Edgar Filing: VORNADO REALTY TRUST

AS FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-105838

PROSPECTUS

VORNADO REALTY TRUST
600,000 COMMON SHARES

The selling shareholders of Vornado Realty Trust described under
"Selling Shareholders" may offer and sell from time to time up to 600,000 common
shares of beneficial interest of Vornado, in amounts, at prices and on terms to
be determined at the time of sale. The common shares covered by this prospectus
include up to 340,000 common shares that may be issued, at our option, upon the
redemption of 340,000 class A units of limited partnership interest in Vornado
Realty L.P. beneficially owned by the selling shareholders and 260,000 common
shares issued by Vornado upon the redemption of units beneficially owned by the
selling shareholders. Vornado Realty L.P. is the operating partnership through
which we own our assets and operate our business. The units that may be or have
been redeemed for common shares were issued in connection with our acquisition
on January 1, 2002 of the remaining 66% interest in Charles E. Smith Commercial
Realty L.P. that we did not previously own.

We will acquire units from the redeeming unit holders in exchange for
any common shares that we may issue to them. We have registered the offering and
resale of the common shares to permit their holders to sell them without
restriction in the open market or otherwise, but the registration of the shares
does not necessarily mean that the holders will elect to redeem their units or
that the holders will offer or sell any common shares that they receive. Also,
upon any redemption, we may elect to pay cash for the units tendered rather than
issue common shares. Although we will incur expenses in connection with the
registration of the common shares, we will not receive any cash proceeds upon
their issuance.

The selling shareholders may sell the common shares offered by a variety
of methods, including in underwritten public offerings; in ordinary brokerage
transactions on securities exchanges, including the New York Stock Exchange; to
or through brokers or dealers who may act as principal or agent; or in one or
more public or private negotiated transactions. To the extent required, the
names of any underwriters and applicable commissions or discounts and any other
required information with respect to any particular sale will be set forth in an
accompanying prospectus supplement. See "Plan of Distribution" for a further
description of how the selling shareholders may dispose of the shares covered by
this prospectus.

The common shares are listed on the New York Stock Exchange under the
symbol "VNO."

In order to maintain our qualification as a real estate investment trust
for federal income tax purposes and for other purposes, no person generally may
own more than 6.7% of the outstanding common shares. Shares owned in excess of
this limit will be deemed "excess shares" under the declaration of trust. The
holder of any excess shares will lose some ownership rights with respect to
these shares, and we will have the right to purchase them from the holder.

See "Risk Factors" beginning on page 5 for information about factors
relevant to an investment in the common shares.

Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

The date of this prospectus is June 11, 2003.

YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THESE DOCUMENTS.

When we say "we," "our," "us" or "Vornado," we mean Vornado Realty Trust
and its consolidated subsidiaries, except where we make it clear that we mean
only the parent company. When we say the "operating partnership," we mean
Vornado Realty L.P.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room.

This prospectus is part of a registration statement on Form S-3 filed by
Vornado with the SEC under the Securities Act. As permitted by the rules and
regulations of the SEC, this prospectus omits some of the information contained
in the registration statement. You should read the registration statement and
related exhibits for further information about Vornado and the common shares
offered by this prospectus. Statements in this prospectus about the provisions
of any document filed as an exhibit to the registration statement or otherwise
filed with the SEC are only summaries, and in each instance you should read the
document so filed for complete information about its provisions. Each statement
in this prospectus about the provisions of any document filed with the SEC is
qualified in its entirety by reference to the document.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and, where applicable, supersede this
information.

We incorporate by reference into this prospectus the following documents
or information filed with the SEC:

(1) Annual report of Vornado Realty Trust on Form 10-K for the fiscal
year ended December 31, 2002 (File No. 001-11954);

(2) Quarterly report of Vornado Realty Trust on Form 10-Q for the
fiscal quarter ended March 31, 2003 (File No. 001-11954);

(3) Current report on Form 8-K of Vornado Realty Trust dated April
23, 2003 and filed with the SEC on April 24, 2003 (File No.
001-11954);

(4) Current report on Form 8-K of Vornado Realty Trust dated May 5,
2003 and filed with the SEC on May 6, 2003 (File No. 001-11954);

(5) Current report on Form 8-K of Vornado Realty Trust dated May 28,
2003 and filed with the SEC on June 2, 2003 (File No. 001-11954);

(6) The description of Vornado's common shares contained in Vornado's
registration statement on Form 8-B (File No. 001-11954), filed on
May 10, 1993; and

(7) All documents filed by Vornado Realty Trust under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus and until we sell all of the
securities or after the date of the initial registration statement
and before effectiveness of the registration statement, except
that the information referred to in Item 402(a)(8) of Regulation
S-K of the SEC is not incorporated by reference into this
prospectus.

You may request a copy of these filings, excluding exhibits to these
filings unless they are specifically incorporated by reference into these
filings, at no cost, by writing or telephoning us at the following address:
Vornado Realty Trust, 210 Route 4 East, Paramus, New Jersey 07652, telephone
(201) 587-1000, Attn: Secretary.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents incorporated by reference in
it, contains forward-looking statements with respect to our financial condition,
results of operations and business. You can find many of these statements by
looking for words such as "believes," "expects," "anticipates," "estimates,"
"intends," "plans" or similar expressions in this prospectus or the documents
incorporated by reference.

These forward-looking statements are subject to numerous assumptions,
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by the forward-looking statements include,
among others, the following possibilities:

- national, regional and local economic conditions;

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

- our ability to secure adequate insurance;

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

- competition from other available space;

- whether tenants consider a property attractive;

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

- whether we are able to pass some or all of any increased
operating costs we experience through to our tenants;

- how well we manage our properties;

- increased interest rates;

- increases in real estate taxes and other expenses;

- decreases in market rental rates;

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

- changes in taxation or zoning laws;

- government regulations;

- our failure to continue to qualify as a real estate investment
trust;

- availability of financing on acceptable terms or at all;

- potential liability under environmental or other laws or
regulations; and

- general competitive factors.

Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. Our future results, financial
condition and business may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these items
are beyond our ability to control or predict. 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 prospectus or the date of the applicable 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 after the date of
this prospectus or to reflect the occurrence of unanticipated events. For more
information on the uncertainty of forward-looking statements, see "Risk Factors"
in this prospectus.

RISK FACTORS

An investment in our common shares involves risks. You should carefully
consider, among other factors, the matters described 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 LIMIT OUR
REVENUES AND AVAILABLE CASH.

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

- national, regional and local economic conditions;

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

- our ability to secure adequate insurance;

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

- competition from other available space;

- whether tenants consider a property attractive;

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

- whether we are able to pass some or all of any increased
operating costs we experience through to tenants;

- how well we manage our properties;

- increased interest rates;

- increases in real estate taxes and other expenses;

- decreases in market rental rates;

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

- changes in taxation or zoning laws;

- government regulations;

- availability of financing on acceptable terms or at all;

- potential liability under environmental or other laws or
regulations; and

- general competitive factors.

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 our rental
revenues decline, we generally would expect to have less cash available to
distribute to our 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.

If rents decline while costs remain the same, our income and funds available for
distribution to our shareholders would decline.

WE DEPEND ON LEASING SPACE TO TENANTS ON ECONOMICALLY FAVORABLE TERMS AND
COLLECTING RENT FROM OUR TENANTS, WHO MAY NOT BE ABLE TO PAY.

Our financial results depend on leasing space in our properties to
tenants on economically favorable terms. In addition, because substantially all
of our income comes from rentals of real property, our income and funds
available for distribution to our shareholders will decrease if a significant
number of our tenants cannot pay their rent. If a tenant does not pay its rent,
we might not be able to enforce our rights as landlord without delays and might
incur substantial legal costs. For information regarding the bankruptcy of our
tenants, see "-- Bankruptcy of tenants may decrease our revenues and available
cash" below.

