,000 for organization costs of the Fund, net of the Fund's reimbursement to us, which are included in "general and administrative" expenses on our consolidated statement of income.

The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. As of December 31, 2010, the Fund received $146,789,000 of capital from partners, including $53,378,000 from us. During the second half of 2010, the Fund made four investments aggregating approximately $145,000,000 and reimbursed us for $1,500,000 of organization costs.

## Other

On October 8, 2010, we acquired 510 Fifth Avenue, a 59,000 square foot retail property located at 43 \( ^{rd} \)  Street and Fifth Avenue in New York, for 57,000,000, comprised of 24,700,000 in cash and 32,300,000 of existing debt. We consolidate the accounts of this property into our consolidated financial statements from the date of the acquisition.

On October 15, 2010, we acquired the 55% interest that we did not already own of a 646,000 square foot retail property located in San Jose, California, for $97,000,000, consisting of $27,000,000 in cash and $70,000,000 of existing debt. We consolidate the accounts of the property into our consolidated financial statements from the date of this acquisition.

On November 4, 2010, we acquired 11.3 acres of the land under a portion of the Borgata Hotel and Casino complex for $83,000,000 in cash. The land is leased to the partnership that controls the Borgata Hotel and Casino complex through December 2070. In January 2011, we completed a 10-year $60,000,000 financing of this land. The loan has a fixed interest rate of 5.14% and amortizes beginning in the third year, based on a 30-year schedule.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 4. Marketable Securities and Derivative Instruments

## Marketable Securities

Our portfolio of marketable securities is comprised of debt and equity securities that are classified as available for sale. Available for sale securities are presented on our consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the mark-to-market of these securities are recognized as an increase or decrease in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet) and not recognized in income. Gains and losses are recognized in earnings only upon the sale of the securities and are recorded based on the weighted average cost of such securities.

We evaluate our portfolio of marketable securities for impairment each reporting period. For each of the securities in our portfolio with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a reasonable period of time sufficient for us to recover our cost basis. We also evaluate the near-term prospects for each of these investments in relation to the severity and duration of the decline. During 2009 and 2008, we concluded that certain of our investments in marketable securities were “other-than-temporarily” impaired and recognized an aggregate of $3,361,000 and $76,352,000, respectively, of non-cash impairment losses. These charges are included as a component of “interest and other investment income (loss), net” on our consolidated statements of income. Our conclusions were based on the severity and duration of the decline in the market value of these securities and our inability to forecast a recovery in the near term. No impairment losses were recognized in the year ended December 31, 2010.

The carrying amount of marketable securities classified as available for sale and their corresponding fair values at December 31, 2010 and December 31, 2009 are as follows:

<table><tr><td rowspan="2"></td><td colspan="3">As of December 31, 2010</td><td colspan="3">As of December 31, 2009</td></tr><tr><td>Carrying Amount</td><td colspan="2">Fair Value</td><td>Carrying Amount</td><td colspan="2">Fair Value</td></tr><tr><td>(Amounts in thousands)</td><td>$ 647,848</td><td>$ 647,848</td><td>$ 79,925</td><td>$ 79,925</td><td>$ 79,925</td><td>$ 79,925</td></tr><tr><td>Equity securities</td><td>118,268</td><td>118,268</td><td>300,727</td><td>319,393</td><td>319,393</td><td>319,393</td></tr><tr><td>Debt securities</td><td>$ 766,116</td><td>$ 766,116</td><td>$ 380,652</td><td>$ 380,652</td><td>$ 380,652</td><td>$ 380,652</td></tr></table>

During 2010, 2009 and 2008 we sold certain of our marketable securities for aggregate proceeds of $281,486,000, $64,355,000 and $51,185,000, respectively. In connection therewith, we recognized $22,604,000, $3,834,000 and $2,028,000, respectively, of net gains which are included as a component of "net gain on disposition of wholly owned and partially owned assets" on our consolidated statements of income. At December 31, 2010 and December 31, 2009, our marketable securities portfolio had $45,089,000 and $13,026,000, respectively, of gross unrealized gains. There were no unrealized losses at December 31, 2010 and $1,223,000 of gross unrealized losses at December 31, 2009.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 4. Marketable Securities and Derivative Instruments - continued

Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)

We own an economic interest in 23,400,000 J.C. Penney common shares, or 9.9% of J.C. Penney’s outstanding common shares. Below are the details of our investment.

We own 18,584,010 common shares at an average price of $25.70 per share, or $477,678,000 in the aggregate. These shares, which have an aggregate fair value of $600,449,000 at December 31, 2010, are included in marketable equity securities on our consolidated balance sheet and are classified as “available for sale.” Of these shares, 15,500,000 were acquired through the exercise of a call option that originated on September 28, 2010 and settled on November 9, 2010. During the period in which the call option was outstanding and classified as a derivative instrument, we recognized $112,537,000 of income from the mark-to-market of the underlying common shares, which is included in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from November 10 through December 31, 2010, we recognized $10,234,000 from the mark-to-market of the common shares classified as available-for-sale, which is included in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet).

We also own an economic interest in 4,815,990 common shares through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.65 per share, or $137,989,000 in the aggregate. The contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012. The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us. The strike price per share increases at an annual rate of LIBOR plus 80 basis points and decreases for dividends received on the shares. The contract is a derivative instrument that does not qualify for hedge accounting treatment. Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment income (loss), net” on our consolidated statement of income. During the period from October 7, 2010 through December 31, 2010, we recognized $17,616,000 of income from the mark-to-market of this position, based on J.C. Penney’s closing share price of $32.31 per share at December 31, 2010.

As of December 31, 2010, the aggregate economic net gain on our investment in J.C. Penney was $140,387,000, based on J.C. Penney’s closing share price of $32.31 per share and our weighted average cost of $26.31 per share.

## 5. Investments in Partially Owned Entities

The following is a summary of condensed combined financial information for all of our partially owned entities, including Toys “R” Us, Alexander’s, Inc., Lexington Realty Trust and LNR Property Corporation, as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008.

<table><tr><td colspan="3">(Amounts in thousands)</td><td colspan="2">December 31,</td></tr><tr><td>Balance Sheet:</td><td></td><td>2010</td><td>2009</td><td></td></tr><tr><td>Assets \( ^{(1)} \)</td><td></td><td>$ 165,183,000</td><td>$ 23,512,000</td><td></td></tr><tr><td>Liabilities \( ^{(1)} \)</td><td></td><td>160,203,000</td><td>18,365,000</td><td></td></tr><tr><td>Noncontrolling interests</td><td></td><td>124,000</td><td>230,000</td><td></td></tr><tr><td>Equity</td><td></td><td>4,856,000</td><td>4,917,000</td><td></td></tr></table>

<table><tr><td rowspan="2">Income Statement:</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Total revenue</td><td>$ 15,074,000</td><td>$ 14,397,000</td><td>$ 15,313,000</td></tr><tr><td>Net income (loss)</td><td>63,000</td><td>103,000</td><td>(54,000)</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 5. Investments in Partially Owned Entities - continued

LNR Property Corporation (“LNR”)

On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco Corp. The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to $425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below. We account for our equity interest in LNR under the equity method on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to receiving LNR’s financial statements.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $142 billion as of September 30, 2010, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated income statement. As of December 31, 2010, the carrying amount of our investment in LNR does not materially differ from our share of LNR’s equity.

Below is a summary of LNR’s latest available financial information:

<table><tr><td>(Amounts in thousands)</td><td>As of September 30, 2010</td></tr><tr><td>Balance Sheet:</td><td>$ 143,266,000</td></tr><tr><td>Assets</td><td>142,720,000</td></tr><tr><td>Liabilities</td><td>37,000</td></tr><tr><td>Noncontrolling interests</td><td>509,000</td></tr><tr><td>LNR Property Corporation equity</td><td></td></tr><tr><td>Income Statement:</td><td>For the Period July 29, 2010 to September 30, 2010</td></tr><tr><td>Total revenue</td><td>$ 23,000</td></tr><tr><td>Net income attributable to LNR</td><td>8,000</td></tr></table>

Toys “R” Us (“Toys”)

As of December 31, 2010, we own 32.7% of Toys. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. We account for our investment in Toys under the equity method and record our 32.7% share of Toys net income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31. As of December 31, 2010, the carrying amount of our investment in Toys does not differ materially from our share of the equity in the net assets of Toys on a purchase accounting basis.

On May 28, 2010, Toys filed a registration statement with the SEC for the offering and sale of its common stock. The offering, if completed, would result in a reduction of our percentage ownership of Toys' equity. The size of the offering and its completion are subject to market and other conditions. In August 2010, in connection with certain financing and refinancing transactions, Toys paid us an aggregate of $9,600,000 for our share of advisory fees. Since Toys has capitalized these fees and is amortizing them over the term of the related debt, we recorded the fees as a reduction of the basis of our investment in Toys and will amortize the fees into income over the term of the related debt.

Below is a summary of Toys’ latest available financial information on a purchase accounting basis:

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="2">Balance as of</td></tr><tr><td>October 30, 2010</td><td>October 31, 2009</td></tr><tr><td>Balance Sheet:</td><td></td><td></td></tr><tr><td>Assets</td><td>$ 12,810,000</td><td>$ 12,589,000</td></tr><tr><td>Liabilities</td><td>11,317,000</td><td>11,198,000</td></tr><tr><td>Noncontrolling interests</td><td>-</td><td>112,000</td></tr><tr><td>Toys “R” Us, Inc. equity</td><td>1,493,000</td><td>1,279,000</td></tr></table>

<table><tr><td rowspan="2">Income Statement:</td><td colspan="3">For the Twelve Months Ended</td></tr><tr><td>October 30, 2010</td><td>October 31, 2009</td><td>November 1, 2008</td></tr><tr><td>Total revenues</td><td>$ 13,749,000</td><td>$ 13,172,000</td><td>$ 14,090,000</td></tr><tr><td>Net (loss) income attributable to Toys</td><td>189,000</td><td>216,000</td><td>(13,000)</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 5. Investments in Partially Owned Entities - continued

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)

At December 31, 2010 and 2009, we owned 32.4%, respectively, of the outstanding common shares of Alexander’s. We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of each year and are automatically renewable. At December 31, 2010 the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s, based on Alexander’s 2010 closing share price of $41.28, was $681,939,000, or $495,128,000 in excess of the carrying amount on our consolidated balance sheet.

As of December 31, 2010, the carrying amount of our investment in Alexander’s excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $59,823,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income or loss. The basis difference related to the land will be recognized upon disposition of our investment.

## Management and Development Agreements

We receive an annual fee for managing Alexander’s and all of its properties equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Regional Shopping Center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue and (iv) $248,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue.

In addition, we are entitled to a development fee of 6% of development costs, as defined, with a minimum guaranteed payment of $750,000 per annum. During the years ended December 31, 2010, 2009, and 2008, we recognized $711,000, $2,710,000 and $4,101,000, respectively, of development fee income.

## Leasing Agreements

We provide Alexander’s with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through twentieth year of a lease term and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by Alexander’s tenants. In the event third-party real estate brokers are used, our fee increases by 1% and we are responsible for the fees to the third-parties. We are also entitled to a commission upon the sale of any of Alexander’s assets equal to 3% of gross proceeds, as defined, for asset sales less than $50,000,000, or 1% of gross proceeds, as defined, for asset sales of $50,000,000 or more. The total of these amounts is payable to us in annual installments in an amount not to exceed $4,000,000 with interest on the unpaid balance at one-year LIBOR plus 1.0% (1.99% at December 31, 2010).

## Other Agreements

Building Maintenance Services (“BMS”), our wholly-owned subsidiary, supervises the cleaning, engineering and security services at Alexander’s 731 Lexington Avenue and Kings Plaza properties for an annual fee of the costs for such services plus 6%. During the years ended December 31, 2010, 2009 and 2008, we recognized $2,775,000, $2,552,000 and $2,083,000 of income, respectively, under these agreements.

Below is a summary of Alexander’s latest available financial information:

<table><tr><td colspan="3">(Amounts in thousands)</td><td colspan="2">Balance as of</td></tr><tr><td colspan="2">Balance Sheet:</td><td>December 31, 2010</td><td>December 31, 2009</td><td></td></tr><tr><td>Assets</td><td></td><td>$ 1,679,000</td><td>$ 1,704,000</td><td></td></tr><tr><td>Liabilities</td><td></td><td>1,335,000</td><td>1,389,000</td><td></td></tr><tr><td>Noncontrolling interests</td><td></td><td>3,000</td><td>2,000</td><td></td></tr><tr><td>Stockholders&#x27; equity</td><td></td><td>341,000</td><td>313,000</td><td></td></tr><tr><td colspan="2"></td><td colspan="2">For the Year Ended</td><td></td></tr><tr><td colspan="2">Income Statement:</td><td>December 31, 2010</td><td>December 31, 2009</td><td>December 31, 2008</td></tr><tr><td colspan="2">Total revenues</td><td>$ 242,000</td><td>$ 224,000</td><td>$ 211,000</td></tr><tr><td colspan="2">Net income attributable to Alexander&#x27;s</td><td>67,000</td><td>132,000</td><td>76,000</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 5. Investments in Partially Owned Entities - continued

Lexington Realty Trust (“Lexington”) (NYSE: LXP)

As of December 31, 2010, we own 18,468,969 Lexington common shares, or approximately 12.8% of Lexington's common equity. We account for our investment in Lexington on the equity method because we believe we have the ability to exercise significant influence over Lexington's operating and financial policies, based on, among other factors, our representation on Lexington's Board of Trustees and the level of our ownership in Lexington as compared to other shareholders. We record our pro rata share of Lexington's net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements.

Based on Lexington’s December 31, 2010 closing share price of $7.95, the market value (“fair value” pursuant to ASC 820) of our investment in Lexington was $146,828,000, or $89,558,000 in excess of the December 31, 2010 carrying amount on our consolidated balance sheet. As of December 31, 2010, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $63,871,000. This basis difference resulted primarily from $107,882,000 of non-cash impairment charges recognized during 2008, partially offset by purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real estate (land and buildings) as compared to the carrying amounts in Lexington’s consolidated financial statements. The basis difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net income or loss of Lexington. This amortization is not material to our share of equity in Lexington’s net income or loss. The basis difference attributable to the land will be recognized upon disposition of our investment.

Below is a summary of Lexington’s latest available financial information:

<table><tr><td colspan="2">Balance as of</td></tr><tr><td>Assets</td><td>September 30, 2010</td></tr><tr><td>Liabilities</td><td>$ 3,385,000</td></tr><tr><td>Noncontrolling interests</td><td>2,115,000</td></tr><tr><td>Shareholders&#x27; equity</td><td>71,000</td></tr><tr><td></td><td>1,199,000</td></tr><tr><td colspan="2">For the Twelve Months Ended September 30,</td></tr><tr><td>Income Statement:</td><td>2010</td></tr><tr><td>Total revenues</td><td>$ 351,000</td></tr><tr><td>Net (loss) income attributable to Lexington</td><td>(90,000)</td></tr></table>

## Other

On October 20, 2010, we sold a 45% ownership interest in 1299 Pennsylvania Avenue (the Warner Building) and 1101 17 \( ^{th} \)  Street for 326,700,000, comprised of 91,000,000 in cash and the assumption of existing mortgage debt. We retained the remaining 55% ownership interest and continue to manage and lease the properties. Based on the Warner Building’s implied fair value of 445,000,000, we recognized a net gain of 54,000,000 in the fourth quarter of 2010, which is included as a component of “net gains on dispositions of wholly owned and partially owned assets,” on our consolidated statement of income. The gain on 1101 17 \( ^{th} \)  Street, based on an implied fair value of 81,000,000, will be recognized when we monetize our investment. We share control over major decisions with our joint venture partner. Accordingly, these properties are accounted for under the equity method from the date of sale.



## 5. Investments in Partially Owned Entities - continued

Investments in partially owned entities as of December 31, 2010 and 2009 and income recognized from these investments for the years ended December 31, 2010, 2009 and 2008 are as follows:

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Percentage Ownership as of December 31, 2010</td><td colspan="2">As of December 31,</td></tr><tr><td>2010</td><td>2009</td></tr><tr><td>Investments:</td><td></td><td></td><td></td></tr><tr><td>Toys</td><td>32.7%</td><td>$ 447,334</td><td>$ 409,453</td></tr><tr><td>Alexander&#x27;s</td><td>32.4%</td><td>$ 186,811</td><td>$ 193,174</td></tr><tr><td>Partially owned office buildings</td><td>(1)</td><td>181,838</td><td>158,444</td></tr><tr><td>LNR (see page 131)</td><td>26.2%</td><td>132,973</td><td>-</td></tr><tr><td>India real estate ventures</td><td>4%-36.5%</td><td>127,193</td><td>93,322</td></tr><tr><td>Lexington</td><td>12.8%</td><td>57,270</td><td>55,106</td></tr><tr><td>Other equity method investments</td><td>(2)</td><td>241,587</td><td>299,786</td></tr><tr><td></td><td></td><td>$ 927,672</td><td>$ 799,832</td></tr><tr><td>Our Share of Net Income (Loss):</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>Toys - 32.7% share of:</td><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Equity in net income before income taxes (3)</td><td>$ 16,401</td><td>$ 58,416</td><td>$ 53,867</td></tr><tr><td>Income tax benefit (expense)</td><td>45,418</td><td>13,185</td><td>(44,752)</td></tr><tr><td>Equity in net income</td><td>61,819</td><td>71,601</td><td>9,115</td></tr><tr><td>Non-cash purchase price accounting adjustments</td><td>-</td><td>13,946</td><td>(14,900)</td></tr><tr><td>Interest and other income</td><td>9,805</td><td>6,753</td><td>8,165</td></tr><tr><td></td><td>$ 71,624</td><td>$ 92,300</td><td>$ 2,380</td></tr><tr><td>Alexander&#x27;s - 32.4% share of:</td><td></td><td></td><td></td></tr><tr><td>Equity in net income before income taxes and reversal of stock appreciation rights compensation expense</td><td>$ 20,059</td><td>$ 17,991</td><td>$ 17,484</td></tr><tr><td>Income tax benefit and reversal of stock appreciation rights compensation expense</td><td>-</td><td>24,773</td><td>6,583</td></tr><tr><td>Equity in net income</td><td>20,059</td><td>42,764</td><td>24,067</td></tr><tr><td>Management, leasing and development fees</td><td>9,125</td><td>10,765</td><td>12,604</td></tr><tr><td></td><td>29,184</td><td>53,529</td><td>36,671</td></tr><tr><td>Lexington - 12.8% share in 2010, 15.2% share in 2009 and 17.2% share in 2008 of equity in net income (loss) (4)</td><td>11,018</td><td>(25,665)</td><td>(105,630)</td></tr><tr><td>LNR - 26.2% share of equity in net income (see page 131)</td><td>1,973</td><td>-</td><td>-</td></tr><tr><td>India real estate ventures - 4% to 36.5% range in our share of equity in net income (loss)</td><td>2,581</td><td>(1,636)</td><td>(3,336)</td></tr><tr><td>Other, net (5)</td><td>(22,318)</td><td>(46,138)</td><td>(86,912)</td></tr><tr><td></td><td>$ 22,438</td><td>$ (19,910)</td><td>$ (159,207)</td></tr></table>

(1) Includes interests in 330 Madison Avenue (25%), 825 Seventh Avenue (50%), Warner Building (55%), Fairfax Square (20%), Kaempfer equity interests in three office buildings (2.5% to 5.0%), Rosslyn Plaza (46%) and West 57th Street properties (50%).

(2) Includes interests in Monmouth Mall, Verde Realty Operating Partnership ("Verde"), 85 10th Avenue Associates and redevelopment ventures including Harlem Park and Farley.

(3) 2009 includes $10,200 for our share of income from a litigation settlement.

(4) 2010 includes a $13,710 net gain resulting from Lexington's 2010 stock issuance. 2009 includes $19,121 for our share of impairment losses recorded by Lexington. 2008 includes $107,882 of impairment losses on our investment in Lexington.

(5) 2010 includes $11,481 of impairment losses related to our investment in properties on West 57th Street. 2009 includes $17,820 of impairment losses, substantially all of which relates to our investment in Verde, and $7,650 of expense for our share of the Downtown Crossing, Boston lease termination payment. 2008 includes $96,037 of non-cash charges for the write-off of our share of certain partially owned entities' development costs, including $37,000 for Downtown Crossing, Boston and $23,000 for the "arena move"/Moynihan East portions of the Farley Project.



## 5. Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of December 31, 2010 and December 31, 2009; none of which is recourse to us.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Maturity</td><td rowspan="2">Interest Rate at December 31, 2010</td><td colspan="2">100% of Partially Owned Entities&#x27; Debt at December 31, 2010</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Toys (32.7% interest) (as of October 30, 2010 and October 31, 2009, respectively):</td><td></td><td></td><td></td><td></td></tr><tr><td>Senior unsecured notes (Face value - $950,000)</td><td>07/17</td><td>10.75%</td><td>$ 928,045</td><td>$ 925,931</td></tr><tr><td>Senior unsecured notes (Face value - $725,000)</td><td>12/17</td><td>8.50%</td><td>715,577</td><td>-</td></tr><tr><td>$700 million secured term loan facility</td><td>09/16</td><td>6.00%</td><td>689,757</td><td>-</td></tr><tr><td>Senior U.K. real estate facility</td><td>04/13</td><td>5.02%</td><td>561,559</td><td>578,982</td></tr><tr><td>$1.85 billion credit facility</td><td>08/15</td><td>3.04%</td><td>519,810</td><td>418,777</td></tr><tr><td>$7.625% bonds (Face value - $500,000)</td><td>08/11</td><td>8.82%</td><td>495,943</td><td>490,613</td></tr><tr><td>$7.875% senior notes (Face value - $400,000)</td><td>04/13</td><td>9.50%</td><td>386,167</td><td>381,293</td></tr><tr><td>$7.375% senior secured notes</td><td>09/16</td><td>7.38%</td><td>350,000</td><td>-</td></tr><tr><td>$7.375% senior notes (Face value - $400,000)</td><td>10/18</td><td>9.99%</td><td>343,528</td><td>338,989</td></tr><tr><td>Japan bank loans</td><td>01/11-08/14</td><td>1.20%-2.85%</td><td>180,500</td><td>172,902</td></tr><tr><td>Spanish real estate facility</td><td>02/13</td><td>4.51%</td><td>179,511</td><td>191,436</td></tr><tr><td>Japan borrowings</td><td>03/11</td><td>0.81%</td><td>141,360</td><td>168,720</td></tr><tr><td>Junior U.K. real estate facility</td><td>04/13</td><td>6.84%</td><td>98,266</td><td>101,861</td></tr><tr><td>French real estate facility</td><td>02/13</td><td>4.51%</td><td>86,599</td><td>92,353</td></tr><tr><td>European and Australian asset-based revolving credit facility</td><td>10/12</td><td>5.32%</td><td>25,767</td><td>102,760</td></tr><tr><td>$8.750% debentures (Face value - $21,600)</td><td>09/21</td><td>9.17%</td><td>21,054</td><td>21,022</td></tr><tr><td>Mortgage loan</td><td>n/a</td><td>n/a</td><td>-</td><td>800,000</td></tr><tr><td>$800 million secured term loan facility</td><td>n/a</td><td>n/a</td><td>-</td><td>797,911</td></tr><tr><td>$181 million unsecured term loan facility</td><td>n/a</td><td>n/a</td><td>-</td><td>180,456</td></tr><tr><td>Other</td><td>Various</td><td>Various</td><td>156,853</td><td>136,206</td></tr><tr><td></td><td></td><td></td><td>5,880,296</td><td>5,900,212</td></tr><tr><td>Alexander&#x27;s (32.4% interest):</td><td></td><td></td><td></td><td></td></tr><tr><td>731 Lexington Avenue mortgage note payable, collateralized by the office space (prepayable without penalty after 12/13)</td><td>02/14</td><td>5.33%</td><td>351,751</td><td>362,989</td></tr><tr><td>731 Lexington Avenue mortgage note payable, collateralized by the retail space (prepayable without penalty after 12/13)</td><td>07/15</td><td>4.93%</td><td>320,000</td><td>320,000</td></tr><tr><td>Rego Park construction loan payable</td><td>12/11</td><td>1.46%</td><td>277,200</td><td>266,411</td></tr><tr><td>Kings Plaza Regional Shopping Center mortgage note payable</td><td>06/11</td><td>7.46%</td><td>151,214</td><td>183,319</td></tr><tr><td>Rego Park mortgage note payable (prepayable without penalty)</td><td>03/12</td><td>0.75%</td><td>78,246</td><td>78,246</td></tr><tr><td>Paramus mortgage note payable (prepayable without penalty)</td><td>10/11</td><td>5.92%</td><td>68,000</td><td>68,000</td></tr><tr><td></td><td></td><td></td><td>1,246,411</td><td>1,278,965</td></tr><tr><td>Lexington (12.8% interest) (as of September 30, 2010 and September 30, 2009, respectively):</td><td></td><td></td><td></td><td></td></tr><tr><td>Mortgage loans collateralized by Lexington&#x27;s real estate (various prepayment terms)</td><td>2010-2037</td><td>5.82%</td><td>1,927,729</td><td>2,132,253</td></tr><tr><td>LNR (26.2% interest) (as of September 30, 2010):</td><td></td><td></td><td></td><td></td></tr><tr><td>Mortgage notes payable</td><td>2011-2043</td><td>5.75%</td><td>508,547</td><td>-</td></tr><tr><td>Liabilities of consolidated CMBS and CDO trusts</td><td>n/a</td><td>6.06%</td><td>142,001,333</td><td>-</td></tr><tr><td></td><td></td><td></td><td>142,509,880</td><td>-</td></tr></table>