BANKRUPTCY OF TENANTS MAY DECREASE OUR REVENUES AND AVAILABLE CASH.

A number of companies, including some of our tenants, have declared
bankruptcy in recent years, and other tenants may declare bankruptcy or become
insolvent in the future. If a major tenant declares bankruptcy or becomes
insolvent, the rental property where it leases space may have lower revenues and
operational difficulties, and, in the case of our shopping centers, we may have
difficulty leasing the remainder of the affected property. Our leases generally
do not contain restrictions designed to ensure the creditworthiness of our
tenants. As a result, the bankruptcy or insolvency of a major tenant could
result in a lower level of funds from operations available for distribution to
our shareholders.

U.S. Airways Group Inc. leases 296,000 square feet from us for its
headquarters in Washington, D.C. U.S. Airways has been adversely affected by the
downturn in air travel as a result of the terrorist attacks and economic
decline. On August 11, 2002, US Airways filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. Effective January 1, 2003, we agreed to amend our
lease with US Airways at Crystal City to (a) reduce the tenant's space by 90,732
square feet to 205,600 square feet, (b) reduce the annual escalated rent from
$36.00 to $29.75 per square foot with 2.5% annual base rent escalations, (c)
provide the tenant with up to $1,200,000 of tenant allowances and (d) loan the
tenant up to $1,000,000 at 9% per annum for additional tenant improvements which
is to be repaid over the lease term. This lease modification has been approved
by the Bankruptcy Court.

Stop & Shop leases a number of our retail locations and guarantees the
leases of a number of our former Bradlees retail locations. In February 2003,
Koninklijke Ahold NV, parent of Stop & Shop, announced that it overstated its
2002 and 2001 earnings by at least $500 million and is under investigation by
the U.S. Justice Department and Securities and Exchange Commission. We cannot
predict what effect, if any, this situation may have on Stop & Shop's ability to
satisfy its obligation under the Bradlees guarantees and rent for existing Stop
& Shop leases aggregating approximately $10.5 million per annum.

The risk that some of our tenants may declare bankruptcy is higher
because of the September 11, 2001 terrorist attacks and the resulting decline in
the economy.

SOME OF OUR POTENTIAL LOSSES MAY NOT BE COVERED BY INSURANCE.

We carry comprehensive liability and all risk property insurance (fire,
flood, extended coverage and rental loss insurance) with respect to our assets.

Our all risk insurance policies in effect before September 11, 2001 did not
expressly exclude coverage for hostile acts, except for acts of war. Since
September 11, 2001, insurance companies have for the most part excluded
terrorist acts from coverage in all risk policies. We have generally been unable
to obtain all risk insurance which includes coverage for terrorist acts for
policies we have renewed since September 11, 2001, for each of our businesses.
In 2002, we obtained $200,000,000 of separate aggregate coverage for terrorist
acts for each of our New York City Office, Washington D.C. Office, Retail and
Merchandise Mart businesses and $60,000,000 for our Temperature Controlled
Logistics business. Therefore, we are at risk for financial loss in excess of
these limits for terrorist acts as defined by the policies, which loss could be
material.

The Company's debt instruments, consisting of mortgage loans secured by
its properties (which are generally non-recourse to the Company) and its
revolving credit agreement, contain customary covenants requiring the Company to
maintain insurance. There can be no assurance that the lenders under these
instruments will not take the position that since the Company's current all risk
insurance policies, differ from policies in effect prior to September 11, 2001
as to coverage for terrorist acts, there are breaches of these debt instruments
that allow the lenders to declare an event of default and accelerate repayment
of debt. In addition, if lenders insist on coverage for these risks, as it
existed prior to September 11, 2001, it could adversely affect the Company's
ability to finance and/or refinance its propreties and to expand its portfolio.

On November 26, 2002, the Terrorism Risk Insurance Act of 2002 was
signed into law. Under this new legislation, through 2004 (with a possible
extension through 2005), regulated insurers must offer coverage in their
commercial property and casualty policies (including existing policies) for
losses resulting from defined "acts of terrorism". As a result of the
legislation, in February 2003 we obtained $300 million of per occurrence
coverage for terrorist acts for our New York City Office, Washington, D.C.
Office and Merchandise Mart businesses, of which $240 million is for Certified
Acts, as defined in the legislation. We maintain $200 million and $60 million of
separate aggregate coverage that we had in 2002 for each of our Retail and
Temperature Controlled Logistics businesses (which has been renewed as of
January 1, 2003). Our current Retail property insurance carrier has advised us
that there will be an additional premium of approximately $11,000 per month
through the end of the policy term (June 30, 2003), for "Acts of Terrorism"
coverage, as defined in the new legislation and that the situation may change
upon renewal.

WE MAY ACQUIRE OR DEVELOP NEW PROPERTIES, AND THIS MAY CREATE RISKS.

We may acquire or develop properties or acquire other real estate
companies when we believe that an acquisition or development is consistent with
our business strategies. We may not, however, succeed in consummating desired
acquisitions or in completing developments on time or within our budget. We also
might not succeed in leasing newly developed or acquired properties at rents
sufficient to cover their costs of acquisition or development and operations.

We have experienced rapid growth in recent years, increasing our total
assets from approximately $565,000,000 at December 31, 1996 to approximately
$9,042,000,000 at March 31, 2003. This growth included the acquisition of
Charles E. Smith Commercial Realty L.P. on January 1, 2002, which increased our
total assets as of that date by $2,506,000,000, of which $1,758,000,000 is
attributable to the acquisition of assets and $748,000,000 is attributable to
Charles E. Smith Commercial Realty L.P. becoming a wholly owned subsidiary of
the operating partnership and therefore being consolidated rather than accounted
for under the equity method. We may not be able to maintain a similar rate of
growth in the future, or manage our past and any future growth effectively. Our
failure to do so may have a material adverse effect on our financial condition
and results of operations. Difficulties in integrating acquisitions may prove
costly or time-consuming and could divert management's attention.

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, we may agree with the seller
that we will not dispose of the acquired properties or reduce the mortgage
indebtedness on them for significant periods of time unless we pay certain of
the resulting tax costs of the seller. These agreements could result in our
holding on to properties that we would otherwise sell and not paying down or
refinancing indebtedness that we would otherwise pay down or refinance.

IT MAY BE DIFFICULT TO BUY AND SELL REAL ESTATE QUICKLY, AND TRANSFER
RESTRICTIONS APPLY TO SOME OF OUR MORTGAGED PROPERTIES.

Equity real estate investments are relatively difficult to buy and sell
quickly. We therefore have limited ability to vary our portfolio promptly in
response to changes in economic or other conditions. Some of our properties are
mortgaged to secure payment of indebtedness. If we were unable to meet our
mortgage payments, the lender could foreclose on the properties and we could
incur a loss. In addition, if we wish to dispose of one or more of the mortgaged
properties, we might not be able to obtain release of the lien on the mortgaged
property. If a lender forecloses on a mortgaged property or if a mortgage lien
prevents us from selling a property, our funds available for distribution to our
shareholders could decline. For information relating to the mortgages on our
properties, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" in our annual report
on Form 10-K for the year ended December 31, 2002 and quarterly report on Form
10-Q for the period ended March 31, 2003 and the notes to our consolidated
financial statements in the same reports.

A SIGNIFICANT PROPORTION OF OUR PROPERTIES ARE IN THE NEW YORK CITY/NEW JERSEY
AND WASHINGTON, D.C. METROPOLITAN AREAS AND ARE AFFECTED BY THE ECONOMIC CYCLES
AND RISKS INHERENT TO THOSE REGIONS.