## 5. Investments in Partially Owned Entities - continued

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Maturity</td><td rowspan="2">Interest Rate at December 31, 2010</td><td colspan="2">100% of Partially Owned Entities&#x27; Debt at December 31, 2010</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Partially owned office buildings:</td><td></td><td></td><td></td><td></td></tr><tr><td>Warner Building (55% interest) mortgage note payable(1)</td><td>05/16</td><td>6.26%</td><td>$ 292,700</td><td>$ -</td></tr><tr><td>330 Madison Avenue (25% interest) mortgage note payable</td><td>06/15</td><td>1.79%</td><td>150,000</td><td>150,000</td></tr><tr><td>Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable, collateralized by the partnerships&#x27; real estate</td><td>11/11-12/11</td><td>5.87%</td><td>139,337</td><td>141,547</td></tr><tr><td>Fairfax Square (20% interest) mortgage note payable (prepayable without penalty after 07/14)</td><td>12/14</td><td>7.00%</td><td>71,764</td><td>72,500</td></tr><tr><td>Rosslyn Plaza (46% interest) mortgage note payable</td><td>12/11</td><td>1.26%</td><td>56,680</td><td>56,680</td></tr><tr><td>330 West 34th Street (34.8% interest) mortgage note payable, collateralized by land; we obtained a fee interest in the land upon foreclosure of our $9,041 mezzanine loan in 2010</td><td>07/22</td><td>5.71%</td><td>50,150</td><td>-</td></tr><tr><td>West 57th Street (50% interest) mortgage note payable (prepayable without penalty)</td><td>02/14</td><td>4.94%</td><td>22,922</td><td>29,000</td></tr><tr><td>825 Seventh Avenue (50% interest) mortgage note payable (prepayable without penalty after 04/14)</td><td>10/14</td><td>8.07%</td><td>20,565</td><td>20,773</td></tr><tr><td>India Real Estate Ventures:</td><td></td><td></td><td></td><td></td></tr><tr><td>TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity&#x27;s real estate (various prepayment terms)</td><td>2010-2022</td><td>13.43%</td><td>196,319</td><td>178,553</td></tr><tr><td>India Property Fund L.P. (36.5% interest) revolving credit facility, repaid upon maturity in 03/10</td><td>n/a</td><td>n/a</td><td>-</td><td>77,000</td></tr><tr><td>Other:</td><td></td><td></td><td></td><td></td></tr><tr><td>Verde Realty Operating Partnership (8.3% interest) mortgage notes payable, collateralized by the partnerships&#x27; real estate (various prepayment terms)</td><td>2010-2025</td><td>5.85%</td><td>581,086</td><td>607,089</td></tr><tr><td>Green Courte Real Estate Partners, LLC (8.3% interest) (as of September 30, 2010 and 2009), mortgage notes payable, collateralized by the partnerships&#x27; real estate (various prepayment terms)</td><td>2011-2018</td><td>5.50%</td><td>296,991</td><td>304,481</td></tr><tr><td>Waterfront Associates (2.5% interest) up to $250 million construction and land loan payable</td><td>09/11</td><td>2.26% - 3.76%</td><td>217,106</td><td>183,742</td></tr><tr><td>Monmouth Mall (50% interest) mortgage note payable (prepayable without penalty after 07/15)</td><td>09/15</td><td>5.44%</td><td>164,474</td><td>165,000</td></tr><tr><td>Wells/Kinzie Garage (50% interest) mortgage note payable</td><td>12/17</td><td>5.00%</td><td>15,022</td><td>14,657</td></tr><tr><td>Orleans Hubbard Garage (50% interest) mortgage note payable</td><td>12/17</td><td>5.00%</td><td>9,508</td><td>10,101</td></tr><tr><td>San Jose, California (45% interest) construction loan(2)</td><td>03/13</td><td>n/a</td><td>-</td><td>132,570</td></tr><tr><td>Other</td><td></td><td></td><td>418,339</td><td>425,717</td></tr></table>

(1) On October 20, 2010, we sold a 45% ownership interest in this property and share control over major decisions with our joint venture partner. Accordingly, we account for this property under the equity method from the date of sale and no longer consolidate its accounts into our consolidated financial statements.

(2) On October 15, 2010, we acquired the remaining 55% interest in this property for $97,000, consisting of $27,000 in cash and the assumption of $70,000 of existing debt. Accordingly we consolidate the accounts of this property into our consolidated financial statements, from the date of acquisition.

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities, was $40,443,346,000 and $3,149,640,000 as of December 31, 2010 and December 31, 2009, respectively. Excluding our pro rata share of LNR’s liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us, our pro rata share of partially owned entities debt is $3,275,917,000 and $3,149,640,000 at December 31, 2010 and 2009, respectively.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 6. Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of December 31, 2010 and 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">Interest Rate</td></tr><tr><td colspan="2">as of</td><td colspan="2">Carrying Amount as of</td></tr><tr><td>Mezzanine Loans Receivable:</td><td>Maturity</td><td>December 31, 2010</td><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Tharaldson Lodging Companies (1)</td><td>04/11</td><td>4.56%</td><td>$ 71,084</td><td>$ 74,701</td></tr><tr><td>280 Park Avenue (2)</td><td>06/16</td><td>10.25%</td><td>66,513</td><td>73,750</td></tr><tr><td>Equinox (3)</td><td>n/a</td><td>n/a</td><td>-</td><td>97,968</td></tr><tr><td>Riley HoldCo Corp. (see discussion of LNR in Note 5)</td><td>n/a</td><td>n/a</td><td>-</td><td>74,437</td></tr><tr><td>Other, net</td><td>11/11-8/15</td><td>1.36% - 8.95%</td><td>138,031</td><td>73,168</td></tr><tr><td></td><td></td><td></td><td>275,628</td><td>394,024</td></tr><tr><td>Valuation allowance (4)</td><td></td><td></td><td>(73,216)</td><td>(190,738)</td></tr><tr><td></td><td></td><td></td><td>$ 202,412</td><td>$ 203,286</td></tr></table>

(1) On June 16, 2006, we acquired an 81.5% interest in a $95,968 mezzanine loan to Tharaldson Lodging Companies for $78,166 in cash. The loan is secured by a 107 hotel property portfolio with brands including Fairfield Inn, Residence Inn, Comfort Inn and Courtyard by Marriott. The loan is subordinate to $671,778 of debt and is senior to approximately $192,000 of other debt and equity. The loan provides for a 0.75% placement fee and bears interest at LIBOR plus 4.25% (4.56% at December 31, 2010). The borrower has a one-year extension option.

(2) On June 30, 2006, we made a $73,750 mezzanine loan secured by the equity interests in 280 Park Avenue, a 1.2 million square foot office building, located between 48th and 49th Streets in Manhattan. The loan bears interest at 10.25% and matures in June 2016. The loan is subordinate to $1.036 billion of other debt and is senior to approximately $260,000 of equity and interest reserves.

(3) In January 2010, Equinox prepaid the entire balance of this loan which was scheduled to mature in February 2013. We received $99,314, including accrued interest, for our 50% interest in the loan which we acquired in 2006 for $57,500.

(4) Represents loan loss accruals on certain mezzanine loans based on our estimate of the net realizable value of each loan. Our estimates are based on the present value of expected cash flows, discounted at each loan’s effective interest rate, or if a loan is collateralized, based on the fair value of the underlying collateral, adjusted for estimated costs to sell. The excess of the carrying amount over the net realizable value of a loan is recognized as a reduction of “interest and other investment income (loss), net” in our consolidated statements of income.

The following is a reconciliation of our valuation allowance for the years ended December 31, 2010 and 2009.

<table><tr><td></td><td colspan="2">Balance at Beginning of Year</td><td colspan="2">Additions (Reversals)</td><td colspan="2">(Write-offs)</td><td colspan="2">Balance at End of Year</td></tr><tr><td>Year Ended December 31, 2010:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Valuation Allowance</td><td>$</td><td>190,738</td><td>$</td><td>(53,100)</td><td>$</td><td>(64,422)</td><td>$</td><td>73,216</td></tr><tr><td>Year Ended December 31, 2009:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Valuation Allowance</td><td>$</td><td>46,700</td><td>$</td><td>190,738</td><td>$</td><td>(46,700)</td><td>$</td><td>190,738</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 7. Discontinued Operations

In accordance with the provisions of ASC 360, Property, Plant, and Equipment, we have reclassified the revenues and expenses of properties and businesses sold or held for sale to “(loss) income from discontinued operations” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements. The net gains resulting from the sale of the properties below are included in “(loss) income from discontinued operations” on our consolidated statements of income.

On January 12, 2011, we sold 1140 Connecticut Avenue and contracted to sell 1227 25 \( ^{th} \)  Street, subject to customary closing conditions, for an aggregate price of 127,000,000. We will retain net proceeds of approximately 107,000,000, after repaying an existing mortgage and recognize a net gain of approximately 44,000,000 in the first quarter of 2011.

In December 2010, pursuant to a Court judgment, we sold the fee interest in land located in Arlington County, Virginia, known as Pentagon Row, to the tenants for an aggregate of 14,992,000 in cash. See Litigation, in Note 19 - Commitments and Contingencies, for further details.

In March 2010, we ceased making debt service payments on the mortgage loan secured by the Cannery, a retail property in California as a result of insufficient cash flow, and the loan went into default. On October 14, 2010, the special servicer foreclosed on the property, and the property and related debt were removed from our consolidated balance sheet.

In March 2010, we ceased making debt service payments on the mortgage loan secured by the High Point Complex in North Carolina as a result of insufficient cash flow and the loan went into default. In November 2010, the property was placed in receivership. While the receivership process is inherently lengthy, we anticipate that the property will be sold in the first half of 2011, at which time the assets and liabilities will be removed from our consolidated balance sheet and we will recognize a net gain of approximately $80,000,000.

On September 1, 2009, we sold 1999 K Street, a newly developed 250,000 square foot office building, in Washington’s Central Business District, for $207,800,000 in cash which resulted in a net gain of approximately $41,211,000.

In 2009, we sold 15 retail properties in separate transactions for an aggregate of $55,000,000 in cash which resulted in net gains aggregating $4,073,000.

On June 10, 2008, we sold our Tysons Dulles Plaza office building complex for $152,800,000 in cash which resulted in a net gain of $56,831,000.

On March 31, 2008, we sold our 47.6% interest in Americold, our Temperature Controlled Logistics segment for $220,000,000 in cash which resulted in a net gain of $112,690,000.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 7. Discontinued Operations- continued

The tables below set forth the assets and liabilities related to discontinued operations at December 31, 2010 and 2009, and their combined results of operations for the years ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="3">(Amounts in thousands)</td><td colspan="2">Assets Related to Discontinued Operations as of</td><td colspan="2">Liabilities Related to Discontinued Operations as of</td></tr><tr><td colspan="2">December 31,</td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2010</td><td>2009</td></tr><tr><td>High Point</td><td>$ 154,563</td><td>$ 151,065</td><td>$ 236,974</td><td>$ 218,225</td></tr><tr><td>1227 25th Street</td><td>43,630</td><td>43,173</td><td>-</td><td>-</td></tr><tr><td>1140 Connecticut Avenue</td><td>36,271</td><td>36,811</td><td>18,948</td><td>19,431</td></tr><tr><td>Pentagon Row</td><td>-</td><td>51,140</td><td>-</td><td>26,547</td></tr><tr><td>Retail properties</td><td>-</td><td>55,522</td><td>-</td><td>18,567</td></tr><tr><td>Total</td><td>$ 234,464</td><td>$ 337,711</td><td>$ 255,922</td><td>$ 282,770</td></tr></table>

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Total revenues</td><td>$ 43,871</td><td>$ 55,752</td><td>$ 278,986</td></tr><tr><td>Total expenses</td><td>51,701</td><td>48,709</td><td>268,274</td></tr><tr><td></td><td>(7,830)</td><td>7,043</td><td>10,712</td></tr><tr><td>Litigation loss accrual and impairment losses</td><td>(15,056)</td><td>(11,860)</td><td>-</td></tr><tr><td>Net gain on sales of real estate</td><td>2,506</td><td>45,284</td><td>170,213</td></tr><tr><td>(Loss) income from discontinued operations</td><td>$ (20,380)</td><td>$ 40,467</td><td>$ 180,925</td></tr></table>



## 8. Identified Intangible Assets and Liabilities

The following summarizes our identified intangible assets (primarily acquired above-market leases) and liabilities (primarily acquired below-market leases) as of December 31, 2010 and December 31, 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="2">Balance as of</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Identified intangible assets:</td><td></td><td></td></tr><tr><td>Gross amount</td><td>$ 687,253</td><td>$ 750,667</td></tr><tr><td>Accumulated amortization</td><td>(338,508)</td><td>(311,118)</td></tr><tr><td>Net</td><td>$ 348,745</td><td>$ 439,549</td></tr><tr><td>Identified intangible liabilities (included in deferred credit):</td><td></td><td></td></tr><tr><td>Gross amount</td><td>$ 870,623</td><td>$ 913,896</td></tr><tr><td>Accumulated amortization</td><td>(341,718)</td><td>(307,506)</td></tr><tr><td>Net</td><td>$ 528,905</td><td>$ 606,390</td></tr></table>

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $66,202,000, $71,954,000 and $95,532,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

<table><tr><td>(Amounts in thousands)</td><td></td><td></td></tr><tr><td>2011</td><td>$ 62,020</td><td></td></tr><tr><td>2012</td><td>51,581</td><td></td></tr><tr><td>2013</td><td>43,652</td><td></td></tr><tr><td>2014</td><td>37,800</td><td></td></tr><tr><td>2015</td><td>35,029</td><td></td></tr></table>

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $60,224,000, $64,229,000 and $85,865,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 2011 is as follows:

<table><tr><td>(Amounts in thousands)</td><td></td><td></td></tr><tr><td>2011</td><td>$ 49,907</td><td></td></tr><tr><td>2012</td><td>44,737</td><td></td></tr><tr><td>2013</td><td>37,241</td><td></td></tr><tr><td>2014</td><td>18,844</td><td></td></tr><tr><td>2015</td><td>13,888</td><td></td></tr></table>

We are a tenant under ground leases for certain properties. Amortization of these acquired below-market leases, net of above-market leases resulted in an increase to rent expense of $2,036,000, $1,831,000 and $2,654,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Estimated annual amortization of these below-market leases, net of above-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

<table><tr><td>(Amounts in thousands)</td><td></td><td></td></tr><tr><td>2011</td><td>$ 1,865</td><td></td></tr><tr><td>2012</td><td>1,865</td><td></td></tr><tr><td>2013</td><td>1,865</td><td></td></tr><tr><td>2014</td><td>1,865</td><td></td></tr><tr><td>2015</td><td>1,865</td><td></td></tr></table>



## 9. Debt

The following is a summary of our debt:

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Maturity (1)</td><td rowspan="2">Interest Rate at December 31, 2010</td><td colspan="2">Balance at</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Notes and mortgages payable:</td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed rate:</td><td></td><td></td><td></td><td></td></tr><tr><td>New York Office:</td><td></td><td></td><td></td><td></td></tr><tr><td>350 Park Avenue</td><td>01/12</td><td>5.48%</td><td>$ 430,000</td><td>$ 430,000</td></tr><tr><td>1290 Avenue of the Americas</td><td>01/13</td><td>5.97%</td><td>424,136</td><td>434,643</td></tr><tr><td>770 Broadway</td><td>03/16</td><td>5.65%</td><td>353,000</td><td>353,000</td></tr><tr><td>888 Seventh Avenue</td><td>01/16</td><td>5.71%</td><td>318,554</td><td>318,554</td></tr><tr><td>Two Penn Plaza(2)</td><td>02/11</td><td>4.97%</td><td>277,347</td><td>282,492</td></tr><tr><td>909 Third Avenue</td><td>04/15</td><td>5.64%</td><td>207,045</td><td>210,660</td></tr><tr><td>Eleven Penn Plaza</td><td>12/11</td><td>5.20%</td><td>199,320</td><td>203,198</td></tr><tr><td>Washington, DC Office:</td><td></td><td></td><td></td><td></td></tr><tr><td>Skyline Place</td><td>02/17</td><td>5.74%</td><td>678,000</td><td>678,000</td></tr><tr><td>River House Apartments</td><td>04/15</td><td>5.43%</td><td>195,546</td><td>195,546</td></tr><tr><td>Bowen Building</td><td>06/16</td><td>6.14%</td><td>115,022</td><td>115,022</td></tr><tr><td>1215 Clark Street, 200 12th Street and 251 18th Street</td><td>01/25</td><td>7.09%</td><td>110,931</td><td>113,267</td></tr><tr><td>Universal Buildings</td><td>04/14</td><td>6.38%</td><td>103,049</td><td>106,630</td></tr><tr><td>Reston Executive I, II, and III</td><td>01/13</td><td>5.57%</td><td>93,000</td><td>93,000</td></tr><tr><td>2011 Crystal Drive</td><td>08/17</td><td>7.30%</td><td>81,362</td><td>82,178</td></tr><tr><td>1550 and 1750 Crystal Drive</td><td>11/14</td><td>7.08%</td><td>79,411</td><td>81,822</td></tr><tr><td>1235 Clark Street</td><td>07/12</td><td>6.75%</td><td>52,314</td><td>53,252</td></tr><tr><td>2231 Crystal Drive</td><td>08/13</td><td>7.08%</td><td>46,358</td><td>48,533</td></tr><tr><td>1750 Pennsylvania Avenue</td><td>06/12</td><td>7.26%</td><td>45,132</td><td>45,877</td></tr><tr><td>1225 Clark Street</td><td>08/13</td><td>7.08%</td><td>27,616</td><td>28,925</td></tr><tr><td>1800, 1851 and 1901 South Bell Street</td><td>12/11</td><td>6.91%</td><td>10,099</td><td>19,338</td></tr><tr><td>Warner Building(3)</td><td>n/a</td><td>n/a</td><td>-</td><td>292,700</td></tr><tr><td>1730 M and 1150 17th Street(4)</td><td>n/a</td><td>n/a</td><td>-</td><td>67,826</td></tr><tr><td>241 18th Street(5)</td><td>n/a</td><td>n/a</td><td>-</td><td>45,609</td></tr><tr><td>Retail:</td><td></td><td></td><td></td><td></td></tr><tr><td>Cross-collateralized mortgages on 40 strip shopping centers(6)</td><td>09/20</td><td>4.18%</td><td>597,138</td><td>-</td></tr><tr><td>Montehiedra Town Center</td><td>07/16</td><td>6.04%</td><td>120,000</td><td>120,000</td></tr><tr><td>Broadway Mall</td><td>07/13</td><td>5.30%</td><td>90,227</td><td>92,601</td></tr><tr><td>828-850 Madison Avenue Condominium</td><td>06/18</td><td>5.29%</td><td>80,000</td><td>80,000</td></tr><tr><td>Las Catalinas Mall</td><td>11/13</td><td>6.97%</td><td>57,737</td><td>59,304</td></tr><tr><td>510 5th Avenue</td><td>01/16</td><td>5.60%</td><td>32,189</td><td>-</td></tr><tr><td>Springfield Mall (including present value of purchase option)(7)</td><td>n/a</td><td>n/a</td><td>-</td><td>242,583</td></tr><tr><td>Other</td><td>03/12-05/36</td><td>5.10%-7.33%</td><td>101,251</td><td>138,696</td></tr><tr><td>Merchandise Mart:</td><td></td><td></td><td></td><td></td></tr><tr><td>Merchandise Mart</td><td>12/16</td><td>5.57%</td><td>550,000</td><td>550,000</td></tr><tr><td>Boston Design Center</td><td>09/15</td><td>5.02%</td><td>68,538</td><td>69,667</td></tr><tr><td>Washington Design Center</td><td>11/11</td><td>6.95%</td><td>43,447</td><td>44,247</td></tr><tr><td>Other:</td><td></td><td></td><td></td><td></td></tr><tr><td>555 California Street</td><td>09/11</td><td>5.79%</td><td>640,911</td><td>664,117</td></tr><tr><td>Industrial Warehouses</td><td>10/11</td><td>6.95%</td><td>24,358</td><td>24,813</td></tr><tr><td>Total fixed rate notes and mortgages payable</td><td></td><td>5.65%</td><td>$ 6,253,038</td><td>$ 6,386,100</td></tr></table>

See notes on page 143.



## 9. Debt - continued

<table><tr><td rowspan="2">(Amounts in thousands)</td><td rowspan="2">Maturity (1)</td><td rowspan="2">Spread over LIBOR</td><td rowspan="2">Interest Rate at December 31, 2010</td><td colspan="2">Balance at</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Notes and mortgages payable:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Variable rate:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New York Office:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Manhattan Mall</td><td>02/12</td><td>L+55</td><td>0.81%</td><td>$ 232,000</td><td>$ 232,000</td></tr><tr><td>866 UN Plaza</td><td>05/11</td><td>L+40</td><td>0.71%</td><td>44,978</td><td>44,978</td></tr><tr><td>Washington, DC Office:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2101 L Street</td><td>02/13</td><td>L+120</td><td>1.49%</td><td>150,000</td><td>150,000</td></tr><tr><td>West End 25 (construction loan)(8)</td><td>02/11</td><td>L+130</td><td>1.60%</td><td>95,220</td><td>85,735</td></tr><tr><td>220 20th Street(9)</td><td>01/11</td><td>L+115</td><td>1.43%</td><td>83,573</td><td>75,629</td></tr><tr><td>River House Apartments</td><td>04/18</td><td>n/a(10)</td><td>1.66%</td><td>64,000</td><td>64,000</td></tr><tr><td>2200/2300 Clarendon Boulevard</td><td>01/15</td><td>L+75</td><td>1.01%</td><td>59,278</td><td>65,133</td></tr><tr><td>1730 M and 1150 17th Street(4)</td><td>06/14</td><td>L+140</td><td>1.66%</td><td>43,581</td><td>-</td></tr><tr><td>Retail:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Green Acres Mall</td><td>02/13</td><td>L+140</td><td>1.69%</td><td>335,000</td><td>335,000</td></tr><tr><td>Bergen Town Center (construction loan)</td><td>03/13</td><td>L+150</td><td>1.79%</td><td>279,044</td><td>261,903</td></tr><tr><td>San Jose Strip Center(11)</td><td>03/13</td><td>L+400</td><td>4.32%</td><td>120,863</td><td>-</td></tr><tr><td>Beverly Connection(12)</td><td>07/12</td><td>L+350(12)</td><td>5.00%</td><td>100,000</td><td>100,000</td></tr><tr><td>4 Union Square South</td><td>04/14</td><td>L+325</td><td>3.54%</td><td>75,000</td><td>75,000</td></tr><tr><td>Cross-collateralized mortgages on 40 strip shopping centers(6)</td><td>09/20</td><td>L+136(6)</td><td>2.36%</td><td>60,000</td><td>-</td></tr><tr><td>435 Seventh Avenue(13)</td><td>08/14</td><td>L+300(13)</td><td>5.00%</td><td>51,844</td><td>52,000</td></tr><tr><td>Other</td><td>11/12</td><td>L+375</td><td>4.02%</td><td>21,862</td><td>22,758</td></tr><tr><td>Other:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>220 Central Park South</td><td>04/11</td><td>L+235-L+245</td><td>2.64%</td><td>123,750</td><td>123,750</td></tr><tr><td>Other(14)</td><td>11/11-02/12</td><td>Various</td><td>2.79%-4.00%</td><td>66,267</td><td>117,868</td></tr><tr><td>Total variable rate notes and mortgages payable</td><td></td><td></td><td>2.17%</td><td>2,006,260</td><td>1,805,754</td></tr><tr><td>Total notes and mortgages payable</td><td></td><td></td><td>4.80%</td><td>$ 8,259,298</td><td>$ 8,191,854</td></tr><tr><td>Senior unsecured notes:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Senior unsecured notes due 2015(15)</td><td>04/15</td><td></td><td>4.25%</td><td>$ 499,296</td><td>$ -</td></tr><tr><td>Senior unsecured notes due 2039(16)</td><td>10/39</td><td></td><td>7.88%</td><td>460,000</td><td>446,134</td></tr><tr><td>Senior unsecured notes due 2011(17)</td><td>02/11</td><td></td><td>5.60%</td><td>100,382</td><td>117,342</td></tr><tr><td>Floating rate senior unsecured notes due 2011</td><td>12/11</td><td>L+200</td><td>2.26%</td><td>23,250</td><td>-</td></tr><tr><td>Senior unsecured notes due 2010</td><td>n/a</td><td></td><td>n/a</td><td>-</td><td>148,240</td></tr><tr><td>Total senior unsecured notes</td><td></td><td></td><td>5.87%</td><td>$ 1,082,928</td><td>$ 711,716</td></tr><tr><td>3.88% exchangeable senior debentures due 2025 (see page 145)</td><td>04/12</td><td></td><td>5.32%</td><td>$ 491,000</td><td>$ 484,457</td></tr><tr><td>Convertible senior debentures: (see page 145)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>3.63% due 2026(18)(19)</td><td>11/11</td><td></td><td>5.32%</td><td>$ 176,499</td><td>$ 424,207</td></tr><tr><td>2.85% due 2027(18)(19)</td><td>04/12</td><td></td><td>5.45%</td><td>9,914</td><td>21,251</td></tr><tr><td>Total convertible senior debentures(20)</td><td></td><td></td><td>5.33%</td><td>$ 186,413</td><td>$ 445,458</td></tr><tr><td>Unsecured revolving credit facilities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>$1.595 billion unsecured revolving credit facility</td><td>09/12</td><td>L+55</td><td>0.80%</td><td>$ 669,000</td><td>$ 427,218</td></tr><tr><td>$1.000 billion unsecured revolving credit facility</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>($12,198 reserved for outstanding letters of credit)</td><td>06/11</td><td>L+55</td><td>0.80%</td><td>205,000</td><td>425,000</td></tr><tr><td>Total unsecured revolving credit facilities</td><td></td><td></td><td>0.80%</td><td>$ 874,000</td><td>$ 852,218</td></tr></table>

See notes on the following page.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 9. Debt - continued

Notes to preceding tabular information (Amounts in thousands):

(1) Represents the extended maturity for certain loans in which we have the unilateral right, ability and intent to extend. In the case of our convertible and exchangeable debt, represents the earliest date holders may require us to repurchase the debentures.

(2) On February 11, 2011, we completed a $425,000 refinancing of this loan. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for this term of the loan to a fixed rate of 5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately $139,000, after repaying the existing loan and closing costs.

(3) On October 20, 2010, we sold a 45% ownership interest in this property to a joint venture and share control over major decisions with our joint venture partner. Accordingly, we account for this property under the equity method of accounting and no longer consolidate its accounts into our consolidated financial statements.

(4) On June 1, 2010, we refinanced this loan. The new loan, which is guaranteed by the Operating Partnership, has a rate of LIBOR plus 1.40% (1.66% at December 31, 2010) and matures in June 2011 with three one-year extension options.

(5) On September 1, 2010, we repaid the $44,900 outstanding balance of this loan which was scheduled to mature in October 2010.

(6) In August 2010, we sold $660,000 of 10-year mortgage notes in a single issuer securitization. The notes are comprised of a $600,000 fixed rate component and a $60,000 variable rate component and are cross-collateralized by 40 of our strip shopping centers. The variable rate portion of the debt has a LIBOR floor of 1.00%.

(7) In December 2010, we acquired this loan, which had an outstanding balance of $171,500, for $115,000 in cash. In a separate transaction, we acquired our partner’s interest in the partnership that owns the mall for $25,000 in Operating Partnership units. These transactions resulted in a net gain on early extinguishment of debt of $102,932 in our consolidated statement of income.

(8) In February 2011, we repaid a portion of this loan and extended the maturity to August 2011.

(9) On January 18, 2011, we repaid the outstanding balance of this construction loan and closed on a new $76,100 mortgage financing at a fixed rate of 4.61%. The new loan has a 7-year term and amortizes based on a 30-year schedule.

(10) This loan bears interest at the Freddie Mac Reference Note Rate plus 1.53%.

(11) On October 15, 2010, we acquired the remaining 55% interest we did not own in this property. Accordingly, we consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

(12) This loan has a LIBOR floor of 1.50%. The spread over LIBOR increases to 500 bps in July 2011.

(13) This loan has a LIBOR floor of 2.00%.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 9. Debt - continued

Notes to preceding tabular information (Amounts in thousands):

(14) In October 2010, we repaid a $36,000 loan which matured on September 30, 2010.

(15) On March 26, 2010, we completed a public offering of $500,000 aggregate principal amount of 4.25% senior unsecured notes due April 1, 2015. Interest on the notes is payable semi-annually commencing on October 1, 2010. The notes were sold at 99.834% of their face amount to yield 4.287%. The notes can be redeemed without penalty beginning January 1, 2015. We retained net proceeds of approximately $496,000.

(16) These notes may be redeemed at our option in whole or in part beginning on October 1, 2014, at a price equal to the principal amount plus accrued interest. In 2010, we reclassified $13,866 of deferred financing costs to “deferred leasing and financing costs” on our consolidated balance sheet.

(17) In the third quarter of 2010, we purchased $17,000 aggregate face amount ($16,981 aggregate carrying amount) of these senior unsecured notes for $17,382 in cash, resulting in a net loss of $401 and in February 2011, upon maturity, we repaid the $100,000 balance of these notes.

(18) In 2010, we purchased $68,418 aggregate face amount ($66,916 aggregate carrying amount) of our convertible senior debentures for $68,804 in cash, resulting in a net loss of $1,888.

(19) On October 1 2010, pursuant to our September 2, 2010 tender offer, we purchased $189,827 aggregate face amount of our 3.63% convertible senior debentures and $12,246 aggregate face amount of our 2.85% convertible senior debentures for an aggregate of $206,053 in cash, resulting in a net loss of $8,493.

(20) The net proceeds from the offering of these debentures were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed payment of these debentures. There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 9. Debt – continued

Pursuant to the provisions of ASC 470-20, Debt with Conversion and Other Options, below is a summary of required disclosures related to our convertible and exchangeable senior debentures.

<table><tr><td rowspan="3">(Amounts in thousands, except per share amounts)</td><td colspan="3">2.85% Convertible</td><td colspan="3">3.63% Convertible</td><td colspan="3">3.88% Exchangeable</td></tr><tr><td colspan="3">Senior Debentures due 2027</td><td colspan="3">Senior Debentures due 2026</td><td colspan="3">Senior Debentures due 2025</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td><td>December 31, 2010</td><td>December 31, 2009</td><td></td><td></td><td>December 31, 2010</td><td>December 31, 2009</td><td></td></tr><tr><td>Balance Sheet:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Principal amount of debt component</td><td>$ 10,233</td><td>$ 22,479</td><td>$ 179,052</td><td>$ 437,297</td><td>$ 499,982</td><td>$ 499,982</td><td></td><td></td><td></td></tr><tr><td>Unamortized discount</td><td>(319)</td><td>(1,228)</td><td>(2,553)</td><td>(13,090)</td><td>(8,982)</td><td>(15,525)</td><td></td><td></td><td></td></tr><tr><td>Carrying amount of debt component</td><td>$ 9,914</td><td>$ 21,251</td><td>$ 176,499</td><td>$ 424,207</td><td>$ 491,000</td><td>$ 484,457</td><td></td><td></td><td></td></tr><tr><td>Carrying amount of equity component</td><td>$ 956</td><td>$ 2,104</td><td>$ 9,604</td><td>$ 23,457</td><td>$ 32,301</td><td>$ 32,301</td><td></td><td></td><td></td></tr><tr><td>Effective interest rate</td><td>5.45%</td><td>5.45%</td><td>5.32%</td><td>5.32%</td><td>5.32%</td><td>5.32%</td><td></td><td></td><td></td></tr><tr><td>Maturity date (period through which discount is being amortized)</td><td>4/1/12</td><td></td><td>11/15/11</td><td></td><td>4/15/12</td><td></td><td></td><td></td><td></td></tr><tr><td>Conversion price per share, as adjusted</td><td>$ 157.18</td><td></td><td>$ 148.46</td><td></td><td>$ 87.17</td><td></td><td></td><td></td><td></td></tr><tr><td>Number of shares on which the aggregate consideration to be delivered upon conversion is determined</td><td></td><td>- (1)</td><td></td><td>- (1)</td><td></td><td>5,736</td><td></td><td></td><td></td></tr></table>

(1) Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares. Based on the December 31, 2010 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date. The number of common shares on which the aggregate consideration that would be delivered upon conversion is 65 and 1,206 common shares, respectively.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Income Statement:</td><td></td><td></td><td></td><td></td></tr><tr><td>2.85% Convertible Senior Debentures due 2027:</td><td></td><td></td><td></td><td></td></tr><tr><td>Coupon interest</td><td>$ 553</td><td>$ 33,743</td><td>$ 39,853</td><td></td></tr><tr><td>Discount amortization - original issue</td><td>80</td><td>4,596</td><td>5,190</td><td></td></tr><tr><td>Discount amortization - ASC 470-20 implementation</td><td>374</td><td>21,514</td><td>24,296</td><td></td></tr><tr><td></td><td>$ 1,007</td><td>$ 59,853</td><td>$ 69,339</td><td></td></tr><tr><td>3.63% Convertible Senior Debentures due 2026:</td><td></td><td></td><td></td><td></td></tr><tr><td>Coupon interest</td><td>$ 13,015</td><td>$ 32,654</td><td>$ 36,216</td><td></td></tr><tr><td>Discount amortization - original issue</td><td>1,520</td><td>3,606</td><td>3,820</td><td></td></tr><tr><td>Discount amortization - ASC 470-20 implementation</td><td>4,069</td><td>9,651</td><td>10,224</td><td></td></tr><tr><td></td><td>$ 18,604</td><td>$ 45,911</td><td>$ 50,260</td><td></td></tr><tr><td>3.88% Exchangeable Senior Debentures due 2025:</td><td></td><td></td><td></td><td></td></tr><tr><td>Coupon interest</td><td>$ 19,374</td><td>$ 19,428</td><td>$ 19,374</td><td></td></tr><tr><td>Discount amortization - original issue</td><td>1,544</td><td>1,464</td><td>1,389</td><td></td></tr><tr><td>Discount amortization - ASC 470-20 implementation</td><td>4,999</td><td>4,741</td><td>4,497</td><td></td></tr><tr><td></td><td>$ 25,917</td><td>$ 25,633</td><td>$ 25,260</td><td></td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 9. Debt – continued

The net carrying amount of properties collateralizing the notes and mortgages payable amounted to $10.7 billion in December 31, 2010. As of December 31, 2010, the principal repayments required for the next five years and thereafter are as follows:

<table><tr><td>(Amounts in thousands)</td><td>Mortgages Payable</td><td>Senior Unsecured Debt and Revolving Credit Facilities</td></tr><tr><td>Year Ending December 31,</td><td>$ 1,854,915</td><td>$ 328,635</td></tr><tr><td>2011</td><td>928,512</td><td>669,000</td></tr><tr><td>2012</td><td>1,482,785</td><td>-</td></tr><tr><td>2013</td><td>342,707</td><td>-</td></tr><tr><td>2014</td><td>516,328</td><td>500,000</td></tr><tr><td>2015</td><td>3,116,181</td><td>460,000</td></tr><tr><td>Thereafter</td><td></td><td></td></tr></table>

We may refinance our maturing debt as it comes due or choose to repay it.

## 10. Redeemable Noncontrolling Interests

Redeemable noncontrolling interests on our consolidated balance sheets represent Operating Partnership units held by third parties and are comprised of Class A units and Series D-10, D-11, D-14, D-15 and D-16 (collectively, “Series D”) cumulative redeemable preferred units. Class A units of the Operating Partnership may be tendered for redemption to the Operating Partnership for cash; we, at our option, may assume that obligation and pay the holder either cash or Vornado common shares on a one-for-one basis. Because the number of Vornado common shares outstanding at all times equals the number of Class A units owned by Vornado, the redemption value of each Class A unit is equivalent to the market value of one Vornado common share, and the quarterly distribution to a Class A unitholder is equal to the quarterly dividend paid to a Vornado common shareholder. Below are the details of Operating Partnership units held by third-parties that are included in “redeemable noncontrolling interests” as of December 31, 2010 and 2009:

<table><tr><td rowspan="2">Unit Series</td><td colspan="2">Outstanding Units at</td><td rowspan="2">Per Unit Liquidation Preference</td><td rowspan="2">Preferred or Annual Distribution Rate</td><td rowspan="2">Conversion Rate Into Class A Units</td></tr><tr><td>December 31, 2010</td><td>December 31, 2009</td></tr><tr><td>Common:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Class A</td><td>12,804,202</td><td>13,892,313</td><td>N/A</td><td>$ 2.76</td><td>N/A</td></tr><tr><td>Perpetual Preferred: (1)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>7.00% D-10 Cumulative Redeemable</td><td>3,200,000</td><td>3,200,000</td><td>$ 25.00</td><td>$ 1.75</td><td>N/A</td></tr><tr><td>7.20% D-11 Cumulative Redeemable</td><td>1,400,000</td><td>1,400,000</td><td>$ 25.00</td><td>$ 1.80</td><td>N/A</td></tr><tr><td>6.55% D-12 Cumulative Redeemable (2)</td><td>-</td><td>800,000</td><td>$ 25.00</td><td>$ 1.637</td><td>N/A</td></tr><tr><td>6.75% D-14 Cumulative Redeemable</td><td>4,000,000</td><td>4,000,000</td><td>$ 25.00</td><td>$ 1.6875</td><td>N/A</td></tr><tr><td>6.875% D-15 Cumulative Redeemable</td><td>1,800,000</td><td>1,800,000</td><td>$ 25.00</td><td>$ 1.71875</td><td>N/A</td></tr><tr><td>5.00% D-16 Cumulative Redeemable (3)</td><td>1</td><td>-</td><td>$ 1,000,000.00</td><td>$ 50,000.00</td><td>N/A</td></tr></table>

(1) Holders may tender units for redemption to the Operating Partnership for cash at their stated redemption amount; we, at our option, may assume that obligation and pay the holders either cash or Vornado preferred shares on a one-for-one basis. These units are redeemable at our option after the 5th anniversary of the date of issuance (ranging from November 2008 to December 2011).

(2) In 2010, we redeemed all of the outstanding Series D-12 cumulative redeemable preferred units for $16.25 per unit in cash, or $13,000,000 in the aggregate. In connection therewith, we recognized a $6,972,000 net gain which is included as a component of "net income attributable to noncontrolling interests" on our consolidated statement of income.

(3) Issued in connection with the acquisition of our partner's interest in the Springfield Mall in December 2010.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 10. Redeemable Noncontrolling Interests - continued

Redeemable noncontrolling interests on our consolidated balance sheets are recorded at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to period are charged to “additional capital” in our consolidated statements of changes in equity. Below is a table summarizing the activity of redeemable noncontrolling interests.

<table><tr><td>(Amounts in thousands)</td><td></td></tr><tr><td>Balance at December 31, 2008</td><td>$ 1,177,978</td></tr><tr><td>Net income</td><td>25,120</td></tr><tr><td>Distributions</td><td>(42,451)</td></tr><tr><td>Conversion of Class A units into common shares, at redemption value</td><td>(90,955)</td></tr><tr><td>Adjustment to carry redeemable Class A units at redemption value</td><td>167,049</td></tr><tr><td>Other, net</td><td>14,887</td></tr><tr><td>Balance at December 31, 2009</td><td>$ 1,251,628</td></tr><tr><td>Net income</td><td>55,228</td></tr><tr><td>Distributions</td><td>(53,515)</td></tr><tr><td>Conversion of Class A units into common shares, at redemption value</td><td>(126,764)</td></tr><tr><td>Adjustment to carry redeemable Class A units at redemption value</td><td>191,826</td></tr><tr><td>Redemption of Series D-12 redeemable units</td><td>(13,000)</td></tr><tr><td>Other, net</td><td>22,571</td></tr><tr><td>Balance at December 31, 2010</td><td>$ 1,327,974</td></tr></table>

As of December 31, 2010 and 2009, the aggregate redemption value of redeemable Class A units was $1,066,974,000 and $971,628,000, respectively.

Redeemable noncontrolling interests exclude our Series G convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with ASC 480, Distinguishing Liabilities and Equity, because of their possible settlement by issuing a variable number of Vornado common shares. Accordingly the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $55,097,000 and $60,271,000 as of December 31, 2010 and 2009, respectively.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 11. Shareholders' Equity

Preferred Shares

The following table sets forth the details of our preferred shares of beneficial interest outstanding as of December 31, 2010 and 2009:

<table><tr><td rowspan="2">(Amounts in thousands, except share and per share amounts)</td><td colspan="3">December 31,</td></tr><tr><td>2010</td><td>2009</td><td></td></tr><tr><td>6.5% Series A: liquidation preference $50.00 per share; authorized 5,750,000 shares; issued and outstanding 40,009 and 52,324 shares</td><td>2,057</td><td>2,673</td><td></td></tr><tr><td>7.0% Series D-10: liquidation preference $25.00 per share; authorized 4,800,000 shares; issued and outstanding 1,600,000 shares \( ^{(1)} \)</td><td>-</td><td>39,982</td><td></td></tr><tr><td>7.0% Series E: liquidation preference $25.00 per share; authorized 3,450,000 shares; issued and outstanding 3,000,000 shares</td><td>72,248</td><td>72,248</td><td></td></tr><tr><td>6.75% Series F: liquidation preference $25.00 per share; authorized 6,000,000 shares; issued and outstanding 6,000,000 shares</td><td>144,720</td><td>144,720</td><td></td></tr><tr><td>6.625% Series G: liquidation preference $25.00 per share; authorized 9,200,000 shares; issued and outstanding 8,000,000 shares</td><td>193,135</td><td>193,135</td><td></td></tr><tr><td>6.75% Series H: liquidation preference $25.00 per share; authorized 4,600,000 shares; issued and outstanding 4,500,000 shares</td><td>108,549</td><td>108,549</td><td></td></tr><tr><td>6.625% Series I: liquidation preference $25.00 per share; authorized 12,050,000 shares; issued and outstanding 10,800,000 shares</td><td>262,379</td><td>262,379</td><td></td></tr><tr><td></td><td>$ 783,088</td><td>$ 823,686</td><td></td></tr></table>

(1) In September 2010, we purchased all of the outstanding Series D-10 preferred shares for $22.25 per share in cash, or $35,600 in the aggregate. In connection therewith, the $4,382 discount was included as “discount on preferred share redemptions” on our consolidated statement of income.

## Series A Convertible Preferred Shares of Beneficial Interest

Holders of Series A Preferred Shares of beneficial interest are entitled to receive dividends in an amount equivalent to $3.25 per annum per share. These dividends are cumulative and payable quarterly in arrears. The Series A Preferred Shares are convertible at any time at the option of their respective holders at a conversion rate of 1.4334 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. In addition, upon the satisfaction of certain conditions we, at our option, may redeem the $3.25 Series A Preferred Shares at a current conversion rate of 1.4334 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. At no time will the Series A Preferred Shares be redeemable for cash.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 11. Shareholders' Equity - continued

## Series E Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series E Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the liquidation preference of $25.00 per share, or $1.75 per Series E Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series E Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. We, at our option, may redeem Series E Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series E Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

## Series F Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series F Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series F Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series F Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. We, at our option, may redeem Series F Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series F Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

## Series G Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series G Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series G Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series G Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. We, at our option, may redeem Series G Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series G Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

## Series H Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series H Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series H Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series H Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after June 17, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series H Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series H Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

## Series I Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series I Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series I Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series I Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after August 31, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series I Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series I Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

## Accumulated Other Comprehensive Income

Accumulated other comprehensive income was $73,453,000 and $28,449,000 as of December 31, 2010 and 2009, respectively, and primarily consists of accumulated unrealized gains from the mark-to-market of marketable securities classified as available-for-sale.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 12. Fair Value Measurements

ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.

## Fair Value Measurements on a Recurring Basis

Financial assets and liabilities that are measured at fair value in our consolidated financial statements consist of (i) marketable securities, (ii) derivative positions in marketable equity securities (iii) the assets of our deferred compensation plan, which are primarily marketable equity securities and equity investments in limited partnerships, (iv) Real Estate Fund investments, (v) short-term investments (CDARS classified as available-for-sale), and (vi) mandatorily redeemable instruments (Series G convertible preferred units and Series D-13 cumulative redeemable preferred units). The tables below aggregate the fair values of financial assets and liabilities by the levels in the fair value hierarchy at December 31, 2010 and 2009, respectively.

As of December 31, 2010

<table><tr><td>(Amounts in thousands)</td><td>Total</td><td>Level 1</td><td>Level 2</td><td>Level 3</td></tr><tr><td>Marketable securities</td><td>$ 766,116</td><td>$ 766,116</td><td>$ -</td><td>$ -</td></tr><tr><td>Real Estate Fund investments</td><td>144,423</td><td>-</td><td>-</td><td>144,423</td></tr><tr><td>Deferred compensation plan assets (included in other assets)</td><td>91,549</td><td>43,699</td><td>-</td><td>47,850</td></tr><tr><td>Derivative positions in marketable equity securities</td><td>17,616</td><td>-</td><td>17,616</td><td>-</td></tr><tr><td>Total assets</td><td>$ 1,019,704</td><td>$ 809,815</td><td>$ 17,616</td><td>$ 192,273</td></tr><tr><td>Mandatorily redeemable instruments (included in other liabilities)</td><td>$ 55,097</td><td>$ 55,097</td><td>$ -</td><td>$ -</td></tr></table>

As of December 31, 2009

<table><tr><td>(Amounts in thousands)</td><td>Total</td><td>Level 1</td><td>Level 2</td><td>Level 3</td></tr><tr><td>Deferred compensation plan assets (included in other assets)</td><td>$ 80,443</td><td>$ 40,854</td><td>$ -</td><td>$ 39,589</td></tr><tr><td>Marketable equity securities</td><td>79,925</td><td>79,925</td><td>-</td><td>-</td></tr><tr><td>Short-term investments</td><td>40,000</td><td>40,000</td><td>-</td><td>-</td></tr><tr><td>Total assets</td><td>$ 200,368</td><td>$ 160,779</td><td>$ -</td><td>$ 39,589</td></tr><tr><td>Mandatorily redeemable instruments (included in other liabilities)</td><td>$ 60,271</td><td>$ 60,271</td><td>$ -</td><td>$ -</td></tr></table>

The table below summarizes the changes in the fair value of the level 3 assets above for the years ended December 31, 2010 and 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="2">For The Years Ended December 31,</td></tr><tr><td>2010</td><td>2009</td></tr><tr><td>Beginning balance</td><td>$ 39,589</td><td>$ 34,176</td></tr><tr><td>Total realized/unrealized gains</td><td>3,527</td><td>4,187</td></tr><tr><td>Purchases, sales, other settlements and issuances, net</td><td>149,157</td><td>1,226</td></tr><tr><td>Ending balance</td><td>$ 192,273</td><td>$ 39,589</td></tr></table>

Purchases in the year ended December 31, 2010, include the investments of our consolidated Real Estate Fund.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 12. Fair Value Measurements - continued

## Fair Value Measurements on a Nonrecurring Basis

Non-financial assets measured at fair value on a nonrecurring basis in our consolidated financial statements consist of real estate assets and investments in partially owned entities that have been written-down to estimated fair value during 2010 and 2009. See Note 2 – Basis of Presentation and Significant Accounting Policies for details of impairment losses recognized during 2010 and 2009. The fair values of these assets are determined using widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income capitalization approach, which considers prevailing market capitalization rates and (iii) comparable sales activity. In general, we consider multiple valuation techniques when measuring fair values. However, in certain circumstances, a single valuation technique may be appropriate. The tables below aggregate the fair values of these assets by the levels in the fair value hierarchy.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="5">As of December 31, 2010</td></tr><tr><td>Total</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td></td></tr><tr><td>Real estate assets</td><td>$ 381,889</td><td>$ -</td><td>$ -</td><td>$ 381,889</td><td></td></tr><tr><td>Investments in partially owned entities</td><td>11,413</td><td>-</td><td>-</td><td>11,413</td><td></td></tr><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="5">As of December 31, 2009</td></tr><tr><td>Total</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td></td></tr><tr><td>Real estate assets</td><td>$ 169,861</td><td>$ -</td><td>$ -</td><td>$ 169,861</td><td></td></tr><tr><td>Investments in partially owned entities</td><td>36,052</td><td>-</td><td>-</td><td>36,052</td><td></td></tr></table>

## Financial Assets and Liabilities not Measured at Fair Value

Financial assets and liabilities that are not measured at fair value in our consolidated financial statements include mezzanine loans receivable and debt. Estimates of the fair values of these instruments are based on our assessments of available market information and valuation methodologies, including discounted cash flow analyses. The table below summarizes the carrying amounts and fair values of these financial instruments as of December 31, 2010 and 2009.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="2">As of December 31, 2010</td><td colspan="2">As of December 31, 2009</td></tr><tr><td>Carrying Amount</td><td>Fair Value</td><td>Carrying Amount</td><td>Fair Value</td></tr><tr><td>Mezzanine loans receivable</td><td>$ 202,412</td><td>$ 197,581</td><td>$ 203,286</td><td>$ 192,612</td></tr><tr><td>Debt:</td><td></td><td></td><td></td><td></td></tr><tr><td>Notes and mortgages payable</td><td>$ 8,259,298</td><td>$ 8,450,812</td><td>$ 8,191,854</td><td>$ 7,858,873</td></tr><tr><td>Senior unsecured notes</td><td>1,082,928</td><td>1,119,512</td><td>711,716</td><td>718,302</td></tr><tr><td>Exchangeable senior debentures</td><td>491,000</td><td>554,355</td><td>484,457</td><td>547,480</td></tr><tr><td>Convertible senior debentures</td><td>186,413</td><td>191,510</td><td>445,458</td><td>461,275</td></tr><tr><td>Revolving credit facility debt</td><td>874,000</td><td>874,000</td><td>852,218</td><td>852,218</td></tr><tr><td></td><td>$ 10,893,639</td><td>$ 11,190,189</td><td>$ 10,685,703</td><td>$ 10,438,148</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 13. Stock-based Compensation

On May 13, 2010, our shareholders approved the 2010 Omnibus Share Plan (the "Plan"), which replaces the 2002 Omnibus Share Plan. Under the Plan, the Compensation Committee of the Board (the "Committee") may grant eligible participants awards of stock options, stock appreciation rights, performance shares, restricted shares and other stock-based awards and operating partnership units, certain of which may provide for dividends or dividend equivalents and voting rights prior to vesting. Awards may be granted up to a maximum of 6,000,000 shares, if all awards granted are Full Value Awards, as defined, and up to 12,000,000 shares, if all of the awards granted are Not Full Value Awards, as defined. Full Value Awards are awards of securities, such as restricted shares, that, if all vesting requirements are met, do not require the payment of an exercise price or strike price to acquire the securities. Not Full Value Awards are awards of securities, such as options, that do require the payment of an exercise price or strike price. This means, for example, if the Committee were to award only restricted shares, it could award up to 6,000,000 restricted shares. On the other hand, if the Committee were to award only stock options, it could award options to purchase up to 12,000,000 shares (at the applicable exercise price). The Committee may also issue any combination of awards under the Plan, with reductions in availability of future awards made in accordance with the above limitations.