During 2002, 86% of our income before gains in sale of real estate and
cumulative effect of change in accounting principle came from properties located
in New Jersey and the New York City and Washington, D.C. metropolitan areas. We
may continue to concentrate a significant portion of our future acquisitions in
New Jersey and the New York City and Washington, D.C. metropolitan areas. Like
other real estate markets, the real estate markets in these areas have
experienced economic downturns in the past, and we cannot predict how the
current economic conditions will impact these markets in both the short and long
term. Further 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:

- business layoffs or downsizing;

- industry slowdowns;

- relocations of businesses;

- changing demographics;

- increased telecommuting and use of alternative work places;

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

- infrastructure quality; and

- any oversupply of or reduced demand for real estate.

It is impossible for us to assess the future effects of the current
uncertain trends in the economic and investment climates of the New York
City/New Jersey and Washington, D.C. regions, and more generally of the United
States, on the real estate markets in these areas. If these conditions persist,
they may adversely affect our businesses and future profitability.

ON JANUARY 1, 2002, WE COMPLETED THE ACQUISITION OF THE 66% INTEREST IN CHARLES
E. SMITH COMMERCIAL REALTY L.P. THAT WE DID NOT PREVIOUSLY OWN. THE TERMS OF THE
MERGER RESTRICT OUR ABILITY TO SELL OR OTHERWISE DISPOSE OF, OR TO FINANCE OR
REFINANCE, THE PROPERTIES FORMERLY OWNED BY CHARLES E. SMITH COMMERCIAL REALTY
L.P., WHICH COULD RESULT IN OUR INABILITY TO SELL THESE PROPERTIES AT AN
OPPORTUNE TIME AND INCREASED COSTS TO US.

We have agreed to restrictions on our ability to sell, finance,
refinance and, in some instances, pay down existing financing on the Charles E.
Smith Commercial Realty L.P. properties for a period of up to 20 years, under a
tax reporting and protection agreement that we entered into at the closing of
the merger. This agreement prohibits us from taking these actions unless the
operating partnership also pays the contributing partners based on their tax
liabilities as a result of the sale. These arrangements may significantly reduce
our ability to sell, finance or repay indebtedness secured by the subject
properties or assets.

In addition, subject to limited exceptions, we are restricted from
selling or otherwise transferring or disposing of certain properties located in
the Crystal City area of Arlington, Virginia or an interest in our division that
manages the majority of our office properties in the Washington, D.C.
metropolitan area, which we refer to as the "Smith Division," for a period of 12
years with respect to certain properties located in the Crystal City area of
Arlington, Virginia or six years with respect to an interest in the Smith
Division. These restrictions, which currently cover approximately 13.0 million
square feet of space, could result in our inability to sell these properties or
an interest in the Smith Division at an opportune time and increased costs to
us.

WE MAY INCUR COSTS TO COMPLY WITH ENVIRONMENTAL LAWS.

Our operations and properties are subject to various federal, state and
local laws, ordinances and regulations concerning the protection of the
environment including air and water quality, hazardous substances and health and
safety. Under certain of these 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 damages, 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 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 exposure at or from our
properties.

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 condition. 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 cleanup or compliance requirements
could result in significant costs to us.

REAL ESTATE IS A COMPETITIVE BUSINESS.

Our business segments -- Office, Retail, Merchandise Mart Properties,
Temperature Controlled Logistics, and Other -- operate in highly competitive
environments. We have a large concentration of properties in the New York City
metropolitan area and in the Washington, D.C. and Northern Virginia area. We
compete with a large number of real estate property owners and developers.
Principal factors of competition are rent charged, attractiveness of location
and quality and breadth of services provided. Our success depends upon, among
other factors, trends of the national 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 regulations, legislation and population trends.

THE TERRORIST ATTACKS OF SEPTEMBER 11, 2001 IN NEW YORK CITY AND THE WASHINGTON,
D.C. AREA MAY ADVERSELY AFFECT THE VALUE OF OUR PROPERTIES AND OUR ABILITY TO
GENERATE CASH FLOW.

THERE MAY BE A DECREASE IN DEMAND FOR SPACE IN LARGE METROPOLITAN AREAS THAT ARE
CONSIDERED AT RISK FOR FUTURE TERRORIST ATTACKS, AND THIS DECREASE MAY REDUCE
OUR REVENUES FROM PROPERTY RENTALS.

We have significant investments in large metropolitan areas, including
the New York/New Jersey, Washington, D.C. and Chicago metropolitan areas. In the
aftermath of the terrorist attacks, tenants in these areas may choose to
relocate their business to less populated, lower-profile areas of the United
States that are not as likely to be targets of future terrorist activity. 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 our properties
on less favorable terms. As a result, the value of our properties and the level
of our revenues could decline materially.

OUR INVESTMENT IN HOTEL PENNSYLVANIA IS DEPENDENT ON THE TRAVEL INDUSTRY, AND
THAT INVESTMENT HAS BEEN AND MAY CONTINUE TO BE IMPACTED SEVERELY BY THE
TERRORIST ATTACKS AND THE CURRENT ECONOMIC DOWNTURN.

Our investment in Hotel Pennsylvania is directly dependent on the travel
industry generally and the numbers of visitors to New York City in particular.
Since September 11, 2001, there has been a substantial decline in travel and
tourism generally, and in particular in New York City. Accordingly, there has
been a significant reduction in occupancy at Hotel Pennsylvania. As a result,
revenues generated by this investment have been impacted severely by that
decline, and we expect this impact on revenues to continue.

ALL OF OUR TEMPERATURE CONTROLLED LOGISTICS WAREHOUSES ARE LEASED TO ONE TENANT,
AND THAT TENANT IS EXPERIENCING OPERATING DIFFICULTIES.

The operating partnership owns a 60% general partnership interest in a
partnership, which we refer to as the "Vornado Crescent Portland Partnership,"
that owns 88 cold storage warehouses nationwide with an aggregate of
approximately 441.5 million cubic feet of refrigerated, frozen and dry storage
space. The Vornado Crescent Portland Partnership sold all of the non-real estate
assets encompassing the operations of the temperature controlled business to a
new partnership named AmeriCold Logistics owned 60% by Vornado Operating
Company, which we refer to as "Vornado Operating," and 40% by Crescent Operating
Inc. AmeriCold Logistics leases the underlying temperature controlled warehouses
used in this business from the Vornado Crescent Portland Partnership, which
continues to own the real estate. During 2002, AmeriCold Logistics generated
approximately 4.5% of our income before gains in sale of real estate and
cumulative effect of change in accounting principle. The leases, as amended,
generally have a 15 year term with two five-year renewal options and provide for
the payment of fixed base rent and percentage rent based on revenue AmeriCold
Logistics receives from its customers. The contractual rent for 2002 was
$150,000,000. The landlord's share of annual maintenance capital expenditures is
$9,500,000. In accordance with the leases, AmeriCold Logistics deferred payment
of $32,248,000 of 2002 rent due to the landlord, of which our share was
$19,349,000 and $5,627,000 of rent due for the three months ended March 31,
2003, of which our share was $3,376,000. Based on the joint venture's policy of
recognizing rental income when earned and collection is assured or cash is
received, the joint venture did not recognize this rent in the year ended
December 31, 2002 or the quarter ended March 31, 2003. At March 31, 2003, our
share of the joint venture's total deferred rent receivable from the tenant is
$27,726,000. On December 31, 2001, the landlord released the tenant from its
obligation to pay $39,812,000 of rent deferred in 2001 and 2000, of which our
share was $23,887,000. This amount equaled the rent which was not recognized as
income by the joint venture and accordingly had no profit and loss effect to us.
On March 7, 2003, AmeriCold Logistics and the Landlord extended the deferred
rent period to December 31, 2004 from December 31, 2003.

To the extent that the operations of AmeriCold Logistics may affect its
ability to pay rent, including percentage rent due under the leases, we
indirectly bear the risks associated with AmeriCold Logistics' cold storage
business. The cold storage business is extremely competitive. Factors affecting
AmeriCold Logistics' ability to compete include, among others, (a) warehouse
locations, (b) customer mix and (c) availability, quality and price of
additional services.

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 net taxable
income, excluding net capital gains, to its shareholders. Our access to debt or
equity financing depends on banks' willingness to lend and on conditions in the
capital markets. We and other companies in the real estate industry have
experienced limited availability of bank loans and capital markets financing
from time to time. Although we believe that we will be able to finance any
investments we wish to make in the foreseeable future, financing other than what
we already have available might not be 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 our annual report on Form 10-K for the year ended December 31,
2002.

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 March 31, 2003, Interstate Properties, a New Jersey general
partnership, and its partners owned approximately 12.9% of the common shares of
Vornado and approximately 27.5% of the common stock of Alexander's, Inc. and
beneficially owned approximately 7.9% of the common stock of Vornado Operating
(approximately 17.0% assuming redemption of 447,017 units of Vornado Operating
L.P., the operating subsidiary of Vornado Operating, that are beneficially owned
by Interstate Properties and redeemable for common stock of Vornado Operating).
Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners
of Interstate Properties. Mr. Roth is the Chairman of the Board and Chief
Executive Officer of Vornado, the managing general partner of Interstate
Properties, the Chief Executive Officer and a director of Alexander's and the
Chairman of the Board and Chief Executive Officer of Vornado Operating. Mr.
Wight is a trustee of Vornado and is also a director of both Alexander's and
Vornado Operating. Mr. Mandelbaum is a trustee of Vornado and is also a director
of Alexander's.

and Michael D. Fascitelli, the President and a trustee of Vornado, are directors
of Alexander's. Messrs. Mandelbaum, Richard R. West and Wight are trustees of
Vornado and are also directors of Alexander's.

Because of these overlapping interests, Mr. Roth and Interstate
Properties may have substantial influence over Vornado, Alexander's and Vornado
Operating and on the outcome of any matters submitted to Vornado's, Alexander's
or Vornado Operating'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 shareholders. In addition, Mr. Roth and Interstate Properties 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
Vornado, Alexander's or Vornado Operating, 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, by Vornado,
Interstate Properties, Alexander's and Vornado Operating, competition for
properties and tenants, possible corporate transactions such as acquisitions and
other strategic decisions affecting the future of these entities.

Vornado currently manages and leases the real estate assets of
Interstate Properties under a management agreement for which Vornado receives an
annual fee equal to 4% of base rent and percentage rent and certain other
commissions. 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. Vornado earned $1,450,000 of management fees
under the management agreement for the year ended December 31, 2002 and $176,000
for the 3 months ended March 31, 2003. Because Vornado and Interstate Properties
are controlled by the same persons, 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.

VORNADO ENGAGES IN TRANSACTIONS WITH VORNADO OPERATING ON TERMS THAT MAY OR MAY
NOT BE COMPARABLE TO THOSE WE COULD NEGOTIATE WITH UNAFFILIATED THIRD PARTIES.

In October 1998, Vornado Operating was spun off from Vornado in order to
own assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct.

In addition to being trustees of Vornado, Messrs. Roth, Fascitelli, West
and Wight are directors of Vornado Operating. Mr. Roth is also Chairman of the
Board and Chief Executive Officer of Vornado Operating, Mr. Fascitelli is also
President of Vornado Operating, and certain other members of Vornado's senior
management hold corresponding positions with Vornado Operating.

The operating partnership entered into a $75,000,000 unsecured revolving
credit facility with Vornado Operating that expires on December 31, 2004.
Borrowings under the revolving credit agreement bear interest at LIBOR plus 3%.
The operating partnership receives an annual commitment fee equal to 1% on the
average daily unused portion of the facility. Vornado Operating is not required
to pay any amortization under the revolving credit agreement during its term.
The revolving credit agreement prohibits Vornado Operating from incurring
indebtedness to third parties, other than certain purchase money debt and
certain other exceptions, and prohibits Vornado Operating from paying dividends.
As of April 17, 2003, $23,804,000 was outstanding under the revolving credit
agreement.

The operating partnership and Vornado Operating are parties to an
agreement under which, among other things, (a) the operating partnership will
offer Vornado Operating, under certain circumstances, an opportunity to become
the lessee of certain real property owned now or in the future by the operating
partnership under mutually satisfactory lease terms and (b) Vornado Operating
will not make any real estate investment or other investments known as
REIT-qualified investments unless it first offers the operating partnership the
opportunity to make the investment and the operating partnership has rejected
that

opportunity. Under this agreement, the operating partnership provides Vornado
Operating with administrative, corporate, accounting, financial, insurance,
legal, tax, data processing, human resources and operational services. For these
services, Vornado Operating compensates the operating partnership in an amount
determined in good faith by the operating partnership as the amount an
unaffiliated third party would charge Vornado Operating for comparable services
and reimburses the operating partnership for certain costs incurred and paid to
third parties on behalf of Vornado Operating. Under this agreement, compensation
for these services was approximately $330,000, $371,000 and $330,000 for the
years ended December 31, 2000, 2001 and 2002 and $82,500 for the three months
ended March 31, 2003. Vornado Operating and the operating partnership each have
the right to terminate this agreement if the other party is in material default
of the agreement or upon 90 days' written notice to the other party at any time
after December 31, 2003. In addition, the operating partnership has the right to
terminate this agreement upon a change in control of Vornado Operating.

Vornado Operating's restated certificate of incorporation specifies that
one of its corporate purposes is to perform this agreement and, for so long as
the agreement remains in effect, prohibits Vornado Operating from making any
real estate investment or other REIT-qualified investment without first offering
the opportunity to the operating partnership in the manner specified in this
agreement.

We and Vornado Operating may enter into additional transactions in the
future. Because we and Vornado Operating share common senior management and
because a majority of our trustees also constitute the majority of the directors
of Vornado Operating, the terms of the foregoing agreements and any future
agreements between us and Vornado Operating may not be comparable to those we
could have negotiated with an unaffiliated third party.

THERE MAY BE CONFLICTS OF INTEREST BETWEEN VORNADO AND ALEXANDER'S.

As of March 31, 2003, Vornado owned 33.1% 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 six properties. Interstate Properties, which is further
described above, owned an additional 27.5% of the outstanding common stock of
Alexander's as of December 31, 2002. Mr. Roth, Chairman of the Board and Chief
Executive Officer of Vornado, is Chief Executive Officer and a director of
Alexander's, and Mr. Fascitelli, President and a trustee of Vornado, is
President and a director of Alexander's. Messrs. Mandelbaum, West and Wight,
trustees of Vornado, are also directors of Alexander's. Alexander's common stock
is listed on the New York Stock Exchange under the symbol "ALX."

At March 31, 2003, the operating partnership had loans receivable
from Alexander's of $119,000,000 at an interest rate of 12.48%. These loans
mature on the earlier of January 3, 2006 or the date that Alexander's Lexington
Avenue construction loan is repaid in full. The operating partnership manages,
develops and leases the Alexander's properties under management and development
agreements and leasing agreements under which the operating partnership receives
annual fees from Alexander's. These agreements have a one-year term expiring in
March of each year, except that the Lexington Avenue management and development
agreements have a term lasting until substantial completion of development of
the Lexington Avenue property, and are all automatically renewable. Because
Vornado and Alexander's share common senior management and because a majority of
the trustees of Vornado also constitute the 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,
Vornado Operating 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.