The Plan provides for grants of incentive and non-qualified stock options, restricted stock, restricted Operating Partnership units and out-performance plan awards. As of December 31, 2010, we have approximately 5,942,000 shares available for future grants under the Plan, if all awards granted are Full Value Awards, as defined.

In the third quarter of 2010, we recognized $2,800,000 of expense resulting from accelerating the vesting of certain Operating Partnership units and 2006 out-performance plan units, which were scheduled to fully vest in the first quarter of 2011. In the first quarter of 2009, our nine most senior executives voluntarily surrendered their 2008 out-performance plan awards and their 2007 and 2008 stock option awards resulting in $32,588,000 of expense, representing the write-off of the unamortized portion of these awards, which is included in “general and administrative expenses” on our consolidated statement of income.

## Out-Performance Plans

On March 31, 2008, the Compensation Committee of our Board of Trustees approved a $75,000,000 out-performance plan (the “2008 OPP”). Under the 2008 OPP, the total return to our shareholders (the “Total Return”) resulting from both share appreciation and dividends for the four-year period from March 31, 2008 to March 31, 2012 must exceed both an absolute and a relative hurdle. The initial value from which to determine the Total Return is $86.20 per share, a 0.93% premium to the trailing 10-day average closing price on the New York Stock Exchange for our common shares on the date the plan was adopted. During the four-year performance period, participants are entitled to receive 10% of the common dividends paid on Vornado’s common shares for each 2008 OPP unit awarded, regardless of whether the units are ultimately earned. The fair value of the 2008 OPP awards on the date of grant, as adjusted for estimated forfeitures, was approximately $21,600,000, and is being amortized into expense over a five-year period beginning on the date of grant through the final vesting period, using a graded vesting attribution model, with the exception of an aggregate of $13,722,000 which was accelerated into expense in the first quarter of 2009 as a result of the voluntary surrender of such awards discussed above.

On April 25, 2006, our Compensation Committee approved a $100,000,000 Out-performance plan (the “2006 OPP”), under which 91% of the total Out-Performance Plan was awarded. The fair value of the awards on the date of grant, as adjusted for estimated forfeitures, was approximately $46,141,000 and is being amortized into expense over the five-year vesting period beginning on the date of grant, using a graded vesting attribution model. As of January 12, 2007, the maximum performance threshold under the Out-Performance Plan was achieved, concluding the performance period.

During the years ended December 31, 2010, 2009 and 2008, we recognized $5,062,000, $23,493,000 and $16,021,000 of compensation expense, respectively, for these plans. As of December 31, 2010, there was $1,250,000 of total unrecognized compensation cost related these plans, which will be recognized over a weighted-average period of 1.47 years. Distributions paid on unvested OPP Units are charged to “net income attributable to noncontrolling interests” on our consolidated statements of income and amounted to $815,000, $1,935,000 and $2,918,000 in 2010, 2009 and 2008, respectively.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 13. Stock-based Compensation - continued

## Stock Options

Stock options are granted at an exercise price equal to 100% of the average of the high and low market price of our common shares on the NYSE on the date of grant, generally vest pro-rata over four years and expire 10 years from the date of grant. Compensation expense related to stock option awards is recognized on a straight-line basis over the vesting period with the exception of an aggregate of $18,866,000 which was accelerated into expense in the first quarter of 2009 as a result of voluntary surrenders. During the years ended December 31, 2010, 2009 and 2008, we recognized $7,916,000, $25,911,000 and $9,051,000, of compensation expense, respectively, for these options. As of December 31, 2010 there was $17,606,000 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.0 years.

Below is a summary of our stock option activity under the Plan for the year ended December 31, 2010.

<table><tr><td></td><td>Shares</td><td>Weighted-Average Exercise Price</td><td>Weighted-Average Remaining Contractual Term</td><td>Aggregate Intrinsic Value</td></tr><tr><td>Outstanding at January 1, 2010</td><td>6,179,806</td><td>47.90</td><td></td><td></td></tr><tr><td>Granted</td><td>1,204,095</td><td>73.00</td><td></td><td></td></tr><tr><td>Exercised</td><td>(1,856,837)</td><td>36.84</td><td></td><td></td></tr><tr><td>Cancelled</td><td>(38,184)</td><td>86.15</td><td></td><td></td></tr><tr><td>Outstanding at December 31, 2010</td><td>5,488,880</td><td>56.89</td><td>5.1</td><td>157,071,000</td></tr><tr><td>Options vested and expected to vest at December 31, 2010</td><td>5,459,567</td><td>56.73</td><td>5.1</td><td>156,252,000</td></tr><tr><td>Options exercisable at December 31, 2010</td><td>3,196,309</td><td>54.92</td><td>2.7</td><td>98,859,000</td></tr></table>

The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions for grants in the years ended December 31, 2010, 2009 and 2008.

<table><tr><td rowspan="2"></td><td colspan="3">December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Expected volatility</td><td>35.00%</td><td>28.00%</td><td>19.00%</td></tr><tr><td>Expected life</td><td>7.9 years</td><td>7.0 years</td><td>7.7 years</td></tr><tr><td>Risk free interest rate</td><td>3.60%</td><td>2.30%</td><td>3.20%</td></tr><tr><td>Expected dividend yield</td><td>4.90%</td><td>4.60%</td><td>4.80%</td></tr></table>

The weighted average grant date fair value of options granted during the years ended December 31, 2010, 2009 and 2008 was $16.96, $5.67 and $6.80, respectively. Cash received from option exercises for the years ended December 31, 2010, 2009 and 2008 was $25,338,000, $1,749,000 and $27,587,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was $60,923,000, $62,139,000 and $79,997,000, respectively.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 13. Stock-based Compensation - continued

## Restricted Stock

Restricted stock awards are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant and generally vest over four years. Restricted stock awards granted in 2010, 2009 and 2008 had a fair value of $3,922,000, $496,000 and $595,000, respectively. Compensation expense related to restricted stock awards is recognized on a straight-line basis over the vesting period. During the years ended December 31, 2010, 2009 and 2008, we recognized $1,432,000, $2,063,000 and $3,201,000 of compensation expense, respectively, for the portion of restricted stock awards that vested during each year. The fair value of restricted stock that vested during the years ended December 31, 2010, 2009 and 2008 was $2,186,000, $3,272,000 and $4,472,000, respectively. As of December 31, 2010, there was $4,419,000 of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 2.1 years. Dividends paid on unvested restricted stock are charged directly to retained earnings and amounted to $115,000, $161,000 and $308,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

Below is a summary of our restricted stock activity under the Plan for the year ended December 31, 2010.

<table><tr><td>Non-vested Shares</td><td>Shares</td><td>Weighted-Average Grant-Date Fair Value</td></tr><tr><td>Non-vested at January 1, 2010</td><td>55,618</td><td>$ 76.69</td></tr><tr><td>Granted</td><td>48,682</td><td>80.55</td></tr><tr><td>Vested</td><td>(27,795)</td><td>78.08</td></tr><tr><td>Forfeited</td><td>(957)</td><td>82.12</td></tr><tr><td>Non-vested at December 31, 2010</td><td>75,548</td><td>78.60</td></tr></table>

## Restricted Operating Partnership Units (“OP Units”)

OP Units are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant, vest ratably over four years and are subject to a taxable book-up event, as defined. OP Units granted in 2010, 2009 and 2008 had a fair value of $31,437,000, $10,691,000, and $7,167,000, respectively. Compensation expense related to OP Units is recognized ratably over the vesting period using a graded vesting attribution model. During the years ended December 31, 2010, 2009 and 2008, we recognized $20,204,000, $8,347,000, and $6,257,000, of compensation expense, respectively, for the portion of OP Units that vested during last year. The fair value of OP Units that vested during the years ended December 31, 2010, 2009 and 2008 was $14,087,000, $4,020,000 and $1,952,000, respectively. As of December 31, 2010, there was $18,138,000 of total remaining unrecognized compensation cost related to unvested OP units, which is expected to be recognized over a weighted-average period of 1.6 years. Distributions paid on unvested OP Units are charged to “net income attributable to noncontrolling interests” on our consolidated statements of income and amounted to $2,285,000, $1,583,000, and $938,000 in 2010, 2009 and 2008, respectively.

Below is a summary of restricted OP unit activity under the Plan for the year ended December 31, 2010.

<table><tr><td>Non-Vested Units</td><td>Units</td><td>Weighted-Average Grant-Date Fair Value</td></tr><tr><td>Non-vested at January 1, 2010</td><td>508,080</td><td>$ 46.55</td></tr><tr><td>Granted</td><td>461,865</td><td>68.07</td></tr><tr><td>Vested</td><td>(247,333)</td><td>56.96</td></tr><tr><td>Forfeited</td><td>(2,155)</td><td>42.20</td></tr><tr><td>Non-vested at December 31, 2010</td><td>720,457</td><td>56.78</td></tr></table>



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 14. Fee and Other Income

The following table sets forth the details of our fee and other income:

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Years Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Tenant cleaning fees</td><td>$ 58,053</td><td>$ 53,824</td><td>$ 56,416</td><td></td></tr><tr><td>Management and leasing fees</td><td>20,117</td><td>11,456</td><td>13,397</td><td></td></tr><tr><td>Lease termination fees</td><td>14,826</td><td>4,888</td><td>8,465</td><td></td></tr><tr><td>Other income</td><td>54,926</td><td>87,144 (1)</td><td>48,538</td><td></td></tr><tr><td></td><td>$ 147,922</td><td>$ 157,312</td><td>$ 126,816</td><td></td></tr></table>

(1) In December 2009, an agreement to sell an 8.6 acre parcel of land in the Pentagon City area of Arlington, Virginia, was terminated and we recognized $27,089 of income representing the buyer's non-refundable purchase deposit, which is included in other income.

Fee and other income above includes management fee income from Interstate Properties, a related party, of $815,000, $782,000, and $803,000 for the years ended December 31, 2010, 2009, and 2008, respectively. The above table excludes fee income from partially owned entities which is included in income from partially owned entities (see Note 5 – Investments in Partially Owned Entities).

## 15. Interest and Other Investment Income (Loss), Net

The following table sets forth the details of our interest and other investment income (loss):

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Income (loss) from the mark-to-market of derivative positions in marketable equity securities</td><td>$ 130,153</td><td>$ -</td><td>$ (33,602)</td></tr><tr><td>Mezzanine loans receivable loss reversal (accrual)</td><td>53,100</td><td>(190,738)</td><td>10,300</td></tr><tr><td>Dividends and interest on marketable securities</td><td>25,772</td><td>25,908</td><td>24,658</td></tr><tr><td>Interest on mezzanine loans</td><td>10,319</td><td>32,181</td><td>44,721</td></tr><tr><td>Mark-to-market of investments in our deferred compensation plan \( ^{(1)} \)</td><td>8,049</td><td>9,506</td><td>(14,204)</td></tr><tr><td>Impairment losses on marketable equity securities</td><td>-</td><td>(3,361)</td><td>(76,742)</td></tr><tr><td>Other, net</td><td>7,922</td><td>10,154</td><td>42,122</td></tr><tr><td></td><td>$ 235,315</td><td>$ (116,350)</td><td>$ (2,747)</td></tr></table>

(1) This income (loss) is entirely offset by the expense (income) resulting from the mark-to-market of the deferred compensation plan liability, which is included in "general and administrative" expense.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 16. Income Per Share

The following table provides a reconciliation of both net income and the number of common shares used in the computation of (i) basic income per common share - which utilizes the weighted average number of common shares outstanding without regard to dilutive potential common shares, and (ii) diluted income per common share - which includes the weighted average common shares and potentially dilutive share equivalents. Potentially dilutive share equivalents include our Series A convertible preferred shares, employee stock options, restricted stock and exchangeable senior debentures due 2025.

<table><tr><td rowspan="2">(Amounts in thousands, except per share amounts)</td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Numerator:</td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations, net of income attributable to noncontrolling interests (Loss) income from discontinued operations, net of income attributable to noncontrolling interests</td><td>$ 668,289</td><td>$ 69,117</td><td>$ 194,462</td><td></td></tr><tr><td>Net income attributable to Vornado</td><td>(20,406)</td><td>37,052</td><td>164,835</td><td></td></tr><tr><td>Preferred share dividends</td><td>647,883</td><td>106,169</td><td>359,297</td><td></td></tr><tr><td>Discount on preferred share redemptions</td><td>(55,534)</td><td>(57,076)</td><td>(57,091)</td><td></td></tr><tr><td>Net income attributable to common shareholders</td><td>4,382</td><td>-</td><td>-</td><td></td></tr><tr><td>Earnings allocated to unvested participating securities</td><td>596,731</td><td>49,093</td><td>302,206</td><td></td></tr><tr><td>Numerator for basic income per share</td><td>(120)</td><td>(184)</td><td>(328)</td><td></td></tr><tr><td>Impact of assumed conversions:</td><td>596,611</td><td>48,909</td><td>301,878</td><td></td></tr><tr><td>Convertible preferred share dividends</td><td>160</td><td>-</td><td>-</td><td></td></tr><tr><td>Numerator for diluted income per share</td><td>$ 596,771</td><td>$ 48,909</td><td>$ 301,878</td><td></td></tr><tr><td>Denominator:</td><td></td><td></td><td></td><td></td></tr><tr><td>Denominator for basic income per share - weighted average shares</td><td>182,340</td><td>171,595</td><td>153,900</td><td></td></tr><tr><td>Effect of dilutive securities \( ^{(1)} \) :</td><td></td><td></td><td></td><td></td></tr><tr><td>Employee stock options and restricted share awards</td><td>1,748</td><td>1,908</td><td>4,219</td><td></td></tr><tr><td>Convertible preferred shares</td><td>71</td><td>-</td><td>-</td><td></td></tr><tr><td>Denominator for diluted income per share - weighted average shares and assumed conversions</td><td>184,159</td><td>173,503</td><td>158,119</td><td></td></tr><tr><td>INCOME PER COMMON SHARE - BASIC:</td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations, net</td><td>$ 3.38</td><td>$ 0.07</td><td>$ 0.89</td><td></td></tr><tr><td>(Loss) income from discontinued operations, net</td><td>(0.11)</td><td>0.21</td><td>1.07</td><td></td></tr><tr><td>Net income per common share</td><td>$ 3.27</td><td>$ 0.28</td><td>$ 1.96</td><td></td></tr><tr><td>INCOME PER COMMON SHARE - DILUTED:</td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations, net</td><td>$ 3.35</td><td>$ 0.07</td><td>$ 0.87</td><td></td></tr><tr><td>(Loss) income from discontinued operations, net</td><td>(0.11)</td><td>0.21</td><td>1.04</td><td></td></tr><tr><td>Net income per common share</td><td>$ 3.24</td><td>$ 0.28</td><td>$ 1.91</td><td></td></tr></table>

(1) The effect of dilutive securities in the years ended December 31, 2010, 2009 and 2008 excludes an aggregate of 19,684, 21,276 and 25,501 weighted average common share equivalents, respectively, as their effect was anti-dilutive.



## 17. Comprehensive Income

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="4">For the Years Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Net income</td><td>$ 708,031</td><td>$ 128,450</td><td>$ 411,445</td><td></td></tr><tr><td>Other comprehensive income (loss)</td><td>45,004</td><td>35,348</td><td>(36,671)</td><td></td></tr><tr><td>Comprehensive income</td><td>753,035</td><td>163,798</td><td>374,774</td><td></td></tr><tr><td>Less: Comprehensive income attributable to noncontrolling interests</td><td>63,343</td><td>25,144</td><td>48,701</td><td></td></tr><tr><td>Comprehensive income attributable to Vornado</td><td>$ 689,692</td><td>$ 138,654</td><td>$ 326,073</td><td></td></tr></table>

Substantially all of other comprehensive income for the years ended December 31, 2010, 2009 and 2008 relates to income from the mark-to-market of marketable securities classified as available-for-sale and our share of other comprehensive income or loss of partially owned entities.

## 18. Leases

As lessor:

We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rentals payable monthly in advance. Office building leases generally require the tenants to reimburse us for operating costs and real estate taxes above their base year costs. Shopping center leases provide for pass-through to tenants the tenant’s share of real estate taxes, insurance and maintenance. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants’ sales. As of December 31, 2010, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an original term of less than one year and rents resulting from the exercise of renewal options, is as follows:

<table><tr><td colspan="2">(Amounts in thousands)</td></tr><tr><td colspan="2">Year Ending December 31:</td></tr><tr><td>2011</td><td>$ 1,872,000</td></tr><tr><td>2012</td><td>1,693,000</td></tr><tr><td>2013</td><td>1,568,000</td></tr><tr><td>2014</td><td>1,446,000</td></tr><tr><td>2015</td><td>1,258,000</td></tr><tr><td>Thereafter</td><td>6,206,000</td></tr></table>

These amounts do not include rentals based on tenants’ sales. These percentage rents approximated $8,534,000, $9,051,000 and $7,322,000, for the years ended December 31, 2010, 2009 and 2008, respectively.

None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2010, 2009 and 2008.

## Former Bradlees Locations

Pursuant to the Master Agreement and Guaranty, dated May 1, 1992, we are due $5,000,000 per annum of additional rent from Stop & Shop which was allocated to certain Bradlees former locations. On December 31, 2002, prior to the expiration of the leases to which the additional rent was allocated, we reallocated this rent to other former Bradlees leases also guaranteed by Stop & Shop. Stop & Shop is contesting our right to reallocate and claims that we are no longer entitled to the additional rent. At December 31, 2010, we were due an aggregate of $40,417,000. We believe the additional rent provision of the guaranty expires, at the earliest, in 2012, and we are vigorously contesting Stop & Shop’s position.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 18. Leases - continued

As lessee:

We are a tenant under operating leases for certain properties. These leases have terms that expire during the next thirty years. Future minimum lease payments under operating leases at December 31, 2010 are as follows:

<table><tr><td colspan="3">(Amounts in thousands)</td></tr><tr><td colspan="3">Year Ending December 31:</td></tr><tr><td>2011</td><td>$     30,564</td><td></td></tr><tr><td>2012</td><td>31,072</td><td></td></tr><tr><td>2013</td><td>31,254</td><td></td></tr><tr><td>2014</td><td>31,575</td><td></td></tr><tr><td>2015</td><td>30,230</td><td></td></tr><tr><td>Thereafter</td><td>1,061,662</td><td></td></tr></table>

Rent expense was $36,872,000, $35,463,000 and $29,320,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

We are also a lessee under capital leases for real estate. Lease terms generally range from 5-20 years with renewal or purchase options. Capitalized leases are recorded at the present value of future minimum lease payments or the fair market value of the property. Capitalized leases are depreciated on a straight-line basis over the estimated life of the asset or life of the related lease, whichever is shorter. Amortization expense on capital leases is included in “depreciation and amortization” on our consolidated statements of income. As of December 31, 2010, future minimum lease payments under capital leases are as follows:

<table><tr><td colspan="3">(Amounts in thousands)</td></tr><tr><td colspan="3">Year Ending December 31:</td></tr><tr><td>2011</td><td>$     706</td><td></td></tr><tr><td>2012</td><td>707</td><td></td></tr><tr><td>2013</td><td>706</td><td></td></tr><tr><td>2014</td><td>707</td><td></td></tr><tr><td>2015</td><td>706</td><td></td></tr><tr><td>Thereafter</td><td>16,721</td><td></td></tr><tr><td>Total minimum obligations</td><td>20,253</td><td></td></tr><tr><td>Interest portion</td><td>(13,539)</td><td></td></tr><tr><td>Present value of net minimum payments</td><td>$     6,714</td><td></td></tr></table>

At December 31, 2010 and 2009, $6,714,000 and $6,753,000, respectively, representing the present value of net minimum payments are included in “Other Liabilities” on our consolidated balance sheets. At December 31, 2010 and 2009, property leased under capital leases had a total cost of $6,216,000 and $6,216,000, respectively, and accumulated depreciation of $2,029,000 and $1,873,000, respectively.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 19. Commitments and Contingencies

## Insurance

We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, up to a $150,000,000 annual aggregate.

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Our coverage for NBCR losses is up to $2 billion per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss. We are ultimately responsible for any loss borne by PPIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance our properties and expand our portfolio.

## Other Commitments and Contingencies

Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans. As of December 31, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $263,178,000.

At December 31, 2010, $12,198,000 of letters of credit were outstanding under one of our revolving credit facilities. Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $199,953,000, of which $146,622,000 is committed to our real estate Fund. In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

As part of the process of obtaining the required approvals to demolish and develop our 220 Central Park South property into a new residential tower, we have committed to fund the estimated project cost of approximately $400,000,000 to $425,000,000.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 19. Commitments and Contingencies - continued

During 2010, we entered into agreements with Cuyahoga County, Ohio (the “County”) to develop and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and conference center in Cleveland’s central business district. The County will fund the development of the Facility, using proceeds from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and maintain effective control of the property. During the 17-year development and operating period, we will receive net settled payments of approximately $10,000,000 per year, which is net of our $36,000,000 annual obligation to the County. Our obligation has been pledged by the County to the bondholders, but is payable by us only to the extent that we first receive at least an equal payment from the County. We engaged a contractor to construct the Facility pursuant to a guaranteed maximum price contract. Although we are ultimately responsible for cost overruns, the contractor is responsible for all costs incurred in excess of its contract and has provided a completion guaranty. Construction of the Facility is expected to be completed in 2013. Subsequent thereto, we are required to fund $11,500,000, primarily for tenant improvements, are responsible for all operating expenses and are entitled to the net operating income, if any, of the Facility. The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if we fail to achieve certain performance thresholds. We plan to account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as we are providing development, marketing, leasing, and other property management related services over the 17-year term. We plan to recognize development fees using the percentage of completion method of accounting.

## Litigation

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. Discovery is complete and a trial was held in November 2010, with closing arguments expected in March 2011. We intend to continue to vigorously pursue our claims against Stop & Shop.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P. In April 2007, H Street acquired the remaining 50% interest in that fee. On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street. The request for damages and punitive damages was denied. As a result of the Trial Court’s decision, we recorded a $10,056,000 loss accrual in the first quarter of 2010. We filed a motion to appeal the Trial Court’s decision, which the appeals court refused to hear. Accordingly, in the fourth quarter of 2010, we sold the property to the tenants for $14,992,000 in cash (our reduced carrying amount) and reclassified the results of operations of this property to “(loss) income from discontinued operations,” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 20. Related Party Transactions

Transactions with Affiliates and Officers and Trustees

## Alexander's

We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with management, development and leasing agreements. These agreements are described in Note 5 - Investments in Partially Owned Entities.

On March 2, 2009, Mr. Roth and Mr. Fascitelli each exercised 150,000 stock appreciation rights which were scheduled to expire on March 4, 2009 and each received gross proceeds of $11,419,000.

## Interstate Properties (“Interstate”)

Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B. Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2010, Interstate and its partners beneficially owned approximately 7.0% of the common shares of beneficial interest of Vornado and 27.2% of Alexander’s common stock.