ARCHSTONE-SMITH TRUST PROVIDES SERVICES TO US UNDER AGREEMENTS THAT WERE NOT
NEGOTIATED AT ARM'S LENGTH.

We have agreements with Archstone-Smith Trust under which we lease
office space to Archstone-Smith Trust and share the cost of certain
office-related services with it that were not negotiated at arm's length. These
agreements were entered into by Charles E. Smith Commercial Realty in 1997,
before our January 1, 2002 acquisition of Charles E. Smith Commercial Realty, at
a time when Mr. Smith and Mr. Kogod were in control of both Charles E. Smith
Commercial and the Charles E. Smith Residential Division of Archstone-Smith. Mr.
Smith and Mr. Kogod, who became members of our board of trustees on January 1,
2002, are also trustees and shareholders of Archstone-Smith Trust.

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

WE DEPEND ON OUR DIRECT AND INDIRECT SUBSIDIARIES' DIVIDENDS AND DISTRIBUTIONS,
AND THESE SUBSIDIARIES' CREDITORS AND PREFERRED SECURITY HOLDERS ARE ENTITLED TO
PAYMENT OF AMOUNTS PAYABLE TO THEM BY THE SUBSIDIARIES BEFORE THE SUBSIDIARIES
MAY PAY ANY DIVIDENDS OR DISTRIBUTIONS TO US.

Substantially all of our assets consist of our partnership interests in
the operating partnership. The operating partnership holds substantially all of
its properties and assets through subsidiaries. The operating partnership
therefore depends for substantially all of its cash flow on cash distributions
to it by its subsidiaries, and we in turn depend for substantially all of our
cash flow on cash distributions to us by the operating partnership. The
creditors of each of our 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 units
depends on its subsidiaries' ability first to satisfy their obligations to their
creditors and then to make distributions to the operating partnership. Likewise,
our 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 us.

Furthermore, the holders of preferred units of the operating partnership
are entitled to receive preferred distributions before payment of distributions
to holders of common units of the operating partnership, including us. Thus, our
ability to pay dividends to holders of our common 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 us. There are currently 17 series of preferred units of
the operating partnership not held by us that have preference over our common
shares. The total liquidation value of these 17 series of
preferred units is approximately $1,494,061,000.

In addition, we may participate in any distribution of the assets of any
of our direct or indirect subsidiaries upon the liquidation, reorganization or
insolvency of the subsidiary only after the claims of the creditors, including
trade creditors, and preferred security holders, if any, of the subsidiary are
satisfied.

WE HAVE INDEBTEDNESS, AND THIS INDEBTEDNESS MAY INCREASE.

As of March 31, 2003, we had approximately $5.092 billion in total
debt outstanding. Our ratio of total debt to total enterprise value was 45%.
When we say "enterprise value" in the preceding sentence, we mean market equity
value of Vornado Realty Trust plus debt less cash. In the future, we may incur
additional debt, and thus increase our ratio of total debt to total enterprise
value, to finance acquisitions or property developments.

LOSS OF OUR KEY PERSONNEL COULD HARM OUR OPERATIONS.

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

WE MIGHT FAIL TO QUALIFY OR REMAIN QUALIFIED AS A REIT.

Although we believe that Vornado will remain organized and will continue
to operate so as to qualify as a REIT for federal income tax purposes, we might
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. Vornado's 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 might significantly change the tax laws with respect to the
requirements for qualification as a REIT or the federal income tax consequences
of qualification as a REIT.

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

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

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 or 9.9% of the outstanding
preferred shares, 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'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 our shareholders.

Vornado's declaration of trust authorizes the Board of Trustees:

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

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

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

- to 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 our 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 the shareholders.

Under the Maryland General Corporation Law, as amended, which we refer
to as the "MGCL," as applicable to real estate investment trusts, certain
"business combinations," including certain mergers, consolidations, share
exchanges and asset transfers and certain issuances and reclassifications of
equity securities, between a Maryland real estate investment trust 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 shares of beneficial
interest of the trust and (b) two-thirds of the votes entitled to be cast by
holders of voting shares of the trust other than shares held by the interested
shareholder with whom, or with whose affiliate, the business combination is to
be effected, unless, among other conditions, 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 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. The Vornado board has adopted a resolution exempting any business
combination between any trustee or officer of Vornado, or their affiliates, and
Vornado. As a result, the trustees and officers of Vornado and their affiliates
may be able to enter into business combinations with Vornado which may not be in
the best interest of 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.

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

VORNADO HAS MANY SHARES AVAILABLE FOR FUTURE SALE, WHICH COULD HURT THE MARKET
PRICE OF OUR SHARES.

As of May 3, 2003, 31,876,821 Vornado common shares were reserved
for issuance upon redemption of operating partnership units. Some of these
shares may be sold in the public market after registration under the Securities
Act under registration rights agreements between Vornado and some holders of
units of the operating partnership. These shares may also be sold in the public
market under Rule 144 under the Securities Act or other available exemptions
from registration. In addition, we have reserved a number of common shares for
issuance under our employee benefit plans, and these common shares will be
available for sale from time to time. We have awarded shares of restricted stock
and granted options to purchase additional common shares to some of our
executive officers and employees. We cannot predict the effect that future sales
of our common shares, or the perception that sales of common shares could occur,
will have on the market prices of the common shares.

CHANGES IN MARKET CONDITIONS COULD HURT THE MARKET PRICE OF OUR SHARES.

The value of our shares depends on various market conditions, which may
change from time to time. Among the market conditions that may affect the value
of our shares are the following:

- the extent of institutional investor interest in Vornado;

- the reputation of REITs generally and the attractiveness of their
equity securities in comparison to other equity securities,
including securities issued by other real estate companies, and
fixed income securities (including in connection with any
possible change in the taxation of dividends, as discussed
below);

- our financial condition and performance; and

- general financial market conditions.

In particular, the Jobs and Growth Tax Relief and Reconciliation Act of
2003 which was signed into law by President Bush on May 28, 2003 provides
favorable income tax rates for certain corporate dividends received by
individuals through December 31, 2008. Under the Act. REIT dividends are not
eligible for the preferential capital gain rates applicable to dividends unless
the dividends are attributable to income that has been subject to
corporate-level tax. As a result, substantially all of the distributions paid
on our shares are not expected to qualify for such lower rates. This Act could
cause stock in non-REIT corporations to be more attractive to investors than
stock in REITs, which may negatively affect the value of and the market for your
shares.

In addition, the stock market in recent years has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of companies.

INCREASED MARKET INTEREST RATES MAY HURT THE VALUE OF OUR 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 not, however,
result in more funds for us to distribute and, in fact, would likely increase
our borrowing costs and might decrease our funds available for distribution.
Thus, higher market interest rates could cause the market price of our shares to
decline.

VORNADO AND THE OPERATING PARTNERSHIP

Vornado is a fully-integrated real estate investment trust organized
under the laws of Maryland. Vornado conducts its business through, and
substantially all of its interests in properties are held by, the operating
partnership. Vornado is the sole general partner of, and owned approximately 81%
of the common limited partnership interest in, the operating partnership as of
March 31, 2003.

The operating partnership currently owns directly or indirectly:

- Office Properties:

-- all or portions of 76 office properties in the New York
City metropolitan area (primarily Manhattan) and in the
Washington, D.C. and Northern Virginia area aggregating
approximately 27.7 million square feet;

- Retail Properties:

-- 62 retail properties in six states and Puerto Rico
aggregating approximately 12.5 million square feet,
including 1.8 million square feet built by tenants on land
leased from Vornado;

- Merchandise Mart Properties:

-- the Merchandise Mart Properties portfolio containing
approximately 8.6 million square feet, including the 3.4
million square foot Merchandise Mart in Chicago;

- Temperature Controlled Logistics:

-- a 60% interest in the Vornado Crescent Portland Partnership
that owns 88 cold storage warehouses nationwide with an
aggregate of approximately 441.5 million cubic feet of
refrigerated space leased to AmeriCold Logistics;

- Other Real Estate Investments:

-- 33.1% of the outstanding common stock of Alexander's, Inc.;

-- the Hotel Pennsylvania in New York City consisting of a
hotel portion containing 1 million square feet with 1,700
rooms and a commercial portion containing .4 million square
feet of retail and office space;

-- a 22.5% interest in The Newkirk Master Limited Partnership,
which owns office, retail and industrial properties net
leased primarily to credit rated tenants and various debt
interests in those properties;

-- eight dry warehouse/industrial properties in New Jersey
containing approximately 2.0 million square feet; and

-- other investments including interests in other real estate,
marketable securities and loans and notes receivable.

The principal executive offices of Vornado and the operating partnership
are located at 888 Seventh Avenue, New York, New York 10019; telephone (212)
894-7000. We maintain a website at www.vno.com where general information about
us is available. We are not incorporating the contents of our website into this
prospectus.

USE OF PROCEEDS

All of the common shares are being offered by the selling shareholders.
Vornado will not receive any proceeds from the sale of the shares offered by
this prospectus.

SELLING SHAREHOLDERS

The selling shareholders beneficially own 340,000 units of Vornado
Realty L.P. relating to 340,000 common shares of Vornado Realty Trust and
260,000 common shares of Vornado Realty Trust issued by Vornado upon redemption
of units, covered by this prospectus. These units were issued upon the
acquisition by the operating partnership on January 1, 2002 of the remaining 66%
interest in Charles E. Smith Commercial Realty L.P. that Vornado did not
previously own. The following table describes, as of the date of this
prospectus: the selling shareholders; the number of shares beneficially owned by
the selling shareholders before the offering to which this prospectus relates,
including all common shares that we may issue upon redemption of all units
beneficially owned by the selling shareholders; the maximum number of common
shares that the selling shareholders may sell using this prospectus, assuming
that Vornado issues common shares for all of the units redeemed by the selling
shareholders; the number of shares beneficially owned by the selling
shareholders after the offering, including all common shares that we may issue
upon redemption of all units beneficially owned by the selling shareholders; and
the percentage of shares beneficially owned by the selling shareholders after
the offering. Because the selling shareholders may sell all, some or none of the
offered shares, no estimate can be made of the number of offered shares that
will be sold by the selling shareholders or that will be owned by the selling
shareholders upon completion of the offering. However, for purposes of this
table, we have assumed that, at the completion of the offering, none of the
600,000 shares covered by this prospectus will be held by the selling
shareholders.

For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
pursuant to which a person is deemed to have beneficial ownership of any common
shares that such person has the right to acquire within 60 days of the date of
this prospectus. Accordingly, the number of shares beneficially owned by each
selling shareholder includes units of Vornado Realty L.P. beneficially owned by
that selling shareholder that may be redeemed for common shares of Vornado
Realty Trust during such 60 day period as well as beneficially owned options for
common shares exercisable during such period. In addition, for purposes of
computing the percentage of outstanding shares held by each person, any common
shares which such person may acquire within 60 days upon redemption of units
beneficially owned and options are deemed to be outstanding but are not deemed
to be outstanding for the purpose of computing the percentage ownership of any
other person. Some of the common shares beneficially owned by a selling
shareholder are also beneficially owned by other selling shareholders, as
further described in the table. As used in this prospectus, the term selling
shareholder also includes transferees, assignees, distributees and pledgees of
the selling shareholders. Each sale of shares by any selling shareholder may, if
required, be accompanied by a supplement to this prospectus stating the name of
the selling shareholder using that prospectus supplement, the number of shares
being sold and a supplemental plan of distribution describing the specific
manner of sale of those shares.

NUMBER OF NUMBER OF PERCENTAGE OF
SHARES NUMBER OF SHARES SHARES
BENEFICIALLY SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OFFERED BY THIS OWNED AFTER OWNED AFTER
SELLING SHAREHOLDERS THE OFFERING PROSPECTUS THE OFFERING THE OFFERING(10)
--------------------

Robert H. Smith(1)............ 4,187,511(5)(6)(8) 150,000 3,782,511(6)(8)(9) 2.7%

Clarice Smith(2).............. 3,028,619(5)(6) 150,000 2,623,619(6)(9) 1.9%

Robert P. Kogod(3)............ 3,785,704(5)(7)(8) 150,000 3,380,704(7)(8)(9) 2.5%

Arlene Kogod(4)............... 2,599,861(5)(7) 150,000 2,194,861(7)(9) 1.6%

(1) Mr. Smith was appointed a trustee of Vornado and the Chairman of the Charles E. Smith Commercial Realty
Division of Vornado on January 1, 2002. Previously, Mr. Smith was Co-Chief Executive Officer and Co-Chairman of
the Board of Directors of Charles E. Smith Commercial Realty L.P. from October 1997 until December 2001.

(2) Clarice Smith is the wife of Mr. Smith.

(3) Mr. Kogod was appointed a trustee of Vornado on January 1, 2002. Previously, Mr. Kogod was Co-Chief Executive
Officer and Co-Chairman of the Board of Directors of Charles E. Smith Commercial Realty L.P. from October 1997
through December 2001.

(4) Arlene Kogod is the wife of Mr. Kogod.

(5) Includes 1,416,629 shares with respect to which beneficial ownership is shared by all of the selling
shareholders.

(6) Includes 1,237,300 shares with respect to which beneficial ownership is shared solely by Mr. and Mrs. Smith.

(7) Includes 987,280 shares with respect to which beneficial ownership is shared solely by Mr. and Mrs. Kogod.

(8) Includes 40,647 shares with respect to which beneficial ownership is shared solely by Mr. Smith and Mr. Kogod.

(9) Includes 1,076,629 shares with respect to which beneficial ownership is shared by all of the selling
shareholders.

(10) Percentages are based upon 111,672,233 common shares and 26,080,483 units (other than units held by Vornado)
outstanding as of May 30, 2003.

DESCRIPTION OF COMMON SHARES

The following description of the material terms of the common shares of
Vornado is only a summary and is qualified in its entirety by reference to the
provisions governing the common shares contained in the declaration of trust,
including all amendments and supplements to the declaration of trust, and bylaws
of Vornado. Copies of the declaration of trust and bylaws are exhibits to the
registration statement of which this prospectus is a part. See "Where You Can
Find More Information" for information regarding how to obtain a copy of those
documents.

VORNADO'S AUTHORIZED AND OUTSTANDING CLASSES OF SHARES

The declaration of trust authorizes the issuance of up to 540,000,000
shares of beneficial interest, consisting of:

- 200,000,000 common shares of beneficial interest, par value $0.04
per share;

- 70,000,000 preferred shares of beneficial interest, without par
value; and

- 270,000,000 excess shares of beneficial interest, par value $0.04
per share.

Of the authorized 70,000,000 preferred shares, Vornado Realty Trust has
designated:

- 5,789,315 as $3.25 Series A Convertible Preferred Shares;

- 3,400,000 as 8.5% Series B Cumulative Redeemable Preferred
Shares;

- 4,600,000 as 8.5% Series C Cumulative Redeemable Preferred
Shares;

- 3,500,000 as Series D-1 8.5% Cumulative Redeemable Preferred
Shares;

- 549,336 as 8.375% Series D-2 Cumulative Redeemable Preferred
Shares;

- 8,000,000 as Series D-3 8.25% Cumulative Redeemable Preferred
Shares;

- 5,000,000 as Series D-4 8.25% Cumulative Redeemable Preferred
Shares;

- 6,480,000 as Series D-5 8.25% Cumulative Redeemable Preferred
Shares;

- 1,000,000 as Series D-6 8.25% Cumulative Redeemable Preferred
Shares;

- 7,200,000 as Series D-7 8.25% Cumulative Redeemable Preferred
Shares;

- 360,000 as Series D-8 8.25% Cumulative Redeemable Preferred
Shares; and

- 1,800,000 as Series D-9 8.25% Cumulative Redeemable Preferred
Shares.