We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on 60 days' notice at the end of the term. We believe, based upon comparable fees charged by other real estate companies, that the management agreement terms are fair to us. We earned $815,000, $782,000, and $803,000 of management fees under the agreement for the years ended December 31, 2010, 2009 and 2008.



## 21. Summary of Quarterly Results (Unaudited)

The following summary represents the results of operations for each quarter in 2010 and 2009:

<table><tr><td rowspan="2"></td><td rowspan="2">Revenues</td><td rowspan="2">Net Income (Loss) Attributable to Common Shareholders (1)</td><td colspan="2">Net Income (Loss) Per Common Share (2)</td></tr><tr><td>Basic</td><td>Diluted</td></tr><tr><td>(Amounts in thousands, except per share amounts)</td><td></td><td></td><td></td><td></td></tr><tr><td>2010</td><td></td><td></td><td></td><td></td></tr><tr><td>December 31</td><td>$     712,957</td><td>$     243,414</td><td>$     1.33</td><td>$     1.31</td></tr><tr><td>September 30</td><td>697,467</td><td>95,192</td><td>0.52</td><td>0.52</td></tr><tr><td>June 30</td><td>683,989</td><td>57,840</td><td>0.32</td><td>0.31</td></tr><tr><td>March 31</td><td>685,314</td><td>200,285</td><td>1.10</td><td>1.09</td></tr><tr><td>2009</td><td></td><td></td><td></td><td></td></tr><tr><td>December 31</td><td>$     706,552</td><td>$ (151,192)</td><td>$ (0.84)</td><td>$ (0.84)</td></tr><tr><td>September 30</td><td>661,331</td><td>126,348</td><td>0.71</td><td>0.70</td></tr><tr><td>June 30</td><td>661,207</td><td>(51,904)</td><td>(0.30)</td><td>(0.30)</td></tr><tr><td>March 31</td><td>667,602</td><td>125,841</td><td>0.81</td><td>0.80</td></tr></table>

(1) Fluctuations among quarters resulted primarily from non-cash impairment losses, mark-to-market of derivative instruments, net gains on sale of real estate and from seasonality of business operations.

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



## 22. Segment Information

The financial information summarized below is presented by reportable operating segment, consistent with how we review and manage our businesses.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="8">For the Year Ended December 31, 2010</td></tr><tr><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td></tr><tr><td>Property rentals</td><td>$ 2,129,284</td><td>$ 775,142</td><td>$ 566,041</td><td>$ 398,489</td><td>$ 219,882</td><td>$ -</td><td>$ 169,730</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>75,871</td><td>34,212</td><td>5,849</td><td>29,079</td><td>2,756</td><td>-</td><td>3,975</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>66,202</td><td>36,081</td><td>2,326</td><td>22,213</td><td>(75)</td><td>-</td><td>5,657</td><td></td></tr><tr><td>Total rentals</td><td>2,271,357</td><td>845,435</td><td>574,216</td><td>449,781</td><td>222,563</td><td>-</td><td>179,362</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>360,448</td><td>137,624</td><td>51,963</td><td>145,905</td><td>13,998</td><td>-</td><td>10,958</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>58,053</td><td>88,664</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(30,611)</td><td></td></tr><tr><td>Management and leasing fees</td><td>20,117</td><td>6,192</td><td>15,934</td><td>1,029</td><td>156</td><td>-</td><td>(3,194)</td><td></td></tr><tr><td>Lease termination fees</td><td>14,826</td><td>4,270</td><td>1,148</td><td>7,641</td><td>467</td><td>-</td><td>1,300</td><td></td></tr><tr><td>Other</td><td>54,926</td><td>22,283</td><td>21,427</td><td>4,172</td><td>3,904</td><td>-</td><td>3,140</td><td></td></tr><tr><td>Total revenues</td><td>2,779,727</td><td>1,104,468</td><td>664,688</td><td>608,528</td><td>241,088</td><td>-</td><td>160,955</td><td></td></tr><tr><td>Operating expenses</td><td>1,099,478</td><td>470,177</td><td>213,935</td><td>224,340</td><td>125,863</td><td>-</td><td>65,163</td><td></td></tr><tr><td>Depreciation and amortization</td><td>530,704</td><td>176,931</td><td>142,720</td><td>110,416</td><td>46,155</td><td>-</td><td>54,482</td><td></td></tr><tr><td>General and administrative</td><td>214,225</td><td>18,621</td><td>25,464</td><td>29,610</td><td>26,953</td><td>-</td><td>113,577</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>129,458</td><td>-</td><td>-</td><td>72,500</td><td>20,000</td><td>-</td><td>36,958</td><td></td></tr><tr><td>Total expenses</td><td>1,973,865</td><td>665,729</td><td>382,119</td><td>436,866</td><td>218,971</td><td>-</td><td>270,180</td><td></td></tr><tr><td>Operating income (loss)</td><td>805,862</td><td>438,739</td><td>282,569</td><td>171,662</td><td>22,117</td><td>-</td><td>(109,225)</td><td></td></tr><tr><td>Income applicable to Toys</td><td>71,624</td><td>-</td><td>-</td><td>-</td><td>-</td><td>71,624</td><td>-</td><td></td></tr><tr><td>Income (loss) from partially owned entities</td><td>22,438</td><td>(6,354)</td><td>(564)</td><td>9,401</td><td>(179)</td><td>-</td><td>20,134</td><td></td></tr><tr><td>(Loss) from Real Estate Fund</td><td>(303)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(303)</td><td></td></tr><tr><td>Interest and other investment income, net</td><td>235,315</td><td>608</td><td>157</td><td>180</td><td>47</td><td>-</td><td>234,323</td><td></td></tr><tr><td>Interest and debt expense</td><td>(560,270)</td><td>(132,279)</td><td>(130,540)</td><td>(85,281)</td><td>(37,932)</td><td>-</td><td>(174,238)</td><td></td></tr><tr><td>Net gain (loss) on early extinguishment of debt</td><td>94,789</td><td>-</td><td>-</td><td>105,571</td><td>-</td><td>-</td><td>(10,782)</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>81,432</td><td>-</td><td>54,742</td><td>-</td><td>765</td><td>-</td><td>25,925</td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>750,887</td><td>300,714</td><td>206,364</td><td>201,533</td><td>(15,182)</td><td>71,624</td><td>(14,166)</td><td></td></tr><tr><td>Income tax expense</td><td>(22,476)</td><td>(2,167)</td><td>(1,816)</td><td>(37)</td><td>(173)</td><td>-</td><td>(18,283)</td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>728,411</td><td>298,547</td><td>204,548</td><td>201,496</td><td>(15,355)</td><td>71,624</td><td>(32,449)</td><td></td></tr><tr><td>(Loss) from discontinued operations</td><td>(20,380)</td><td>-</td><td>(4,481)</td><td>(2,637)</td><td>(13,262)</td><td>-</td><td>-</td><td></td></tr><tr><td>Net income (loss)</td><td>708,031</td><td>298,547</td><td>200,067</td><td>198,859</td><td>(28,617)</td><td>71,624</td><td>(32,449)</td><td></td></tr><tr><td>Net (income) loss attributable to noncontrolling interests in consolidated subsidiaries</td><td>(4,920)</td><td>(9,559)</td><td>-</td><td>(778)</td><td>-</td><td>-</td><td>5,417</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,228)</td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>647,883</td><td>288,988</td><td>200,067</td><td>198,081</td><td>(28,617)</td><td>71,624</td><td>(82,260)</td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>828,082</td><td>126,209</td><td>136,174</td><td>92,653</td><td>61,379</td><td>177,272</td><td>234,395</td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>729,426</td><td>170,505</td><td>159,283</td><td>114,335</td><td>51,064</td><td>131,284</td><td>102,955</td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(23,036)</td><td>2,167</td><td>2,027</td><td>37</td><td>232</td><td>(45,418)</td><td>17,919</td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 2,182,355</td><td>$ 587,869</td><td>$ 497,551</td><td>$ 405,106</td><td>$ 84,058</td><td>$ 334,762</td><td>$ 273,009</td><td></td></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Real estate at cost</td><td>$ 17,674,922</td><td>$ 5,522,291</td><td>$ 4,237,438</td><td>$ 4,891,526</td><td>$ 1,131,528</td><td>$ -</td><td>$ 1,892,139</td><td></td></tr><tr><td>Investments in partially owned entities</td><td>1,375,006</td><td>97,743</td><td>149,295</td><td>11,831</td><td>4,183</td><td>447,334</td><td>664,620</td><td></td></tr><tr><td>Total assets</td><td>20,517,471</td><td>5,743,781</td><td>3,872,209</td><td>4,284,871</td><td>1,435,714</td><td>447,334</td><td>4,733,562</td><td></td></tr></table>

See notes on page 166.



## 22. Segment Information – continued

<table><tr><td colspan="9">(Amounts in thousands)</td></tr><tr><td></td><td colspan="2">Total</td><td>New York Office</td><td colspan="2">Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td></tr><tr><td>Property rentals</td><td>$ 2,021,072</td><td>$ 758,557</td><td>$ 526,683</td><td>$ 362,689</td><td>$ 213,911</td><td>$ -</td><td>$ 159,232</td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>89,168</td><td>36,805</td><td>22,683</td><td>27,104</td><td>2,107</td><td>-</td><td>469</td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>71,954</td><td>40,129</td><td>3,452</td><td>22,993</td><td>89</td><td>-</td><td>5,291</td><td></td></tr><tr><td>Total rentals</td><td>2,182,194</td><td>835,491</td><td>552,818</td><td>412,786</td><td>216,107</td><td>-</td><td>164,992</td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>357,186</td><td>136,541</td><td>60,620</td><td>134,670</td><td>15,517</td><td>-</td><td>9,838</td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>53,824</td><td>75,549</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(21,725)</td><td></td></tr><tr><td>Management and leasing fees</td><td>11,456</td><td>4,211</td><td>8,183</td><td>1,731</td><td>88</td><td>-</td><td>(2,757)</td><td></td></tr><tr><td>Lease termination fees</td><td>4,888</td><td>1,840</td><td>2,224</td><td>464</td><td>221</td><td>-</td><td>139</td><td></td></tr><tr><td>Other</td><td>87,144</td><td>18,868</td><td>47,745</td><td>2,619</td><td>9,458</td><td>-</td><td>8,454</td><td></td></tr><tr><td>Total revenues</td><td>2,696,692</td><td>1,072,500</td><td>671,590</td><td>552,270</td><td>241,391</td><td>-</td><td>158,941</td><td></td></tr><tr><td>Operating expenses</td><td>1,067,229</td><td>452,370</td><td>220,333</td><td>204,224</td><td>125,602</td><td>-</td><td>64,700</td><td></td></tr><tr><td>Depreciation and amortization</td><td>531,637</td><td>173,923</td><td>142,415</td><td>101,353</td><td>51,064</td><td>-</td><td>62,882</td><td></td></tr><tr><td>General and administrative</td><td>231,010</td><td>22,820</td><td>26,205</td><td>30,339</td><td>31,017</td><td>-</td><td>120,629</td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>75,963</td><td>-</td><td>24,875</td><td>11,789</td><td>-</td><td>-</td><td>39,299</td><td></td></tr><tr><td>Total expenses</td><td>1,905,839</td><td>649,113</td><td>413,828</td><td>347,705</td><td>207,683</td><td>-</td><td>287,510</td><td></td></tr><tr><td>Operating income (loss)</td><td>790,853</td><td>423,387</td><td>257,762</td><td>204,565</td><td>33,708</td><td>-</td><td>(128,569)</td><td></td></tr><tr><td>Income applicable to Toys</td><td>92,300</td><td>-</td><td>-</td><td>-</td><td>-</td><td>92,300</td><td>-</td><td></td></tr><tr><td>(Loss) income from partially owned entities</td><td>(19,910)</td><td>5,817</td><td>4,850</td><td>4,728</td><td>151</td><td>-</td><td>(35,456)</td><td></td></tr><tr><td>Interest and other investment (loss) income, net</td><td>(116,350)</td><td>876</td><td>786</td><td>69</td><td>95</td><td>-</td><td>(118,176)</td><td></td></tr><tr><td>Interest and debt expense</td><td>(617,994)</td><td>(133,647)</td><td>(128,039)</td><td>(89,070)</td><td>(38,009)</td><td>-</td><td>(229,229)</td><td></td></tr><tr><td>Net (loss) gain on early extinguishment of debt</td><td>(25,915)</td><td>-</td><td>-</td><td>769</td><td>-</td><td>-</td><td>(26,684)</td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>5,641</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>5,641</td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>108,625</td><td>296,433</td><td>135,359</td><td>121,061</td><td>(4,055)</td><td>92,300</td><td>(532,473)</td><td></td></tr><tr><td>Income tax expense</td><td>(20,642)</td><td>(1,332)</td><td>(1,482)</td><td>(319)</td><td>(2,140)</td><td>-</td><td>(15,369)</td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>87,983</td><td>295,101</td><td>133,877</td><td>120,742</td><td>(6,195)</td><td>92,300</td><td>(547,842)</td><td></td></tr><tr><td>Income (loss) from discontinued operations</td><td>40,467</td><td>-</td><td>52,308</td><td>(6,791)</td><td>(5,050)</td><td>-</td><td>-</td><td></td></tr><tr><td>Net income (loss)</td><td>128,450</td><td>295,101</td><td>186,185</td><td>113,951</td><td>(11,245)</td><td>92,300</td><td>(547,842)</td><td></td></tr><tr><td>Net loss (income) attributable to noncontrolling interests in consolidated subsidiaries</td><td>2,839</td><td>(9,098)</td><td>-</td><td>915</td><td>-</td><td>-</td><td>11,022</td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(25,120)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(25,120)</td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>106,169</td><td>286,003</td><td>186,185</td><td>114,866</td><td>(11,245)</td><td>92,300</td><td>(561,940)</td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>826,827</td><td>126,968</td><td>132,610</td><td>95,990</td><td>52,862</td><td>127,390</td><td>291,007</td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>728,815</td><td>168,517</td><td>152,747</td><td>105,903</td><td>56,702</td><td>132,227</td><td>112,719</td><td></td></tr><tr><td>Income tax expense (benefit)(2)</td><td>10,193</td><td>1,332</td><td>1,590</td><td>319</td><td>2,208</td><td>(13,185)</td><td>17,929</td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 1,672,004</td><td>$ 582,820</td><td>$ 473,132</td><td>$ 317,078</td><td>$ 100,527</td><td>$ 338,732</td><td>$ (140,285)</td><td></td></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Real estate at cost</td><td>$ 17,574,245</td><td>$ 5,438,655</td><td>$ 4,593,749</td><td>$ 4,626,178</td><td>$ 1,146,997</td><td>$ -</td><td>$ 1,768,666</td><td></td></tr><tr><td>Investments in partially owned entities</td><td>1,209,285</td><td>128,961</td><td>119,182</td><td>22,955</td><td>6,520</td><td>409,453</td><td>522,214</td><td></td></tr><tr><td>Total assets</td><td>20,185,472</td><td>5,538,362</td><td>4,138,752</td><td>3,511,987</td><td>1,455,000</td><td>409,453</td><td>5,131,918</td><td></td></tr></table>

See notes on page 166.



## 22. Segment Information – continued

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="9">For the Year Ended December 31, 2008</td></tr><tr><td>Total</td><td>New York Office</td><td>Washington, DC Office</td><td>Retail</td><td>Merchandise Mart</td><td>Toys</td><td>Other(3)</td><td></td><td></td></tr><tr><td>Property rentals</td><td>$ 1,975,838</td><td>$ 722,445</td><td>$ 497,735</td><td>$ 342,714</td><td>$ 215,854</td><td>$ -</td><td>$ 197,090</td><td></td><td></td></tr><tr><td>Straight-line rent adjustments</td><td>88,703</td><td>42,766</td><td>15,720</td><td>20,384</td><td>8,516</td><td>-</td><td>1,317</td><td></td><td></td></tr><tr><td>Amortization of acquired below-market leases, net</td><td>95,532</td><td>60,355</td><td>3,998</td><td>26,546</td><td>161</td><td>-</td><td>4,472</td><td></td><td></td></tr><tr><td>Total rentals</td><td>2,160,073</td><td>825,566</td><td>517,453</td><td>389,644</td><td>224,531</td><td>-</td><td>202,879</td><td></td><td></td></tr><tr><td>Tenant expense reimbursements</td><td>353,602</td><td>135,788</td><td>57,793</td><td>127,903</td><td>18,055</td><td>-</td><td>14,063</td><td></td><td></td></tr><tr><td>Fee and other income:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tenant cleaning fees</td><td>56,416</td><td>71,833</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(15,417)</td><td></td><td></td></tr><tr><td>Management and leasing fees</td><td>13,397</td><td>6,411</td><td>8,940</td><td>1,673</td><td>349</td><td>-</td><td>(3,976)</td><td></td><td></td></tr><tr><td>Lease termination fees</td><td>8,465</td><td>3,088</td><td>2,635</td><td>2,281</td><td>461</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Other</td><td>48,538</td><td>15,699</td><td>22,350</td><td>2,543</td><td>6,811</td><td>-</td><td>1,135</td><td></td><td></td></tr><tr><td>Total revenues</td><td>2,640,491</td><td>1,058,385</td><td>609,171</td><td>524,044</td><td>250,207</td><td>-</td><td>198,684</td><td></td><td></td></tr><tr><td>Operating expenses</td><td>1,048,537</td><td>439,012</td><td>211,687</td><td>198,802</td><td>127,437</td><td>-</td><td>71,599</td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>529,134</td><td>190,925</td><td>135,351</td><td>90,974</td><td>46,823</td><td>-</td><td>65,061</td><td></td><td></td></tr><tr><td>General and administrative</td><td>193,969</td><td>20,217</td><td>26,522</td><td>29,836</td><td>29,252</td><td>-</td><td>88,142</td><td></td><td></td></tr><tr><td>Impairment losses and acquisition costs</td><td>81,447</td><td>-</td><td>-</td><td>595</td><td>-</td><td>-</td><td>80,852</td><td></td><td></td></tr><tr><td>Total expenses</td><td>1,853,087</td><td>650,154</td><td>373,560</td><td>320,207</td><td>203,512</td><td>-</td><td>305,654</td><td></td><td></td></tr><tr><td>Operating income (loss)</td><td>787,404</td><td>408,231</td><td>235,611</td><td>203,837</td><td>46,695</td><td>-</td><td>(106,970)</td><td></td><td></td></tr><tr><td>Income applicable to Toys</td><td>2,380</td><td>-</td><td>-</td><td>-</td><td>-</td><td>2,380</td><td>-</td><td></td><td></td></tr><tr><td>(Loss) income from partially owned entities</td><td>(159,207)</td><td>6,082</td><td>6,173</td><td>10,371</td><td>1,106</td><td>-</td><td>(182,939)</td><td></td><td></td></tr><tr><td>Interest and other investment (loss) income, net</td><td>(2,747)</td><td>2,288</td><td>2,108</td><td>464</td><td>329</td><td>-</td><td>(7,936)</td><td></td><td></td></tr><tr><td>Interest and debt expense</td><td>(619,531)</td><td>(139,146)</td><td>(125,141)</td><td>(85,895)</td><td>(38,214)</td><td>-</td><td>(231,135)</td><td></td><td></td></tr><tr><td>Net gain on early extinguishment of debt</td><td>9,820</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>9,820</td><td></td><td></td></tr><tr><td>Net gain on disposition of wholly owned and partially owned assets</td><td>7,757</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>7,757</td><td></td><td></td></tr><tr><td>Income (loss) before income taxes</td><td>25,876</td><td>277,455</td><td>118,751</td><td>128,777</td><td>9,916</td><td>2,380</td><td>(511,403)</td><td></td><td></td></tr><tr><td>Income tax benefit (expense)</td><td>204,644</td><td>-</td><td>221,080</td><td>(82)</td><td>(1,206)</td><td>-</td><td>(15,148)</td><td></td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>230,520</td><td>277,455</td><td>339,831</td><td>128,695</td><td>8,710</td><td>2,380</td><td>(526,551)</td><td></td><td></td></tr><tr><td>Income from discontinued operations</td><td>180,925</td><td>-</td><td>64,849</td><td>3,001</td><td>1,163</td><td>-</td><td>111,912</td><td></td><td></td></tr><tr><td>Net income (loss)</td><td>411,445</td><td>277,455</td><td>404,680</td><td>131,696</td><td>9,873</td><td>2,380</td><td>(414,639)</td><td></td><td></td></tr><tr><td>Net loss (income) attributable to noncontrolling interests in consolidated subsidiaries</td><td>3,263</td><td>(4,762)</td><td>-</td><td>157</td><td>(125)</td><td>-</td><td>7,993</td><td></td><td></td></tr><tr><td>Net (income) attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,411)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(55,411)</td><td></td><td></td></tr><tr><td>Net income (loss) attributable to Vornado</td><td>359,297</td><td>272,693</td><td>404,680</td><td>131,853</td><td>9,748</td><td>2,380</td><td>(462,057)</td><td></td><td></td></tr><tr><td>Interest and debt expense(2)</td><td>821,940</td><td>132,406</td><td>130,310</td><td>102,600</td><td>53,072</td><td>147,812</td><td>255,740</td><td></td><td></td></tr><tr><td>Depreciation and amortization(2)</td><td>710,526</td><td>181,699</td><td>143,989</td><td>98,238</td><td>52,357</td><td>136,634</td><td>97,609</td><td></td><td></td></tr><tr><td>Income tax (benefit) expense(2)</td><td>(142,415)</td><td>-</td><td>(220,965)</td><td>82</td><td>1,260</td><td>59,652</td><td>17,556</td><td></td><td></td></tr><tr><td>EBITDA(1)</td><td>$ 1,749,348</td><td>$ 586,798</td><td>$ 458,014</td><td>$ 332,773</td><td>$ 116,437</td><td>$ 346,478</td><td>$ (91,152)</td><td></td><td></td></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Real estate at cost</td><td>$ 17,432,906</td><td>$ 5,362,129</td><td>$ 4,443,887</td><td>$ 4,469,378</td><td>$ 1,149,357</td><td>$ -</td><td>$ 2,008,155</td><td></td><td></td></tr><tr><td>Investments in partially owned entities</td><td>1,083,250</td><td>129,934</td><td>115,121</td><td>20,079</td><td>6,969</td><td>293,096</td><td>518,051</td><td></td><td></td></tr><tr><td>Total assets</td><td>21,418,048</td><td>5,287,544</td><td>3,934,039</td><td>3,733,586</td><td>1,468,470</td><td>293,096</td><td>6,701,313</td><td></td><td></td></tr></table>

See notes on the following page.



# VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

## 22. Segment Information - continued

Notes to preceding tabular information:

(1) EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2) Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.

(3) The components of other EBITDA are summarized below. The totals for each of the columns below agree to the total EBITDA for the "other" column in the preceding EBITDA by segment reconciliations.

<table><tr><td rowspan="2">(Amounts in thousands)</td><td colspan="3">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td></tr><tr><td>Alexander&#x27;s</td><td>$ 57,425</td><td>$ 81,703</td><td>$ 64,683</td></tr><tr><td>Lexington</td><td>55,304</td><td>50,024</td><td>35,150</td></tr><tr><td>555 California Street</td><td>46,782</td><td>44,757</td><td>48,316</td></tr><tr><td>Hotel Pennsylvania</td><td>23,763</td><td>15,108</td><td>42,269</td></tr><tr><td>LNR (acquired in July 2010)</td><td>6,116</td><td>-</td><td>-</td></tr><tr><td>Industrial warehouses</td><td>2,528</td><td>4,737</td><td>5,264</td></tr><tr><td>Other investments</td><td>31,587</td><td>6,981</td><td>6,321</td></tr><tr><td></td><td>223,505</td><td>203,310</td><td>202,003</td></tr><tr><td>Corporate general and administrative expenses (1)</td><td>(90,343)</td><td>(79,843)</td><td>(91,967)</td></tr><tr><td>Investment income and other, net (1)</td><td>65,499</td><td>78,593</td><td>109,519</td></tr><tr><td>Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions</td><td>(55,228)</td><td>(25,120)</td><td>(55,411)</td></tr><tr><td>Income (loss) from the mark-to-market of derivative positions in marketable equity securities</td><td>130,153</td><td>-</td><td>(33,740)</td></tr><tr><td>Net (loss) gain on early extinguishment of debt</td><td>(10,782)</td><td>(26,684)</td><td>-</td></tr><tr><td>Real Estate Fund organization costs</td><td>(5,937)</td><td>-</td><td>-</td></tr><tr><td>Non-cash mezzanine loans receivable loss (accrual) reversal</td><td>53,100</td><td>(190,738)</td><td>10,300</td></tr><tr><td>Non-cash asset write-downs:</td><td></td><td></td><td></td></tr><tr><td>Investment in Lexington</td><td>-</td><td>(19,121)</td><td>(107,882)</td></tr><tr><td>Marketable equity securities</td><td>-</td><td>(3,361)</td><td>(76,352)</td></tr><tr><td>Real estate - primarily development projects:</td><td></td><td></td><td></td></tr><tr><td>Wholly owned entities (including acquisition costs)</td><td>(36,958)</td><td>(39,299)</td><td>(80,852)</td></tr><tr><td>Partially owned entities</td><td>-</td><td>(17,820)</td><td>(96,037)</td></tr><tr><td>Write-off of unamortized costs from the voluntary surrender of equity awards</td><td>-</td><td>(20,202)</td><td>-</td></tr><tr><td>Discontinued operations of Americold (including a $112,690 net gain on sale)</td><td>-</td><td>-</td><td>129,267</td></tr><tr><td></td><td>$ 273,009</td><td>$ (140,285)</td><td>$ (91,152)</td></tr></table>



# CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

## ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15 (e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Vornado Realty Trust, together with its consolidated subsidiaries (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2010, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2010 was effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures are being made only in accordance with authorizations of management and our trustees; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 168, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2010.



# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York

We have audited the internal control over financial reporting of Vornado Realty Trust, together with its consolidated subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of trustees, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and trustees of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2010 of the Company and our report dated February 23, 2011 expressed an unqualified opinion on those financial statements and financial statement schedules.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
February 23, 2011



## PART III

## ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to trustees of the Registrant, including its audit committee and audit committee financial expert, will be contained in a definitive Proxy Statement involving the election of trustees under the caption “Election of Trustees” which the Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 2010, and such information is incorporated herein by reference. Also incorporated herein by reference is the information under the caption “16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.

The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office that run until the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Shareholders unless they are removed sooner by the Board.

PRINCIPAL OCCUPATION, POSITION AND OFFICE

<table><tr><td>Name</td><td>Age</td><td>(Current and during past five years with Vornado unless otherwise stated)</td></tr><tr><td>Steven Roth</td><td>69</td><td>Chairman of the Board; Chief Executive Officer from May 1989 to May 2009; Managing General Partner of Interstate Properties, an owner of shopping centers and an investor in securities and partnerships; Chief Executive Officer of Alexander&#x27;s, Inc. since March 1995, a Director since 1989, and Chairman since May 2004.</td></tr><tr><td>Michael D. Fascitelli</td><td>54</td><td>Chief Executive Officer since May 2009; President and a Trustee since December 1996; President of Alexander&#x27;s Inc. since August 2000 and Director since December 1996; Partner at Goldman, Sachs &amp; Co. in charge of its real estate practice from December 1992 to December 1996; and Vice President at Goldman, Sachs &amp; Co., prior to December 1992.</td></tr><tr><td>Michael J. Franco</td><td>42</td><td>Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010; Managing Director (2003-2010) and Executive Director (2001-2003) of the Real Estate Investing Group of Morgan Stanley.</td></tr><tr><td>David R. Greenbaum</td><td>59</td><td>President of the New York City Office Division since April 1997 (date of our acquisition); President of Mendik Realty (the predecessor to the New York Office division) from 1990 until April 1997.</td></tr><tr><td>Christopher Kennedy</td><td>47</td><td>President of the Merchandise Mart Division since September 2000; Executive Vice President of the Merchandise Mart Division from April 1998 to September 2000; Executive Vice President of Merchandise Mart Properties, Inc. from 1994 to April 1998.</td></tr><tr><td>Joseph Macnow</td><td>65</td><td>Executive Vice President - Finance and Administration since January 1998 and Chief Financial Officer since March 2001; Vice President and Chief Financial Officer of the Company from 1985 to January 1998; Executive Vice President and Chief Financial Officer of Alexander&#x27;s Inc. since August 1995.</td></tr><tr><td>Mitchell N. Schear</td><td>52</td><td>President of Vornado/Charles E. Smith L.P. (our Washington, DC Office division) since April 2003; President of the Kaempfer Company from 1998 to April 2003 (date acquired by us).</td></tr><tr><td>Wendy Silverstein</td><td>50</td><td>Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010; Executive Vice President of Capital Markets since 1998; Senior Credit Officer of Citicorp Real Estate and Citibank, N.A. from 1986 to 1998.</td></tr></table>

The Registrant has adopted a Code of Business Conduct and Ethics that applies to, among others, Michael Fascitelli, its principal executive officer, and Joseph Macnow, its principal financial and accounting officer. This Code is available on our website at www.vno.com.



## ITEM 11. EXECUTIVE COMPENSATION

Information relating to executive officer and director compensation will be contained in the Proxy Statement referred to above in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Executive Compensation” and such information is incorporated herein by reference.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement referred to in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Principal Security Holders” and such information is incorporated herein by reference.

## Equity compensation plan information

The following table provides information as of December 31, 2010 regarding our equity compensation plans.

<table><tr><td>Plan Category</td><td>Number of securities to be issued upon exercise of outstanding options, warrants and rights</td><td>Weighted-average exercise price of outstanding options, warrants and rights</td><td>Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the second column)</td></tr><tr><td>Equity compensation plans approved by security holders</td><td>6,596,962 (1)</td><td>56.89</td><td>5,942,459 (2)</td></tr><tr><td>Equity compensation awards not approved by security holders</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Total</td><td>6,596,962</td><td>56.89</td><td>5,942,459</td></tr></table>

(1) Includes 75,548 restricted common shares, 920,391 restricted Operating Partnership units and 112,143 Out-Performance Plan units which do not have an option exercise price.

(2) All of the shares available for future issuance under plans approved by the security holders may be issued as Full Value Awards or Not Full Value Awards, as defined.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Certain Relationships and Related Transactions” and such information is incorporated herein by reference.

## ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information relating to Principal Accounting fees and services will be contained in the Proxy Statement referred to in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Ratification of Selection of Independent Auditors” and such information is incorporated herein by reference.



## PART IV

## ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are 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.

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><tr><td></td><td>Pages in this Annual Report on Form 10-K</td></tr><tr><td>II--Valuation and Qualifying Accounts--years ended December 31, 2010, 2009 and 2008</td><td>173</td></tr><tr><td>III--Real Estate and Accumulated Depreciation as of December 31, 2010</td><td>174</td></tr></table>

Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto.

The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K.

<table><tr><td>Exhibit No.</td></tr><tr><td>10.42 Form of Vornado Realty Trust 2010 Omnibus Share Plan Stock Option Agreement</td></tr><tr><td>10.43 Form of Vornado Realty Trust 2010 Omnibus share Plan Restricted LTIP Unit Agreement</td></tr><tr><td>10.44 Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted Stock Agreement</td></tr><tr><td>10.45 Letter Agreement between Vornado Realty Trust and Michelle Felman, dated December 21, 2010</td></tr><tr><td>10.46 Waiver and Release between Vornado Realty Trust and Michelle Felman, dated December 21, 2011</td></tr><tr><td>12 Computation of Ratios</td></tr><tr><td>21 Subsidiaries of Registrant</td></tr><tr><td>23 Consent of Independent Registered Public Accounting Firm</td></tr><tr><td>31.1 Rule 13a-14 (a) Certification of Chief Executive Officer</td></tr><tr><td>31.2 Rule 13a-14 (a) Certification of Chief Financial Officer</td></tr><tr><td>32.1 Section 1350 Certification of the Chief Executive Officer</td></tr><tr><td>32.2 Section 1350 Certification of the Chief Financial Officer</td></tr><tr><td>101.INS XBRL Instance Document</td></tr><tr><td>101.SCH XBRL Taxonomy Extension Schema</td></tr><tr><td>101.CAL XBRL Taxonomy Extension Calculation Linkbase</td></tr><tr><td>101.DEF XBRL Taxonomy Extension Definition Linkbase</td></tr><tr><td>101.LAB XBRL Taxonomy Extension Label Linkbase</td></tr><tr><td>101.PRE XBRL Taxonomy Extension Presentation Linkbase</td></tr></table>



## 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.

<table><tr><td rowspan="2">Date: February 23, 2011</td><td colspan="2">VORNADO REALTY TRUST</td></tr><tr><td>(Registrant)</td><td></td></tr><tr><td>By:</td><td>/s/ Joseph Macnow</td><td></td></tr><tr><td></td><td>Joseph Macnow, Executive Vice President - Finance and Administration and Chief Financial Officer (duly authorized officer and principal financial and accounting officer)</td><td></td></tr></table>

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

<table><tr><td>Signature</td><td>Title</td><td>Date</td></tr><tr><td>By: /s/ Steven Roth (Steven Roth)</td><td>Chairman of the Board of Trustees</td><td>February 23, 2011</td></tr><tr><td>By: /s/ Michael D. Fascitelli (Michael D. Fascitelli)</td><td>President and Chief Executive Officer (Principal Executive Officer)</td><td>February 23, 2011</td></tr><tr><td>By: /s/Candace L. Beinecke (Candace L. Beinecke)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/ Anthony W. Deering (Anthony W. Deering)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Robert P. Kogod (Robert P. Kogod)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Michael Lynne (Michael Lynne)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By:/s/David Mandelbaum (David Mandelbaum)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Ronald G. Targan (Ronald G. Targan)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Richard R. West (Richard R. West)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Russell B. Wight (Russell B. Wight, Jr.)</td><td>Trustee</td><td>February 23, 2011</td></tr><tr><td>By: /s/Joseph Macnow (Joseph Macnow)</td><td>Executive Vice President — Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)</td><td>February 23, 2011</td></tr></table>



## SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2010
(Amounts in Thousands)

<table><tr><td>Column A</td><td>Column B</td><td>Column C</td><td>Column D</td><td>Column E</td></tr><tr><td>Description</td><td>Balance at Beginning of Year</td><td>Additions Charged Against Operations</td><td>Uncollectible Accounts Written-off</td><td>Balance at End of Year</td></tr><tr><td>Year Ended December 31, 2010:</td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$ 242,118</td><td>$ (23,465)</td><td>$ (75,135)</td><td>$ 143,518</td></tr><tr><td>Year Ended December 31, 2009:</td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$ 85,307</td><td>$ 216,712</td><td>$ (59,901)</td><td>$ 242,118</td></tr><tr><td>Year Ended December 31, 2008:</td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$ 79,227</td><td>$ 20,931</td><td>$ (14,851)</td><td>$ 85,307</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III

## REAL ESTATE AND ACCUMULATED DEPRECIATION

(Amounts in thousands)

<table><tr><td>COLUMN A</td><td colspan="2">COLUMN B</td><td colspan="2">COLUMN C</td><td colspan="2">COLUMN D</td><td colspan="2">COLUMN E</td><td colspan="2">COLUMN F</td><td colspan="2">COLUMN G</td><td colspan="2">COLUMN H</td><td colspan="2">COLUMN I</td></tr><tr><td></td><td colspan="6">Initial cost to company (1)</td><td colspan="6">Gross amount at which carried at close of period</td><td rowspan="2">Accumulated depreciation and amortization</td><td rowspan="2">Date of construction (3)</td><td rowspan="2">Date acquired</td><td rowspan="2">Life on which depreciation in latest income statement is computed</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Building and improvements</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td><td>Total (2)</td><td>Land</td><td>Buildings and improvements</td><td>Total (2)</td></tr><tr><td>Office Buildings</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New York</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Manhattan</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1290 Avenue of the Americas</td><td>$ 424,136</td><td>$ 515,539</td><td>$ 923,653</td><td>$ 68,603</td><td>$ 515,539</td><td>$ 992,256</td><td>$ 1,507,795</td><td>$ 100,556</td><td>1963</td><td>2007</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>350 Park Avenue</td><td>430,000</td><td>265,889</td><td>363,381</td><td>25,400</td><td>265,889</td><td>388,781</td><td>654,670</td><td>38,798</td><td>1960</td><td>2006</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>One Penn Plaza</td><td>-</td><td>-</td><td>412,169</td><td>148,019</td><td>-</td><td>560,188</td><td>560,188</td><td>176,108</td><td>1972</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>100 W.33rd St (Manhattan Mall)</td><td>159,361</td><td>242,776</td><td>247,970</td><td>3,608</td><td>242,776</td><td>251,578</td><td>494,354</td><td>24,828</td><td>1911</td><td>2007</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Two Penn Plaza</td><td>277,347</td><td>53,615</td><td>164,903</td><td>78,470</td><td>52,689</td><td>244,299</td><td>296,988</td><td>93,497</td><td>1968</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>770 Broadway</td><td>353,000</td><td>52,898</td><td>95,686</td><td>73,942</td><td>52,898</td><td>169,628</td><td>222,526</td><td>55,274</td><td>1907</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>90 Park Avenue</td><td>-</td><td>8,000</td><td>175,890</td><td>32,211</td><td>8,000</td><td>208,101</td><td>216,101</td><td>70,516</td><td>1964</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>888 Seventh Avenue</td><td>318,554</td><td>-</td><td>117,269</td><td>90,982</td><td>-</td><td>208,251</td><td>208,251</td><td>68,690</td><td>1980</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>640 Fifth Avenue</td><td>-</td><td>38,224</td><td>25,992</td><td>111,463</td><td>38,224</td><td>137,455</td><td>175,679</td><td>46,395</td><td>1950</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Eleven Penn Plaza</td><td>199,320</td><td>40,333</td><td>85,259</td><td>45,524</td><td>40,333</td><td>130,783</td><td>171,116</td><td>45,132</td><td>1923</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1740 Broadway</td><td>-</td><td>26,971</td><td>102,890</td><td>36,891</td><td>26,971</td><td>139,781</td><td>166,752</td><td>42,261</td><td>1950</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>909 Third Avenue</td><td>207,045</td><td>-</td><td>120,723</td><td>43,689</td><td>-</td><td>164,412</td><td>164,412</td><td>43,510</td><td>1969</td><td>1999</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>150 East 58th Street</td><td>-</td><td>39,303</td><td>80,216</td><td>28,657</td><td>39,303</td><td>108,873</td><td>148,176</td><td>37,385</td><td>1969</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>595 Madison Avenue</td><td>-</td><td>62,731</td><td>62,888</td><td>15,500</td><td>62,731</td><td>78,388</td><td>141,119</td><td>20,961</td><td>1968</td><td>1999</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>866 United Nations Plaza</td><td>44,978</td><td>32,196</td><td>37,534</td><td>10,635</td><td>32,196</td><td>48,169</td><td>80,365</td><td>18,228</td><td>1966</td><td>1997</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>20 Broad Street</td><td>-</td><td>-</td><td>28,760</td><td>25,953</td><td>-</td><td>54,713</td><td>54,713</td><td>14,878</td><td>1956</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>40 Fulton Street</td><td>-</td><td>15,732</td><td>26,388</td><td>5,758</td><td>15,732</td><td>32,146</td><td>47,878</td><td>10,999</td><td>1987</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>689 Fifth Avenue</td><td>-</td><td>19,721</td><td>13,446</td><td>10,844</td><td>19,721</td><td>24,290</td><td>44,011</td><td>9,315</td><td>1925</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>330 West 34th Street</td><td>-</td><td>-</td><td>8,599</td><td>12,764</td><td>-</td><td>21,363</td><td>21,363</td><td>9,426</td><td>1925</td><td>1998</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>40-42 Thompson Street</td><td>-</td><td>6,503</td><td>10,057</td><td>721</td><td>6,503</td><td>10,778</td><td>17,281</td><td>1,414</td><td>1928</td><td>2005</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1540 Broadway Garage</td><td>-</td><td>4,086</td><td>8,914</td><td>-</td><td>4,086</td><td>8,914</td><td>13,000</td><td>1,009</td><td>1990</td><td>2006</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Other</td><td>-</td><td>5,548</td><td>65,866</td><td>36,106</td><td>35,308</td><td>7,414</td><td>3,547</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total New York</td><td>2,413,741</td><td>1,424,517</td><td>3,118,135</td><td>935,500</td><td>1,459,697</td><td>4,018,455</td><td>5,478,152</td><td>932,727</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Washington, DC</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2011-2451 Crystal Drive</td><td>127,720</td><td>100,935</td><td>409,920</td><td>116,865</td><td>100,228</td><td>527,492</td><td>627,720</td><td>134,079</td><td>1984-1989</td><td>2002</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2001 Jefferson Davis Highway,</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2100/2200 Crystal Drive, 223 23rd</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Street, 2221 South Clark Street, Crystal</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>City Shops at 2100, 220 20th Street</td><td>83,573</td><td>57,213</td><td>131,206</td><td>184,306</td><td>57,070</td><td>315,655</td><td>372,725</td><td>58,484</td><td>1964-1969</td><td>2002</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1550-1750 Crystal Drive/</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>241-251 18th Street</td><td>124,883</td><td>64,817</td><td>218,330</td><td>51,019</td><td>64,652</td><td>269,514</td><td>334,166</td><td>72,441</td><td>1974-1980</td><td>2002</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Riverhouse Apartments</td><td>259,546</td><td>118,421</td><td>125,078</td><td>53,308</td><td>138,696</td><td>158,111</td><td>296,807</td><td>14,724</td><td></td><td>2007</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Skyline Place (6 buildings)</td><td>442,500</td><td>41,986</td><td>221,869</td><td>22,325</td><td>41,862</td><td>244,318</td><td>286,180</td><td>61,383</td><td>1973-1984</td><td>2002</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1215, 1225 S. Clark Street/ 200, 201</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>12th Street S.</td><td>93,075</td><td>47,594</td><td>177,373</td><td>25,482</td><td>47,465</td><td>202,984</td><td>250,449</td><td>52,564</td><td>1983-1987</td><td>2002</td><td>(4)</td><td></td><td></td><td></td><td></td><td></td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td colspan="3">Initial cost to company (1)</td><td colspan="3">Gross amount at which carried at close of period</td><td rowspan="2">Accumulated depreciation and amortization</td><td rowspan="2">Date of construction (3)</td><td rowspan="2">Date acquired</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Building and improvements</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td></tr><tr><td>1800, 1851 and 1901 South Bell Street</td><td>10,099</td><td>37,551</td><td>118,806</td><td>26,418</td><td>37,551</td><td>145,224</td><td>182,775</td><td>36,256</td></tr><tr><td>1229-1231 25th Street</td><td>95,220</td><td>67,049</td><td>5,039</td><td>105,288</td><td>68,198</td><td>109,178</td><td>177,376</td><td>3,091</td></tr><tr><td>2101 L Street</td><td>150,000</td><td>32,815</td><td>51,642</td><td>80,965</td><td>39,768</td><td>125,654</td><td>165,422</td><td>12,192</td></tr><tr><td>2200-2300 Courthouse Plaza</td><td>59,278</td><td>-</td><td>105,475</td><td>26,748</td><td>-</td><td>132,223</td><td>132,223</td><td>34,991</td></tr><tr><td>Bowen Building</td><td>115,022</td><td>30,077</td><td>98,962</td><td>1,695</td><td>30,176</td><td>100,558</td><td>130,734</td><td>14,625</td></tr><tr><td>1875 Connecticut Ave NW</td><td>51,900</td><td>36,303</td><td>82,004</td><td>1,428</td><td>35,886</td><td>83,849</td><td>119,735</td><td>10,771</td></tr><tr><td>One Skyline Tower</td><td>134,700</td><td>12,266</td><td>75,343</td><td>31,684</td><td>12,231</td><td>107,062</td><td>119,293</td><td>23,382</td></tr><tr><td>Reston Executive</td><td>93,000</td><td>15,424</td><td>85,722</td><td>8,150</td><td>15,380</td><td>93,916</td><td>109,296</td><td>24,980</td></tr><tr><td>H Street - North 10-1D Land Parcel</td><td>-</td><td>104,473</td><td>55</td><td>(12,230)</td><td>87,666</td><td>4,632</td><td>92,298</td><td>-</td></tr><tr><td>409 3rd Street</td><td>-</td><td>10,719</td><td>69,658</td><td>7,229</td><td>10,719</td><td>76,887</td><td>87,606</td><td>25,243</td></tr><tr><td>1825 Connecticut Ave NW</td><td>51,149</td><td>33,090</td><td>61,316</td><td>(6,211)</td><td>32,726</td><td>55,469</td><td>88,195</td><td>7,077</td></tr><tr><td>Warehouses</td><td>-</td><td>106,946</td><td>1,326</td><td>(23,394)</td><td>83,400</td><td>1,478</td><td>84,878</td><td>1,331</td></tr><tr><td>Commerce Executive</td><td>-</td><td>13,401</td><td>58,705</td><td>13,902</td><td>13,363</td><td>72,645</td><td>86,008</td><td>19,854</td></tr><tr><td>1235 S. Clark Street</td><td>52,314</td><td>15,826</td><td>53,894</td><td>13,803</td><td>15,826</td><td>67,697</td><td>83,523</td><td>14,391</td></tr><tr><td>Seven Skyline Place</td><td>100,800</td><td>10,292</td><td>58,351</td><td>(3,318)</td><td>10,262</td><td>55,063</td><td>65,325</td><td>15,504</td></tr><tr><td>1150 17th Street</td><td>28,728</td><td>23,359</td><td>24,876</td><td>14,363</td><td>24,723</td><td>37,875</td><td>62,598</td><td>10,925</td></tr><tr><td>Crystal City Hotel</td><td>-</td><td>8,000</td><td>47,191</td><td>5,556</td><td>8,000</td><td>52,747</td><td>60,747</td><td>8,168</td></tr><tr><td>1750 Pennsylvania Avenue</td><td>45,132</td><td>20,020</td><td>30,032</td><td>1,270</td><td>21,170</td><td>30,152</td><td>51,322</td><td>7,931</td></tr><tr><td>1730 M Street</td><td>14,853</td><td>10,095</td><td>17,541</td><td>9,308</td><td>10,687</td><td>26,257</td><td>36,944</td><td>7,642</td></tr><tr><td>Democracy Plaza I</td><td>-</td><td>-</td><td>33,628</td><td>(75)</td><td>-</td><td>33,553</td><td>33,553</td><td>13,087</td></tr><tr><td>1726 M Street</td><td>-</td><td>9,450</td><td>22,062</td><td>1,686</td><td>9,455</td><td>23,743</td><td>33,198</td><td>2,652</td></tr><tr><td>Crystal Drive Retail</td><td>-</td><td>-</td><td>20,465</td><td>5,792</td><td>-</td><td>26,257</td><td>26,257</td><td>6,900</td></tr><tr><td>1109 South Capitol Street</td><td>-</td><td>11,541</td><td>178</td><td>26</td><td>11,597</td><td>148</td><td>11,745</td><td>178</td></tr><tr><td>South Capitol</td><td>-</td><td>4,009</td><td>6,273</td><td>(3,271)</td><td>-</td><td>7,011</td><td>7,011</td><td>-</td></tr><tr><td>H Street</td><td>-</td><td>1,763</td><td>641</td><td>41</td><td>1,763</td><td>682</td><td>2,445</td><td>91</td></tr><tr><td>Other</td><td>-</td><td>-</td><td>51,767</td><td>(44,150)</td><td>-</td><td>7,617</td><td>7,617</td><td>-</td></tr><tr><td>Total Washington, DC</td><td>2,133,492</td><td>1,045,435</td><td>2,464,728</td><td>716,008</td><td>1,030,520</td><td>3,195,651</td><td>4,226,171</td><td>694,937</td></tr><tr><td>New Jersey</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Paramus</td><td>-</td><td>-</td><td>-</td><td>23,334</td><td>1,033</td><td>22,301</td><td>23,334</td><td>13,605</td></tr><tr><td>California</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>555 California Street</td><td>640,911</td><td>221,903</td><td>893,324</td><td>22,853</td><td>221,903</td><td>916,177</td><td>1,138,080</td><td>93,905</td></tr><tr><td>Total Office Buildings</td><td>5,188,144</td><td>2,691,855</td><td>6,476,187</td><td>1,697,695</td><td>2,713,153</td><td>8,152,584</td><td>10,865,737</td><td>1,735,174</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td colspan="3">Initial cost to company (1)</td><td colspan="3">Gross amount at which carried at close of period</td><td rowspan="2">Accumulated depreciation and amortization</td><td rowspan="2">Date of construction (3)</td><td rowspan="2">Date acquired</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td><td>Total (2)</td></tr><tr><td>Shopping Centers</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>California</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Los Angeles (Beverly Connection)</td><td>100,000</td><td>72,996</td><td>131,510</td><td>16,954</td><td>72,996</td><td>148,464</td><td>221,460</td><td>14,275</td></tr><tr><td>San Jose</td><td>120,863</td><td>51,846</td><td>122,688</td><td>-</td><td>51,846</td><td>122,688</td><td>174,534</td><td>767</td></tr><tr><td>Sacramento</td><td>-</td><td>3,897</td><td>31,370</td><td>528</td><td>3,897</td><td>31,898</td><td>35,795</td><td>4,074</td></tr><tr><td>Walnut Creek (1149 S. Main St)</td><td>-</td><td>2,699</td><td>19,930</td><td>-</td><td>2,699</td><td>19,930</td><td>22,629</td><td>2,555</td></tr><tr><td>Pasadena</td><td>-</td><td>-</td><td>18,337</td><td>546</td><td>-</td><td>18,883</td><td>18,883</td><td>1,878</td></tr><tr><td>San Francisco (3700 Geary Blvd)</td><td>-</td><td>11,857</td><td>4,444</td><td>27</td><td>11,857</td><td>4,471</td><td>16,328</td><td>578</td></tr><tr><td>Signal Hill</td><td>-</td><td>9,652</td><td>2,940</td><td>1</td><td>9,652</td><td>2,941</td><td>12,593</td><td>313</td></tr><tr><td>Walnut Creek (1556 Mount</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Diablo Blvd)</td><td>-</td><td>5,909</td><td>-</td><td>740</td><td>5,908</td><td>741</td><td>6,649</td><td>-</td></tr><tr><td>Redding</td><td>-</td><td>2,900</td><td>2,857</td><td>490</td><td>2,900</td><td>3,347</td><td>6,247</td><td>314</td></tr><tr><td>Merced</td><td>-</td><td>1,725</td><td>1,907</td><td>215</td><td>1,725</td><td>2,122</td><td>3,847</td><td>289</td></tr><tr><td>San Bernadino (1522 E. Highland Ave)</td><td>-</td><td>1,651</td><td>1,810</td><td>-</td><td>1,651</td><td>1,810</td><td>3,461</td><td>290</td></tr><tr><td>Corona</td><td>-</td><td>-</td><td>3,073</td><td>-</td><td>-</td><td>3,073</td><td>3,073</td><td>493</td></tr><tr><td>Vallejo</td><td>-</td><td>-</td><td>2,945</td><td>-</td><td>-</td><td>2,945</td><td>2,945</td><td>311</td></tr><tr><td>San Bernadino (648 W. 4th St)</td><td>-</td><td>1,597</td><td>1,119</td><td>-</td><td>1,597</td><td>1,119</td><td>2,716</td><td>180</td></tr><tr><td>Mojave</td><td>-</td><td>-</td><td>2,250</td><td>-</td><td>-</td><td>2,250</td><td>2,250</td><td>361</td></tr><tr><td>Barstow</td><td>-</td><td>856</td><td>1,367</td><td>-</td><td>856</td><td>1,367</td><td>2,223</td><td>219</td></tr><tr><td>Colton (1904 Ranchero Ave)</td><td>-</td><td>1,239</td><td>954</td><td>-</td><td>1,239</td><td>954</td><td>2,193</td><td>153</td></tr><tr><td>Moreno Valley</td><td>-</td><td>639</td><td>1,156</td><td>-</td><td>639</td><td>1,156</td><td>1,795</td><td>186</td></tr><tr><td>Rialto</td><td>-</td><td>434</td><td>1,173</td><td>-</td><td>434</td><td>1,173</td><td>1,607</td><td>188</td></tr><tr><td>Desert Hot Springs</td><td>-</td><td>197</td><td>1,355</td><td>-</td><td>197</td><td>1,355</td><td>1,552</td><td>217</td></tr><tr><td>Yucaipa</td><td>-</td><td>663</td><td>426</td><td>-</td><td>663</td><td>426</td><td>1,089</td><td>68</td></tr><tr><td>Riverside (9155 Jurupa Road)</td><td>-</td><td>251</td><td>783</td><td>-</td><td>251</td><td>783</td><td>1,034</td><td>126</td></tr><tr><td>Riverside (5571 Mission Blvd)</td><td>-</td><td>209</td><td>704</td><td>-</td><td>209</td><td>704</td><td>913</td><td>113</td></tr><tr><td>Total California</td><td>220,863</td><td>171,217</td><td>355,098</td><td>19,501</td><td>171,216</td><td>374,600</td><td>545,816</td><td>27,948</td></tr><tr><td>Connecticut</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Waterbury</td><td>14,765</td><td>667</td><td>4,504</td><td>4,787</td><td>667</td><td>9,291</td><td>9,958</td><td>5,295</td></tr><tr><td>Newington</td><td>11,870</td><td>2,421</td><td>1,200</td><td>860</td><td>2,421</td><td>2,060</td><td>4,481</td><td>642</td></tr><tr><td>Total Connecticut</td><td>26,635</td><td>3,088</td><td>5,704</td><td>5,647</td><td>3,088</td><td>11,351</td><td>14,439</td><td>5,937</td></tr><tr><td>Florida</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Tampa (Hyde Park)</td><td>21,862</td><td>8,000</td><td>23,293</td><td>13,476</td><td>8,000</td><td>36,769</td><td>44,769</td><td>5,015</td></tr><tr><td>Tampa</td><td>-</td><td>3,651</td><td>2,388</td><td>2,134</td><td>3,650</td><td>4,523</td><td>8,173</td><td>312</td></tr><tr><td>Total Florida</td><td>21,862</td><td>11,651</td><td>25,681</td><td>15,610</td><td>11,650</td><td>41,292</td><td>52,942</td><td>5,327</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION

(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td colspan="2">COLUMN C</td><td colspan="2">COLUMN D</td><td colspan="2">COLUMN E</td><td colspan="2">COLUMN F</td><td colspan="2">COLUMN G</td><td colspan="2">COLUMN H</td><td colspan="2">COLUMN I</td></tr><tr><td></td><td></td><td colspan="2">Initial cost to company (1)</td><td></td><td></td><td colspan="2">Gross amount at which carried at close of period</td><td></td><td></td><td colspan="2">Accumulated depreciation and amortization</td><td colspan="2">Date of construction (3)</td><td colspan="2">Date acquired</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Building and improvements</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td><td>Total</td><td>(2)</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Illinois</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Lansing</td><td>-</td><td>2,135</td><td>1,064</td><td>71</td><td>2,135</td><td>1,135</td><td>3,270</td><td>115</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Iowa</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Dubuque</td><td>-</td><td>-</td><td>1,479</td><td>-</td><td>-</td><td>1,479</td><td>1,479</td><td>156</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Maryland</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Rockville</td><td>-</td><td>3,470</td><td>20,599</td><td>123</td><td>3,470</td><td>20,722</td><td>24,192</td><td>3,019</td><td></td><td></td><td></td><td>2005</td><td>(4)</td><td></td><td></td></tr><tr><td>Baltimore (Townson)</td><td>16,502</td><td>581</td><td>3,227</td><td>8,768</td><td>581</td><td>11,995</td><td>12,576</td><td>4,061</td><td>1968</td><td></td><td></td><td>1968</td><td>(4)</td><td></td><td></td></tr><tr><td>Annapolis</td><td>-</td><td>-</td><td>9,652</td><td>-</td><td>-</td><td>9,652</td><td>9,652</td><td>1,952</td><td></td><td></td><td></td><td>2005</td><td>(4)</td><td></td><td></td></tr><tr><td>Wheaton</td><td>-</td><td>-</td><td>5,367</td><td>-</td><td>-</td><td>5,367</td><td>5,367</td><td>570</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Glen Burnie</td><td>-</td><td>462</td><td>2,571</td><td>528</td><td>462</td><td>3,099</td><td>3,561</td><td>2,602</td><td>1958</td><td></td><td></td><td>1958</td><td>(4)</td><td></td><td></td></tr><tr><td>Total Maryland</td><td>16,502</td><td>4,513</td><td>41,416</td><td>9,419</td><td>4,513</td><td>50,835</td><td>55,348</td><td>12,204</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Massachusetts</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Dorchester</td><td>-</td><td>12,844</td><td>3,794</td><td>(3)</td><td>12,841</td><td>3,794</td><td>16,635</td><td>403</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Springfield</td><td>6,051</td><td>2,797</td><td>2,471</td><td>595</td><td>2,797</td><td>3,066</td><td>5,863</td><td>630</td><td>1993</td><td></td><td></td><td>1966</td><td>(4)</td><td></td><td></td></tr><tr><td>Chicopee</td><td>8,772</td><td>895</td><td>-</td><td>-</td><td>895</td><td>-</td><td>895</td><td>-</td><td></td><td></td><td></td><td>1969</td><td>1969</td><td>(4)</td><td></td></tr><tr><td>Cambridge</td><td>-</td><td>-</td><td>-</td><td>260</td><td>-</td><td>260</td><td>260</td><td>67</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total Massachusetts</td><td>14,823</td><td>16,536</td><td>6,265</td><td>852</td><td>16,533</td><td>7,120</td><td>23,653</td><td>1,100</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Michigan</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Roseville</td><td>-</td><td>30</td><td>6,128</td><td>1,461</td><td>30</td><td>7,589</td><td>7,619</td><td>1,569</td><td></td><td></td><td></td><td>2005</td><td>(4)</td><td></td><td></td></tr><tr><td>Battle Creek</td><td>-</td><td>1,264</td><td>2,144</td><td>(2,443)</td><td>264</td><td>701</td><td>965</td><td>75</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Midland</td><td>-</td><td>-</td><td>133</td><td>86</td><td>-</td><td>219</td><td>219</td><td>51</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Total Michigan</td><td>-</td><td>1,294</td><td>8,405</td><td>(896)</td><td>294</td><td>8,509</td><td>8,803</td><td>1,695</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New Hampshire</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Salem</td><td>-</td><td>6,083</td><td>-</td><td>-</td><td>6,083</td><td>-</td><td>6,083</td><td>-</td><td></td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>New Jersey</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Paramus (Bergen Town Center)</td><td>279,044</td><td>19,884</td><td>81,723</td><td>342,631</td><td>37,635</td><td>406,603</td><td>444,238</td><td>30,708</td><td>1957/2009</td><td></td><td></td><td>2003</td><td>(4)</td><td></td><td></td></tr><tr><td>North Bergen (Tonnelle Ave)</td><td>-</td><td>24,493</td><td>-</td><td>61,363</td><td>31,430</td><td>54,426</td><td>85,856</td><td>2,656</td><td>2009</td><td></td><td></td><td>2006</td><td>(4)</td><td></td><td></td></tr><tr><td>Union (Springfield Avenue)</td><td>30,108</td><td>19,700</td><td>45,090</td><td>-</td><td>19,700</td><td>45,090</td><td>64,790</td><td>4,039</td><td></td><td></td><td></td><td>2007</td><td>(4)</td><td></td><td></td></tr><tr><td>East Rutherford</td><td>14,359</td><td>-</td><td>36,727</td><td>(1)</td><td>-</td><td>36,726</td><td>36,726</td><td>2,481</td><td>2007</td><td></td><td></td><td>2007</td><td>(4)</td><td></td><td></td></tr><tr><td>East Hanover I and II</td><td>45,219</td><td>2,232</td><td>18,241</td><td>10,399</td><td>2,671</td><td>28,201</td><td>30,872</td><td>12,270</td><td>1962</td><td>1962/1998</td><td></td><td>1962/1998</td><td>(4)</td><td></td><td></td></tr><tr><td>Garfield</td><td>-</td><td>45</td><td>8,068</td><td>20,809</td><td>45</td><td>28,877</td><td>28,922</td><td>1,132</td><td>2009</td><td></td><td></td><td>1998</td><td>(4)</td><td></td><td></td></tr><tr><td>Lodi (Washington Street)</td><td>9,881</td><td>7,606</td><td>13,125</td><td>263</td><td>7,606</td><td>13,388</td><td>20,994</td><td>2,023</td><td></td><td></td><td></td><td>2004</td><td>(4)</td><td></td><td></td></tr><tr><td>Englewood</td><td>12,222</td><td>2,300</td><td>17,245</td><td>-</td><td>2,300</td><td>17,245</td><td>19,545</td><td>1,545</td><td></td><td></td><td></td><td>2007</td><td>(4)</td><td></td><td></td></tr><tr><td>Bricktown</td><td>33,755</td><td>1,391</td><td>11,179</td><td>6,123</td><td>1,391</td><td>17,302</td><td>18,693</td><td>9,775</td><td>1968</td><td>1968</td><td></td><td>1968</td><td>(4)</td><td></td><td></td></tr><tr><td>Totowa</td><td>26,171</td><td>1,102</td><td>11,994</td><td>4,667</td><td>1,099</td><td>16,664</td><td>17,763</td><td>10,993</td><td>1957/1999</td><td>1957</td><td></td><td>1957</td><td>(4)</td><td></td><td></td></tr><tr><td>Hazlet</td><td>-</td><td>7,400</td><td>9,413</td><td>-</td><td>7,400</td><td>9,413</td><td>16,813</td><td>843</td><td></td><td></td><td></td><td>2007</td><td>(4)</td><td></td><td></td></tr><tr><td>Carlstadt</td><td>7,442</td><td>-</td><td>16,457</td><td>12</td><td>-</td><td>16,469</td><td>16,469</td><td>1,307</td><td></td><td></td><td></td><td>2007</td><td>(4)</td><td></td><td></td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td colspan="3">Initial cost to company (1)</td><td colspan="3">Gross amount at which carried at close of period</td><td rowspan="2">Accumulated depreciation and amortization</td><td rowspan="2">Date of construction (3)</td><td rowspan="2">Date acquired</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td></tr><tr><td>North Plainfield</td><td>-</td><td>500</td><td>13,983</td><td>1,635</td><td>500</td><td>15,618</td><td>16,118</td><td>1955</td></tr><tr><td>East Brunswick II (339-341 Route 18 S.)</td><td>12,449</td><td>2,098</td><td>10,949</td><td>2,750</td><td>2,098</td><td>13,699</td><td>15,797</td><td>1972</td></tr><tr><td>Manalapan</td><td>22,234</td><td>725</td><td>7,189</td><td>7,774</td><td>1,046</td><td>14,642</td><td>15,688</td><td>1971</td></tr><tr><td>Marlton</td><td>18,239</td><td>11,611</td><td>3,464</td><td>9,706</td><td>1,611</td><td>13,170</td><td>14,781</td><td>1973</td></tr><tr><td>Union (Route 22 and Morris Ave)</td><td>34,160</td><td>3,025</td><td>7,470</td><td>1,879</td><td>3,025</td><td>9,349</td><td>12,374</td><td>1962</td></tr><tr><td>Hackensack</td><td>42,845</td><td>692</td><td>10,219</td><td>1,266</td><td>692</td><td>11,485</td><td>12,177</td><td>1963</td></tr><tr><td>Wayne Towne Center</td><td>-</td><td>-</td><td>12,100</td><td>-</td><td>-</td><td>12,100</td><td>12,100</td><td>2010</td></tr><tr><td>Watchung</td><td>15,923</td><td>4,178</td><td>5,463</td><td>1,427</td><td>4,441</td><td>6,627</td><td>11,068</td><td>1959</td></tr><tr><td>South Plainfield</td><td>5,414</td><td>-</td><td>10,044</td><td>224</td><td>-</td><td>10,268</td><td>10,268</td><td>2007</td></tr><tr><td>Eatontown</td><td>-</td><td>4,653</td><td>4,999</td><td>277</td><td>4,653</td><td>5,276</td><td>9,929</td><td>2005</td></tr><tr><td>Cherry Hill</td><td>14,649</td><td>5,864</td><td>2,694</td><td>1,347</td><td>4,864</td><td>5,041</td><td>9,905</td><td>1964</td></tr><tr><td>Dover</td><td>13,896</td><td>559</td><td>6,363</td><td>2,920</td><td>559</td><td>9,283</td><td>9,842</td><td>1964</td></tr><tr><td>Lodi (Route 17 N.)</td><td>11,985</td><td>238</td><td>9,446</td><td>-</td><td>238</td><td>9,446</td><td>9,684</td><td>1955</td></tr><tr><td>East Brunswick I (325-333 Route 18 S.)</td><td>26,287</td><td>319</td><td>6,220</td><td>2,682</td><td>319</td><td>8,902</td><td>9,221</td><td>1957</td></tr><tr><td>Jersey City</td><td>21,423</td><td>652</td><td>7,495</td><td>323</td><td>652</td><td>7,818</td><td>8,470</td><td>1965</td></tr><tr><td>Morris Plains</td><td>22,581</td><td>1,104</td><td>6,411</td><td>852</td><td>1,104</td><td>7,263</td><td>8,367</td><td>1985</td></tr><tr><td>Middletown</td><td>18,354</td><td>283</td><td>5,248</td><td>1,238</td><td>283</td><td>6,486</td><td>6,769</td><td>1963</td></tr><tr><td>Woodbridge</td><td>21,828</td><td>1,509</td><td>2,675</td><td>1,783</td><td>1,539</td><td>4,428</td><td>5,967</td><td>1959</td></tr><tr><td>Delran</td><td>-</td><td>756</td><td>4,468</td><td>545</td><td>756</td><td>5,013</td><td>5,769</td><td>1972</td></tr><tr><td>Lawside</td><td>11,291</td><td>851</td><td>3,164</td><td>1,282</td><td>851</td><td>4,446</td><td>5,297</td><td>1969</td></tr><tr><td>Kearny</td><td>-</td><td>309</td><td>3,376</td><td>1,151</td><td>309</td><td>4,527</td><td>4,836</td><td>1959</td></tr><tr><td>Bordentown</td><td>-</td><td>498</td><td>3,176</td><td>1,102</td><td>717</td><td>4,059</td><td>4,776</td><td>1958</td></tr><tr><td>Turnersville</td><td>-</td><td>900</td><td>1,342</td><td>878</td><td>900</td><td>2,220</td><td>3,120</td><td>1974</td></tr><tr><td>North Bergen (Kennedy Blvd)</td><td>5,385</td><td>2,308</td><td>636</td><td>34</td><td>2,308</td><td>670</td><td>2,978</td><td>1974</td></tr><tr><td>Montclair</td><td>2,779</td><td>66</td><td>419</td><td>381</td><td>66</td><td>800</td><td>866</td><td>1972</td></tr><tr><td>Total New Jersey</td><td>779,923</td><td>119,851</td><td>418,275</td><td>489,722</td><td>144,808</td><td>883,040</td><td>1,027,848</td><td>185,444</td></tr><tr><td colspan="9">New York</td></tr><tr><td>Valley Stream (Green Acres Mall)</td><td>335,000</td><td>147,172</td><td>134,980</td><td>58,160</td><td>146,969</td><td>193,343</td><td>340,312</td><td>1956</td></tr><tr><td>Bronx (Bruckner Blvd)</td><td>-</td><td>66,100</td><td>259,503</td><td>373</td><td>66,100</td><td>259,876</td><td>32,576</td><td>2007</td></tr><tr><td>Hicksville (Broadway Mall)</td><td>90,227</td><td>126,324</td><td>48,904</td><td>5,969</td><td>126,324</td><td>54,873</td><td>181,197</td><td>2005</td></tr><tr><td>Poughkeepsie</td><td>-</td><td>12,733</td><td>12,026</td><td>35,534</td><td>12,780</td><td>47,513</td><td>60,293</td><td>2005</td></tr><tr><td>Huntington</td><td>17,602</td><td>21,200</td><td>33,667</td><td>186</td><td>21,200</td><td>33,853</td><td>55,053</td><td>2007</td></tr><tr><td>Mount Kisco</td><td>29,382</td><td>22,700</td><td>26,700</td><td>386</td><td>23,297</td><td>26,489</td><td>49,786</td><td>2007</td></tr><tr><td>Bronx (Gun Hill Road)</td><td>-</td><td>6,427</td><td>11,885</td><td>16,556</td><td>6,428</td><td>28,440</td><td>34,868</td><td>2005</td></tr><tr><td>Staten Island</td><td>17,400</td><td>11,446</td><td>21,262</td><td>292</td><td>11,446</td><td>21,554</td><td>33,000</td><td>2004</td></tr><tr><td>Inwood</td><td>-</td><td>12,419</td><td>19,097</td><td>524</td><td>12,419</td><td>19,621</td><td>32,040</td><td>2004</td></tr><tr><td>Queens (99-01 Queens Blvd)</td><td>-</td><td>7,839</td><td>20,392</td><td>1,789</td><td>7,839</td><td>22,181</td><td>30,020</td><td>2004</td></tr><tr><td>West Babylon</td><td>-</td><td>6,720</td><td>13,786</td><td>70</td><td>6,720</td><td>13,856</td><td>20,576</td><td>2007</td></tr><tr><td>Freeport (437 E. Sunrise Highway)</td><td>22,581</td><td>1,231</td><td>4,747</td><td>1,480</td><td>1,231</td><td>6,227</td><td>7,458</td><td>1981</td></tr><tr><td>Dewitt</td><td>-</td><td>-</td><td>7,116</td><td>-</td><td>-</td><td>7,116</td><td>7,116</td><td>2006</td></tr><tr><td>Buffalo (Amherst)</td><td>-</td><td>5,743</td><td>4,056</td><td>611</td><td>5,107</td><td>5,303</td><td>10,410</td><td>1968</td></tr><tr><td>Oceanside</td><td>-</td><td>2,710</td><td>2,306</td><td>-</td><td>2,710</td><td>2,306</td><td>5,016</td><td>2007</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td colspan="3">Initial cost to company (1)</td><td colspan="3">Gross amount at which carried at close of period</td><td rowspan="2">Accumulated depreciation and amortization</td><td rowspan="2">Date of construction (3)</td><td rowspan="2">Date acquired</td><td rowspan="2">Life on which depreciation in latest income statement is computed</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Costs capitalized subsequent to acquisition</td><td>Buildings and improvements</td><td>Land</td><td>Buildings and improvements</td></tr><tr><td>Albany (Menands)</td><td>-</td><td>460</td><td>2,091</td><td>2,313</td><td>460</td><td>4,404</td><td>4,864</td><td>3,314</td><td>1965</td></tr><tr><td>Rochester (Henrietta)</td><td>-</td><td>-</td><td>2,647</td><td>1,142</td><td>-</td><td>3,789</td><td>3,789</td><td>3,381</td><td>1971</td></tr><tr><td>Rochester</td><td>4,632</td><td>2,172</td><td>-</td><td>-</td><td>2,172</td><td>-</td><td>2,172</td><td>-</td><td>1966</td></tr><tr><td>Freeport (240 Sunrise Highway)</td><td>-</td><td>-</td><td>-</td><td>260</td><td>-</td><td>260</td><td>260</td><td>61</td><td>2005</td></tr><tr><td>Commack</td><td>-</td><td>-</td><td>43</td><td>213</td><td>-</td><td>256</td><td>256</td><td>15</td><td>2006</td></tr><tr><td>New Hyde Park</td><td>-</td><td>-</td><td>4</td><td>-</td><td>-</td><td>4</td><td>4</td><td>126</td><td>1976</td></tr><tr><td>Manhattan</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>1540 Broadway</td><td>-</td><td>105,914</td><td>214,208</td><td>17,856</td><td>105,914</td><td>232,064</td><td>337,978</td><td>10,704</td><td>2006</td></tr><tr><td>Manhattan Mall</td><td>72,639</td><td>88,595</td><td>113,473</td><td>73,018</td><td>88,595</td><td>186,491</td><td>275,086</td><td>19,222</td><td>2007</td></tr><tr><td>828-850 Madison Avenue</td><td>80,000</td><td>107,937</td><td>28,261</td><td>10</td><td>107,937</td><td>28,271</td><td>136,208</td><td>4,004</td><td>2005</td></tr><tr><td>4 Union Square South</td><td>75,000</td><td>24,079</td><td>55,220</td><td>388</td><td>24,079</td><td>55,608</td><td>79,687</td><td>9,292</td><td>1993</td></tr><tr><td>478-482 Broadway</td><td>-</td><td>20,000</td><td>13,375</td><td>26,874</td><td>20,000</td><td>40,249</td><td>60,249</td><td>2,354</td><td>2007</td></tr><tr><td>510 5th Avenue</td><td>32,189</td><td>34,200</td><td>23,175</td><td>-</td><td>34,200</td><td>23,175</td><td>57,375</td><td>143</td><td>2010</td></tr><tr><td>40 East 66th Street</td><td>-</td><td>13,616</td><td>34,635</td><td>121</td><td>13,616</td><td>34,756</td><td>48,372</td><td>4,287</td><td>2005</td></tr><tr><td>25 W. 14th Street</td><td>-</td><td>29,169</td><td>17,878</td><td>341</td><td>29,169</td><td>18,219</td><td>47,388</td><td>3,166</td><td>2004</td></tr><tr><td>155 Spring Street</td><td>-</td><td>13,700</td><td>30,544</td><td>1,664</td><td>13,700</td><td>32,208</td><td>45,908</td><td>2,991</td><td>2007</td></tr><tr><td>435 7th Avenue</td><td>51,844</td><td>19,893</td><td>19,091</td><td>37</td><td>19,893</td><td>19,128</td><td>39,021</td><td>4,026</td><td>2002</td></tr><tr><td>692 Broadway</td><td>-</td><td>6,053</td><td>22,908</td><td>1,707</td><td>6,053</td><td>24,615</td><td>30,668</td><td>3,203</td><td>2005</td></tr><tr><td>715 Lexington Avenue</td><td>-</td><td>-</td><td>26,903</td><td>-</td><td>-</td><td>26,903</td><td>26,903</td><td>3,794</td><td>1923</td></tr><tr><td>677-679 Madison Avenue</td><td>-</td><td>13,070</td><td>9,640</td><td>360</td><td>13,070</td><td>10,000</td><td>23,070</td><td>1,123</td><td>2006</td></tr><tr><td>431 7th Avenue</td><td>-</td><td>16,700</td><td>2,751</td><td>-</td><td>16,700</td><td>2,751</td><td>19,451</td><td>258</td><td>2007</td></tr><tr><td>484-486 Broadway</td><td>-</td><td>10,000</td><td>6,688</td><td>4,076</td><td>10,000</td><td>10,764</td><td>20,764</td><td>583</td><td>2007</td></tr><tr><td>1135 Third Avenue</td><td>-</td><td>7,844</td><td>-</td><td>-</td><td>7,844</td><td>15,688</td><td>2,549</td><td>1997</td><td>(4)</td></tr><tr><td>387 West Broadway</td><td>-</td><td>5,858</td><td>7,662</td><td>364</td><td>5,858</td><td>8,026</td><td>13,884</td><td>1,376</td><td>2004</td></tr><tr><td>148 Spring Street</td><td>-</td><td>3,200</td><td>8,112</td><td>109</td><td>3,200</td><td>8,221</td><td>11,421</td><td>529</td><td>2008</td></tr><tr><td>150 Spring Street</td><td>-</td><td>3,200</td><td>5,822</td><td>137</td><td>3,200</td><td>5,959</td><td>9,159</td><td>392</td><td>2008</td></tr><tr><td>386 West Broadway</td><td>4,197</td><td>2,624</td><td>6,160</td><td>-</td><td>2,624</td><td>6,160</td><td>8,784</td><td>937</td><td>2004</td></tr><tr><td>488 8th Avenue</td><td>-</td><td>10,650</td><td>1,767</td><td>(4,674)</td><td>6,859</td><td>884</td><td>7,743</td><td>67</td><td>2007</td></tr><tr><td>484 8th Avenue</td><td>-</td><td>3,856</td><td>762</td><td>-</td><td>3,856</td><td>762</td><td>4,618</td><td>265</td><td>1997</td></tr><tr><td>825 7th Avenue</td><td>-</td><td>1,483</td><td>697</td><td>33</td><td>1,483</td><td>730</td><td>2,213</td><td>243</td><td>1997</td></tr><tr><td>Total New York</td><td>832,693</td><td>995,037</td><td>1,282,788</td><td>248,279</td><td>991,052</td><td>1,535,052</td><td>2,526,104</td><td>191,247</td><td></td></tr><tr><td>Pennsylvania</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Wilkes Barre</td><td>20,727</td><td>6,053</td><td>26,646</td><td>113</td><td>6,053</td><td>26,759</td><td>32,812</td><td>2,067</td><td>2007</td></tr><tr><td>Philadelphia</td><td>-</td><td>933</td><td>23,650</td><td>6,228</td><td>933</td><td>29,878</td><td>30,811</td><td>8,066</td><td>1994</td></tr><tr><td>Allentown</td><td>31,670</td><td>334</td><td>15,580</td><td>348</td><td>334</td><td>15,928</td><td>16,262</td><td>11,398</td><td>1957</td></tr><tr><td>Bensalem</td><td>15,720</td><td>2,727</td><td>6,698</td><td>1,836</td><td>2,727</td><td>8,534</td><td>11,261</td><td>2,819</td><td>1972/1999</td></tr><tr><td>Bethlehem</td><td>5,906</td><td>827</td><td>5,200</td><td>300</td><td>839</td><td>5,488</td><td>6,327</td><td>5,483</td><td>1966</td></tr><tr><td>Wyomissing</td><td>-</td><td>-</td><td>2,646</td><td>2,411</td><td>-</td><td>5,057</td><td>5,057</td><td>2,177</td><td>2005</td></tr><tr><td>York</td><td>5,501</td><td>409</td><td>2,568</td><td>1,934</td><td>409</td><td>4,502</td><td>4,911</td><td>3,487</td><td>1970</td></tr><tr><td>Broomall</td><td>11,291</td><td>850</td><td>2,171</td><td>774</td><td>850</td><td>2,945</td><td>3,795</td><td>2,826</td><td>1966</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td></td><td colspan="3">Initial cost to company (1)</td><td colspan="2">Gross amount at which carried at close of period</td><td>Accumulated depreciation and amortization</td><td>Date of construction (3)</td><td>Date acquired</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Building and improvements</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td><td>Total (2)</td><td></td></tr><tr><td>Lancaster</td><td>5,703</td><td>3,140</td><td>63</td><td>547</td><td>3,140</td><td>610</td><td>3,750</td><td>432</td></tr><tr><td>Upper Mooreland</td><td>-</td><td>683</td><td>1,868</td><td>900</td><td>683</td><td>2,768</td><td>3,451</td><td>2,605</td></tr><tr><td>Glenolden</td><td>7,238</td><td>850</td><td>1,820</td><td>471</td><td>850</td><td>2,291</td><td>3,141</td><td>1,800</td></tr><tr><td>Levittown</td><td>-</td><td>183</td><td>1,008</td><td>377</td><td>183</td><td>1,385</td><td>1,568</td><td>1,369</td></tr><tr><td>Springfield</td><td>-</td><td>-</td><td>-</td><td>167</td><td>-</td><td>167</td><td>167</td><td>-</td></tr><tr><td>Total Pennsylvania</td><td>103,756</td><td>16,989</td><td>89,918</td><td>16,406</td><td>17,001</td><td>106,312</td><td>123,313</td><td>44,529</td></tr><tr><td>South Carolina</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Charleston</td><td>-</td><td>-</td><td>3,634</td><td>-</td><td>-</td><td>3,634</td><td>3,634</td><td>386</td></tr><tr><td>Tennessee</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Antioch</td><td>-</td><td>1,521</td><td>2,386</td><td>-</td><td>1,521</td><td>2,386</td><td>3,907</td><td>253</td></tr><tr><td>Texas</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Texarkana</td><td>-</td><td>-</td><td>458</td><td>33</td><td>-</td><td>491</td><td>491</td><td>53</td></tr><tr><td>Utah</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Ogden</td><td>-</td><td>1,714</td><td>2,431</td><td>(2,201)</td><td>713</td><td>1,231</td><td>1,944</td><td>113</td></tr><tr><td>Virginia</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Springfield (Springfield Mall)</td><td>-</td><td>35,168</td><td>265,964</td><td>(23,424)</td><td>49,516</td><td>228,192</td><td>277,708</td><td>33,789</td></tr><tr><td>Norfolk</td><td>-</td><td>-</td><td>3,927</td><td>15</td><td>-</td><td>3,942</td><td>3,942</td><td>2,084</td></tr><tr><td>Total Virginia</td><td>-</td><td>35,168</td><td>269,891</td><td>(23,409)</td><td>49,516</td><td>232,134</td><td>281,650</td><td>35,873</td></tr><tr><td>Washington</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Bellingham</td><td>-</td><td>1,831</td><td>2,136</td><td>(1,970)</td><td>922</td><td>1,075</td><td>1,997</td><td>99</td></tr><tr><td>Washington, DC</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>3040 M Street</td><td>-</td><td>7,830</td><td>27,490</td><td>45</td><td>7,830</td><td>27,535</td><td>35,365</td><td>3,412</td></tr><tr><td>Wisconsin</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fond Du Lac</td><td>-</td><td>-</td><td>174</td><td>102</td><td>-</td><td>276</td><td>276</td><td>50</td></tr><tr><td>Puerto Rico</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Las Catalinas</td><td>57,737</td><td>15,280</td><td>64,370</td><td>8,104</td><td>15,280</td><td>72,474</td><td>87,754</td><td>22,543</td></tr><tr><td>Montehiedra</td><td>120,000</td><td>9,182</td><td>66,751</td><td>3,591</td><td>9,267</td><td>70,257</td><td>79,524</td><td>24,304</td></tr><tr><td>Total Puerto Rico</td><td>177,737</td><td>24,462</td><td>131,121</td><td>11,695</td><td>24,547</td><td>142,731</td><td>167,278</td><td>46,847</td></tr><tr><td>Other</td><td>-</td><td>-</td><td>-</td><td>2,419</td><td>-</td><td>2,419</td><td>2,419</td><td>-</td></tr><tr><td>Total Retail Properties</td><td>2,194,794</td><td>1,420,920</td><td>2,675,814</td><td>791,325</td><td>1,453,422</td><td>3,434,637</td><td>4,888,059</td><td>562,788</td></tr></table>



## VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)

<table><tr><td>COLUMN A</td><td>COLUMN B</td><td>COLUMN C</td><td>COLUMN D</td><td>COLUMN E</td><td>COLUMN F</td><td>COLUMN G</td><td>COLUMN H</td><td>COLUMN I</td></tr><tr><td colspan="9">Initial cost to company (1)</td></tr><tr><td></td><td></td><td></td><td></td><td></td><td colspan="2">Gross amount at which carried at close of period</td><td>Accumulated depreciation and amortization</td><td>Date of construction (3)</td></tr><tr><td>Description</td><td>Encumbrances</td><td>Land</td><td>Building and improvements</td><td>Costs capitalized subsequent to acquisition</td><td>Land</td><td>Buildings and improvements</td><td>Total (2)</td><td></td></tr><tr><td>Merchandise Mart Properties</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Illinois</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Merchandise Mart, Chicago</td><td>550,000</td><td>64,528</td><td>319,146</td><td>159,448</td><td>64,535</td><td>478,587</td><td>543,122</td><td>146,382</td></tr><tr><td>350 North Orleans, Chicago</td><td>-</td><td>14,238</td><td>67,008</td><td>79,800</td><td>14,246</td><td>146,800</td><td>161,046</td><td>37,745</td></tr><tr><td>527 W. Kinzie, Chicago</td><td>-</td><td>5,166</td><td>-</td><td>-</td><td>5,166</td><td>-</td><td>5,166</td><td>-</td></tr><tr><td>Total Illinois</td><td>550,000</td><td>83,932</td><td>386,154</td><td>239,248</td><td>83,947</td><td>625,387</td><td>709,334</td><td>184,127</td></tr><tr><td>Washington, DC</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Washington Design Center</td><td>43,447</td><td>12,274</td><td>40,662</td><td>13,468</td><td>12,274</td><td>54,130</td><td>66,404</td><td>16,202</td></tr><tr><td>New York</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>7 West 34th Street</td><td>-</td><td>34,614</td><td>94,167</td><td>35,785</td><td>34,614</td><td>129,952</td><td>164,566</td><td>30,561</td></tr><tr><td>MMPI Piers</td><td>-</td><td>-</td><td>-</td><td>9,156</td><td>-</td><td>9,156</td><td>9,156</td><td>130</td></tr><tr><td>Total New York</td><td>-</td><td>34,614</td><td>94,167</td><td>44,941</td><td>34,614</td><td>139,108</td><td>173,722</td><td>30,691</td></tr><tr><td>Massachusetts</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Boston Design Center</td><td>68,538</td><td>-</td><td>93,915</td><td>7,238</td><td>-</td><td>101,153</td><td>101,153</td><td>13,547</td></tr><tr><td>California</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Gift and Furniture Mart, Los Angeles</td><td>-</td><td>10,141</td><td>43,422</td><td>5,968</td><td>10,141</td><td>49,390</td><td>59,531</td><td>17,268</td></tr><tr><td>Other</td><td>-</td><td>-</td><td>-</td><td>3,273</td><td>-</td><td>3,273</td><td>3,273</td><td>-</td></tr><tr><td>Total Merchandise Mart</td><td>661,985</td><td>140,961</td><td>658,320</td><td>314,136</td><td>140,976</td><td>972,441</td><td>1,113,417</td><td>261,835</td></tr><tr><td>Warehouse/Industrial</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>New Jersey</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>East Hanover</td><td>24,358</td><td>576</td><td>7,752</td><td>7,061</td><td>691</td><td>14,698</td><td>15,389</td><td>13,702</td></tr><tr><td>Edison</td><td>-</td><td>-</td><td>-</td><td>4,903</td><td>704</td><td>4,199</td><td>4,903</td><td>4,179</td></tr><tr><td>Total Warehouse/Industrial</td><td>24,358</td><td>576</td><td>7,752</td><td>11,964</td><td>1,395</td><td>18,897</td><td>20,292</td><td>17,881</td></tr><tr><td>Other Properties</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Hotel Pennsylvania</td><td>-</td><td>29,903</td><td>121,712</td><td>72,410</td><td>29,904</td><td>194,121</td><td>224,025</td><td>62,224</td></tr><tr><td>220 Central Park South</td><td>123,750</td><td>115,720</td><td>16,420</td><td>111,068</td><td>115,720</td><td>127,488</td><td>243,208</td><td>20,119</td></tr><tr><td>Wasserman</td><td>43,867</td><td>28,052</td><td>-</td><td>33,436</td><td>40,238</td><td>21,250</td><td>61,488</td><td>11,575</td></tr><tr><td>40 East 66th Residential</td><td>-</td><td>29,199</td><td>85,798</td><td>(68,187)</td><td>18,194</td><td>28,616</td><td>46,810</td><td>3,250</td></tr><tr><td>677-679 Madison</td><td>-</td><td>1,462</td><td>1,058</td><td>1,294</td><td>2,212</td><td>1,602</td><td>3,814</td><td>166</td></tr><tr><td>Atlantic City, NJ</td><td>-</td><td>83,089</td><td>7</td><td>-</td><td>83,089</td><td>7</td><td>83,096</td><td>-</td></tr><tr><td>Total Other Properties</td><td>167,617</td><td>287,425</td><td>224,995</td><td>150,021</td><td>289,357</td><td>373,084</td><td>662,441</td><td>97,334</td></tr><tr><td>Leasehold Improvements</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Equipment and Other</td><td>-</td><td>-</td><td>-</td><td>124,976</td><td>-</td><td>124,976</td><td>124,976</td><td>88,985</td></tr><tr><td>Total December 31, 2010</td><td>$ 8,236,898</td><td>$ 4,541,737</td><td>$ 10,043,068</td><td>$ 3,090,117</td><td>$ 4,598,303</td><td>$ 13,076,619</td><td>$ 17,674,922</td><td>$ 2,763,997</td></tr></table>



# VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION

Notes:

(1) Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations) unless acquired subsequent to that date see Column H.

(2) The net basis of the Company’s assets and liabilities for tax purposes is approximately $3.3 billion lower than the amount reported for financial statement purposes.

(3) Date of original construction — many properties have had substantial renovation or additional construction — see Column D.

(4) Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to forty years.



# VORNADO REALTY TRUST
AND SUBSIDIARIES

## SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(AMOUNTS IN THOUSANDS)

The following is a reconciliation of real estate assets and accumulated depreciation:

<table><tr><td rowspan="2"></td><td colspan="4">Year Ended December 31,</td></tr><tr><td>2010</td><td>2009</td><td>2008</td><td></td></tr><tr><td>Real Estate</td><td></td><td></td><td></td><td></td></tr><tr><td>Balance at beginning of period</td><td>$ 17,574,245</td><td>$ 17,432,906</td><td>$ 16,622,740</td><td></td></tr><tr><td>Additions during the period:</td><td></td><td></td><td></td><td></td></tr><tr><td>Land</td><td>347,345</td><td>-</td><td>95,980</td><td></td></tr><tr><td>Buildings &amp; improvements</td><td>324,114</td><td>601,136</td><td>1,087,944</td><td></td></tr><tr><td></td><td>18,245,704</td><td>18,034,042</td><td>17,806,664</td><td></td></tr><tr><td>Less: Assets sold and written-off</td><td>570,782</td><td>459,797</td><td>373,758</td><td></td></tr><tr><td>Balance at end of period</td><td>$ 17,674,922</td><td>$ 17,574,245</td><td>$ 17,432,906</td><td></td></tr><tr><td>Accumulated Depreciation</td><td></td><td></td><td></td><td></td></tr><tr><td>Balance at beginning of period</td><td>$ 2,441,344</td><td>$ 2,117,643</td><td>$ 1,765,443</td><td></td></tr><tr><td>Additions charged to operating expenses</td><td>428,788</td><td>433,785</td><td>407,753</td><td></td></tr><tr><td></td><td>2,870,132</td><td>2,551,428</td><td>2,173,196</td><td></td></tr><tr><td>Less: Accumulated depreciation on assets sold and written-off</td><td>106,135</td><td>110,084</td><td>55,553</td><td></td></tr><tr><td>Balance at end of period</td><td>$ 2,763,997</td><td>$ 2,441,344</td><td>$ 2,117,643</td><td></td></tr></table>



## EXHIBIT INDEX

3.1 - Articles of Restatement of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated by reference to Exhibit 3.75 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007

3.2 - Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 - Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000

3.3 - Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of October 20, 1997 (the "Partnership Agreement") – Incorporated by reference to Exhibit 3.26 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

3.4 - Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by reference to Exhibit 3.27 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

3.5 - Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust's Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998

3.6 - Third Amendment to the Partnership Agreement, dated as of November 12, 1998 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on November 30, 1998

3.7 - Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on February 9, 1999

3.8 - Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on March 17, 1999

3.9 - Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999

3.10 - Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999

3.11 - Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999

3.12 - Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999

3.13 - Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999



3.14 - Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on December 23, 1999

3.15 - Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on May 19, 2000

3.16 - Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on June 16, 2000

3.17 - Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on December 28, 2000

3.18 - Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 - Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust's Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001

3.19 - Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001 11954), filed on October 12, 2001

3.20 - Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust's Current Report on Form 8 K (File No. 001-11954), filed on October 12, 2001

3.21 - Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust's Current Report on Form 8-K/A (File No. 001-11954), filed on March 18, 2002

3.22 - Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002

3.23 - Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by reference to Exhibit 3.46 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

3.24 - Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003

3.25 - Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 - Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004

3.26 - Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 - Incorporated by reference to Exhibit 99.2 to Vornado Realty Trust's Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004

3.27 - Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 - Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty L.P.'s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005

* Incorporated by reference.



3.28 - Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 – Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty L.P.'s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005

3.29 - Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004

3.30 - Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004

3.31 - Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on January 4, 2005

3.32 - Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on June 21, 2005

3.33 - Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on September 1, 2005

3.34 - Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on September 14, 2005

3.35 - Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 000-22685), filed on May 8, 2006

3.36 - Thirty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust's Form 8-K (File No. 001-11954), filed on May 1, 2006

3.37 - Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on May 3, 2006

3.38 - Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Form 8-K (File No. 000-22685), filed on August 23, 2006

3.39 - Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Form 8-K (File No. 000-22685), filed on January 22, 2007

3.40 - Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007

* Incorporated by reference.



3.41 - Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007

3.42 - Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007

3.43 - Fortieth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to Vornado Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007

3.44 - Forty-First Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (file No. 001-11954), filed on May 6, 2008

3.45 - Forty-Second Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of December 17, 2010

4.1 - Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-11954), filed on April 28, 2005

4.2 - Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 27, 2006

Certain instruments defining the rights of holders of long-term debt securities of Vornado Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange Commission, upon request, copies of any such instruments.

10.1 - Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference to Vornado, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992

10.2 - Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29, 1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

10.3 - Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - Incorporated by reference to Vornado, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

10.4 ** - Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 - Incorporated by reference to Vornado, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

* Incorporated by reference.
** Management contract or compensatory agreement.



10.5 ** - Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to Exhibit 10.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997

10.6 ** - Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2005 – Incorporated by reference to Exhibit 10.15 to Vornado Realty Trust Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006

10.7 ** - Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust - Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000

10.8 - Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E. Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod, individually, and Charles E. Smith Management, Inc. - Incorporated by reference to Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on January 16, 2002

10.9 - Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002

10.10 - Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 001-11954), filed on May 1, 2002

10.11 ** - First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002

10.12 ** - Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

10.13 - 59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

10.14 - Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002



10.15 - Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5 of Interstate Properties' Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed on May 30, 2002

10.16 ** - Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216) filed December 26, 2002

10.17 ** - Form of Stock Option Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005

10.18 ** - Form of Restricted Stock Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005

10.19 ** - Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on May 2, 2006

10.20 ** - Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006

10.21 ** - Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on May 1, 2006

10.22 ** - Revolving Credit Agreement, dated as of June 28, 2006, among the Operating Partnership, the banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citicorp North America, Inc., as Syndication Agents, Deutsche Bank Trust Company Americas, Lasalle Bank National Association, and UBS Loan Finance LLC, as Documentation Agents and Vornado Realty Trust – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on June 28, 2006

10.23 ** - Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006

10.24 ** - Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006

10.25 - Guaranty, made as of June 28, 2006, by Vornado Realty Trust, for the benefit of JP Morgan Chase Bank – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006



10.26 ** - Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006

10.27 ** - Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007

10.28 ** - Amendment to 59th Street Real Estate Retention Agreement, dated January 1, 2007, by and among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007

10.29 ** - Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19, 2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954), filed on May 1, 2007

10.30 - Revolving Credit Agreement, dated as of September 28, 2007, among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks signatory thereto, each as a Bank, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A. as Syndication Agent, Citicorp North America, Inc., Deutsche Bank Trust Company Americas, and UBS Loan Finance LLC as Documentation Agents, and J.P. Morgan Securities Inc. and Bank of America Securities LLC as Lead Arrangers and Bookrunners. - Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007

10.31 - Second Amendment to Revolving Credit Agreement, dated as of September 28, 2007, by and among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages thereof, and J.P. Morgan Chase Bank N.A., as Administrative Agent for the Banks - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007

10.32 ** - Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-11954) filed on February 26, 2008

10.33 ** - Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008

10.34 ** - Amendment to Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 29, 2008. Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009

10.35 ** - Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow, dated December 29, 2008. Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009



10.36 ** - Amendment to Employment Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009

10.37 ** - Amendment to Indemnification Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008. Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009

10.38 ** - Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N. Schear, dated December 29, 2008. Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009

10.39 ** - Amendment to Employment Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated December 29, 2008. Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009

10.40 ** - Vornado Realty Trust's 2010 Omnibus Share Plan. Incorporated by reference to Exhibit 10.41 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 001-11954) filed on August 3, 2010

10.41 ** - Employment Agreement between Vornado Realty Trust and Michael J. Franco, dated September 24, 2010. Incorporated by reference to Exhibit 10.42 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-11954) filed on November 2, 2010

10.42 ** - Form of Vornado Realty Trust 2010 Omnibus Share Plan Stock Option Agreement

10.43 ** - Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted LTIP Unit Agreement

10.44 ** - Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted Stock Agreement

10.45 ** - Letter between Vornado Realty Trust and Michelle Felman, dated December 21, 2010

10.46 ** - Waiver and Release between Vornado Realty Trust and Michelle Felman, dated December 21, 2010

* Incorporated by reference.

** Management contract or compensatory agreement.



12 - Computation of Ratios

21 - Subsidiaries of the Registrant

23 - Consent of Independent Registered Public Accounting Firm

31.1 - Rule 13a-14 (a) Certification of the Chief Executive Officer

31.2 - Rule 13a-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

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema

101.CAL - XBRL Taxonomy Extension Calculation Linkbase

101.DEF - XBRL Taxonomy Extension Definition Linkbase

101.LAB - XBRL Taxonomy Extension Label Linkbase

101.PRE - XBRL Taxonomy Extension Presentation Linkbase



## VORNADO CORPORATE INFORMATION

## TRUSTEES

STEVEN ROTH
Chairman of the Board

MICHAEL D. FASCITELLI
President and Chief Executive Officer

CANDACE K. BEINECKE
Chair of Hughes Hubbard & Reed LLP

ANTHONY W. DEERING \( ^{*} \) 
Chairman of Exeter Capital, LLC

ROBERT P. KOGOD
President of Charles E. Smith Management LLC

MICHAEL LYNNE
Principal of Unique Features

DAVID M. MANDELBAUM
Partner, Interstate Properties

RONALD G. TARGAN \( ^{*} \) 
President, Malt Products Corporation

RICHARD R. WEST \( ^{*} \) 
Dean Emeritus, Leonard N. Stern School of Business,
New York University

RUSSELL B. WIGHT, JR.
Partner, Interstate Properties

Members of the Audit Committee \( ^{*} \) 

## OFFICERS

STEVEN ROTH
Chairman of the Board

MICHAEL D. FASCITELLI
President and Chief Executive Officer

MICHAEL J. FRANCO
Executive Vice President –
Co-Head of Acquisitions and Capital Markets

DAVID R. GREENBAUM
President of the
New York Office Division

CHRISTOPHER KENNEDY
President of the
Merchandise Mart Division

JOSEPH MACNOW
Executive Vice President –
Finance and Administration and
Chief Financial Officer

MITCHELL N. SCHEAR
President of the Vornado/Charles E. Smith
Washington DC Office Division

WENDY SILVERSTEIN
Executive Vice President –
Co-Head of Acquisitions and Capital Markets



## COMPANY DATA

EXECUTIVE OFFICES
888 Seventh Avenue
New York, New York 10019

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Parsippany, New Jersey

COUNSEL
Sullivan & Cromwell LLP
New York, New York

TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Co.
New York, New York

## MANAGEMENT CERTIFICATIONS

The Company’s Chief Executive Officer and Chief Financial Officer provided certifications to the Securities and Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002 and these certifications are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. In addition, as required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, on June 23, 2010 the Company’s Chief Executive Officer submitted to the NYSE the annual CEO certification regarding the Company’s compliance with the NYSE’s corporate governance listing standards.

## REPORT ON FORM 10-K

Shareholders may obtain a copy of the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission free of charge (except for exhibits), by writing to the Secretary, Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019; or, visit the Company’s website at www.vno.com and refer to the Company’s SEC Filings.

## ANNUAL MEETING

The annual meeting of shareholders of Vornado Realty Trust, will be held at 11:30 AM on May 26, 2011 at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663.