As of May 1, 2003, the following shares were issued and outstanding:

- 111,592,675 common shares;

- 1,436,623 Series A preferred shares;

- 3,400,000 Series B preferred shares; and

- 4,600,000 Series C preferred shares.

No Series D-1, Series D-2, Series D-3, Series D-4, Series D-5, Series
D-6, Series D-7, Series D-8, or Series D-9 preferred shares were issued and
outstanding as of February 28, 2003. Shares of each of these series may be
issued in the future upon redemption of preferred units of limited partnership
interest of the operating partnership of a corresponding series that were issued
and outstanding as of May 1, 2003. No excess shares were issued and outstanding
as of May 1, 2003.

DIVIDEND AND VOTING RIGHTS OF HOLDERS OF COMMON SHARES

The holders of common shares are entitled to receive dividends when, if
and as authorized by the Vornado board and declared by Vornado out of assets
legally available to pay dividends, if receipt of the dividends is in compliance
with the provisions in the declaration of trust restricting the transfer of
shares of beneficial interest. However, if any preferred shares are at the time
outstanding, Vornado may only pay dividends or other distributions on common
shares or purchase common shares if full cumulative dividends have been paid on
outstanding preferred shares and there is no arrearage in any mandatory sinking
fund on outstanding preferred shares. The terms of the series of preferred
shares that are now issued and outstanding do not provide for any mandatory
sinking fund.

The holders of common shares are entitled to one vote for each share on
all matters on which shareholders are entitled to vote, including elections of
trustees. There is no cumulative voting in the election of trustees, which means
that the holders of a majority of the outstanding common shares can elect all of
the trustees then standing for election. The holders of common shares do not
have any conversion, redemption or preemptive rights to subscribe to any
securities of Vornado. If Vornado is dissolved, liquidated or wound up, holders
of common shares are entitled to share proportionally in any assets remaining
after the prior rights of creditors, including holders of the indebtedness of
Vornado Realty Trust, and the aggregate liquidation preference of any preferred
shares then outstanding are satisfied in full.

The common shares have equal dividend, distribution, liquidation and
other rights and have no preference, appraisal or exchange rights. All
outstanding common shares are duly authorized, fully paid and non-assessable.

RESTRICTIONS ON OWNERSHIP OF COMMON SHARES

THE COMMON SHARES BENEFICIAL OWNERSHIP LIMIT

For Vornado to maintain its qualification as a REIT under the Internal
Revenue Code, not more than 50% of the value of its outstanding shares of
beneficial interest may be owned, directly or indirectly, by five or fewer
individuals at any time during the last half of a taxable year and the shares of
beneficial interest must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a shorter taxable year. The Internal Revenue Code defines "individuals" to
include some entities for purposes of the preceding sentence. All references to
a shareholder's ownership of common shares in this section "-- The common
shares beneficial ownership limit" assume application of the applicable
attribution rules of the Internal Revenue Code under which, for example, a
shareholder is deemed to own shares owned by his or her spouse.

The declaration of trust contains a number of provisions which restrict
the ownership and transfer of shares. These provisions seek to safeguard Vornado
against an inadvertent loss of its REIT status and to deter non-negotiated
acquisitions of, and proxy fights for, us by third parties. The declaration of
trust contains a limitation that restricts, with some exceptions, shareholders
from owning more than a specified percentage of the outstanding common shares.
We call this percentage the "common shares beneficial

ownership limit." The common shares beneficial ownership limit was initially set
at 2.0% of the outstanding common shares. The Vornado board subsequently adopted
a resolution increasing the common shares beneficial ownership limit from 2.0%
to 6.7% of the outstanding common shares and has the authority to grant, and in
certain circumstances has granted, limited exemptions from the common shares
beneficial ownership limit. The shareholders who owned more than 6.7% of the
common shares immediately after the merger of Vornado, Inc. into Vornado in May
1993 may continue to do so and may acquire additional common shares through
stock option and similar plans or from other shareholders who owned more than
6.7% of the common shares immediately after that merger. However, common shares
cannot be transferred if, as a result, more than 50% in value of the outstanding
shares of Vornado would be owned by five or fewer individuals. While the
shareholders who owned more than 6.7% of the common shares immediately after the
merger of Vornado, Inc. into Vornado in May 1993 are not generally permitted to
acquire additional common shares from any other source, these shareholders may
acquire additional common shares from any source if Vornado issues additional
common shares, up to the percentage held by them immediately before Vornado
issues the additional shares.

Shareholders should be aware that events other than a purchase or other
transfer of common shares can result in ownership, under the applicable
attribution rules of the Internal Revenue Code, of common shares in excess of
the common shares beneficial ownership limit. For instance, if two shareholders,
each of whom owns 3.5% of the outstanding common shares, were to marry, then
after their marriage both shareholders would be deemed to own 7.0% of the
outstanding common shares, which is in excess of the common shares beneficial
ownership limit. Similarly, if a shareholder who owns 4.9% of the outstanding
common shares were to purchase a 50% interest in a corporation which owns 4.8%
of the outstanding common shares, then the shareholder would be deemed to own
7.3% of the outstanding common shares. You should consult your own tax advisors
concerning the application of the attribution rules of the Internal Revenue Code
in your particular circumstances.

THE CONSTRUCTIVE OWNERSHIP LIMIT

Under the Internal Revenue Code, rental income received by a REIT from
persons in which the REIT is treated, under the applicable attribution rules of
the Internal Revenue Code, as owning a 10% or greater interest does not
constitute qualifying income for purposes of the income requirements that REITs
must satisfy. For these purposes, a REIT is treated as owning any stock owned,
under the applicable attribution rules of the Internal Revenue Code, by a person
that owns 10% or more of the value of the outstanding shares of the REIT. The
attribution rules of the Internal Revenue Code applicable for these purposes are
different from those applicable with respect to the common shares beneficial
ownership limit. All references to a shareholder's ownership of common shares in
this section "-- The constructive ownership limit" assume application of the
applicable attribution rules of the Internal Revenue Code.

In order to ensure that rental income of Vornado will not be treated as
nonqualifying income under the rule described in the preceding paragraph, and
thus to ensure that Vornado will not inadvertently lose its REIT status as a
result of the ownership of shares by a tenant, or a person that holds an
interest in a tenant, the declaration of trust contains an ownership limit that
restricts, with some exceptions, shareholders from owning more than 9.9% of the
outstanding shares of any class. We refer to this 9.9% ownership limit as the
"constructive ownership limit." The shareholders who owned shares in excess of
the constructive ownership limit immediately after the merger of Vornado, Inc.
into Vornado in May 1993 generally are not subject to the constructive ownership
limit. The declaration of trust also contains restrictions that are designed to
ensure that the shareholders who owned shares in excess of the constructive
ownership limit immediately after the merger of Vornado, Inc. into Vornado in
May 1993 will not, in the aggregate, own a large enough interest in a tenant or
subtenant of the REIT to cause rental income received, directly or indirectly,
by the REIT from that tenant or subtenant to be treated as nonqualifying income
for purposes of the income requirements that REITs must satisfy. The
restrictions described in the preceding sentence have an exception for tenants
and subtenants from whom the REIT receives, directly or indirectly, rental
income that is not in excess of a specified threshold.

Shareholders should be aware that events other than a purchase or other
transfer of shares can result in ownership, under the applicable attribution
rules of the Internal Revenue Code, of shares in excess of the constructive
ownership limit. As the attribution rules that apply with respect to the
constructive ownership limit differ from those that apply with respect to the
common shares beneficial ownership limit, the events other than a purchase or
other transfer of shares which can result in share ownership in excess of the
constructive ownership limit can differ from those which can result in share
ownership in excess of the common shares beneficial ownership limit. You should
consult your own tax advisors concerning the application of the attribution
rules of the Internal Revenue Code in your particular circumstances.

ISSUANCE OF EXCESS SHARES IF THE OWNERSHIP LIMITS ARE VIOLATED

The declaration of trust provides that a transfer of common shares that
would otherwise result in ownership, under the applicable attribution rules of
the Internal Revenue Code, of common shares in excess of the common shares
beneficial ownership limit or the constructive ownership limit, or which would
cause the shares of beneficial interest of Vornado to be beneficially owned by
fewer than 100 persons, will have no effect and the purported transferee will
acquire no rights or economic interest in the common shares. In addition, the
declaration of trust provides that common shares that would otherwise be owned,
under the applicable attribution rules of the Internal Revenue Code, in excess
of the common shares beneficial ownership limit or the constructive ownership
limit will be automatically exchanged for excess shares. These excess shares
will be transferred, by operation of law, to Vornado as trustee of a trust for
the exclusive benefit of a beneficiary designated by the purported transferee or
purported holder. While so held in trust, excess shares are not entitled to vote
and are not entitled to participate in any dividends or distributions made by
Vornado. Any dividends or distributions received by the purported transferee or
other purported holder of the excess shares before Vornado discovers the
automatic exchange for excess shares must be repaid to Vornado upon demand.

If the purported transferee or purported holder elects to designate a
beneficiary of an interest in the trust with respect to the excess shares, he or
she may designate only a person whose ownership of the shares will not violate
the common shares beneficial ownership limit or the constructive ownership
limit. When the designation is made, the excess shares will be automatically
exchanged for common shares. The declaration of trust contains provisions
designed to ensure that the purported transferee or other purported holder of
the excess shares may not receive in return for transferring an interest in the
trust with respect to the excess shares, an amount that reflects any
appreciation in the common shares that were exchanged during the period that the
excess shares were outstanding but will bear the burden of any decline in value
during that period. Any amount received by a purported transferee or other
purported holder for designating a beneficiary in excess of the amount permitted
to be received must be turned over to Vornado. The declaration of trust provides
that Vornado, or its designee, may purchase any excess shares that have been
automatically exchanged for common shares as a result of a purported transfer or
other event. The price at which Vornado, or its designee, may purchase the
excess shares will be equal to the lesser of:

- in the case of excess shares resulting from a purported transfer
for value, the price per share in the purported transfer that
resulted in the automatic exchange for excess shares, or in the
case of excess shares resulting from some other event, the market
price of the common shares exchanged on the date of the automatic
exchange for excess shares; and

- the market price of the common shares exchanged for the excess
shares on the date that Vornado accepts the deemed offer to sell
the excess shares.

The right of Vornado to buy the excess shares will exist for 90 days,
beginning on the date that the automatic exchange for excess shares occurred or,
if Vornado did not receive a notice concerning the purported transfer that
resulted in the automatic exchange for excess shares, the date that the Vornado
board determines in good faith that an exchange for excess shares has occurred.

OTHER PROVISIONS CONCERNING THE RESTRICTIONS ON OWNERSHIP

The Vornado board may exempt persons from the common shares beneficial
ownership limit or the constructive ownership limit, including the limitations
applicable to holders who owned in excess of 6.7% of the common shares
immediately after the merger of Vornado, Inc. into Vornado in May 1993, if
evidence satisfactory to the Vornado board is presented showing that the
exemption will not jeopardize the status of Vornado as a REIT under the Internal
Revenue Code. No exemption to a person that is an individual for purposes of
Section 542(a)(2) of the Internal Revenue Code, however, may permit the
individual to have beneficial ownership with respect to any class of shares in
excess of 9.9% of the outstanding shares of the class. Before granting an
exemption of this kind, the Vornado board may require a ruling from the IRS, an
opinion of counsel satisfactory to it and representations and undertakings from
the applicant with respect to preserving the REIT status of Vornado.

The foregoing restrictions on transferability and ownership will not
apply if the Vornado board determines that it is no longer in the best interests
of Vornado to attempt to qualify, or to continue to qualify, as a REIT.

All persons who own, directly or by virtue of the applicable attribution
rules of the Internal Revenue Code, more than 2.0% of the outstanding common
shares must give a written notice to Vornado containing the information
specified in the declaration of trust by January 31 of each year. In addition,
each shareholder will be required to disclose to Vornado upon demand any
information that Vornado may request, in good faith, to determine the status of
Vornado as a REIT or to comply with Treasury regulations promulgated under the
REIT provisions of the Internal Revenue Code.

The ownership restrictions described above may have the effect of
precluding acquisition of control of Vornado unless the Vornado board determines
that maintenance of REIT status is no longer in the best interests of Vornado.

TRANSFER AGENT

The transfer agent for common shares of Vornado is Wachovia Bank, N.A.
located in Charlotte, North Carolina.

FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes the taxation of Vornado Realty Trust
and the material Federal income tax consequences to holders of the common shares
for your general information only. It is not tax advice. The tax treatment of a
holder of common shares will vary depending upon the holder's particular
situation, and this discussion addresses only holders that hold common shares as
capital assets and does not deal with all aspects of taxation that may be
relevant to particular holders in light of their personal investment or tax
circumstances. This section also does not deal with all aspects of taxation that
may be relevant to certain types of holders to which special provisions of the
Federal income tax laws apply, including:

- dealers in securities or currencies;

- traders in securities that elect to use a mark-to-market method
of accounting for their securities holdings;

- banks;

- tax-exempt organizations;

- certain insurance companies;

- persons liable for the alternative minimum tax;

- persons that hold securities that are a hedge, that are hedged
against currency risks or that are part of a straddle or
conversion transaction; and

- persons whose functional currency is not the U.S. dollar.

This summary is based on the Internal Revenue Code, its legislative
history, existing and proposed regulations under the Internal Revenue Code,
published rulings and court decisions. This summary describes the provisions of
these sources of law only as they are currently in effect. All of these sources
of law may change at any time, and any change in the law may apply
retroactively.

WE URGE YOU TO CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO YOU OF ACQUIRING, OWNING AND SELLING COMMON SHARES, INCLUDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, OWNING AND
SELLING COMMON SHARES IN YOUR PARTICULAR CIRCUMSTANCES AND POTENTIAL CHANGES IN
APPLICABLE LAWS.

TAXATION OF VORNADO REALTY TRUST AS A REIT

In the opinion of Sullivan & Cromwell LLP, commencing with its taxable
year ended December 31, 1993, Vornado Realty Trust has been organized and
operated in conformity with the requirements for qualification and taxation as a
REIT under the Internal Revenue Code, and Vornado Realty Trust's proposed method
of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Internal Revenue Code. Investors
should be aware, however, that opinions of counsel are not binding upon the
Internal Revenue Service or any court.

In providing its opinion, Sullivan & Cromwell LLP is relying,

- as to certain factual matters upon the statements and
representations contained in certificates provided to Sullivan &
Cromwell LLP by Vornado, Two Penn Plaza, REIT, Inc. and AmeriCold
Corporation;

- without independent investigation, as to certain factual matters
upon the statements and representations contained in the
certificate provided to Sullivan & Cromwell LLP by Alexander's;

- without independent investigation, upon the opinion of Shearman &
Sterling concerning the qualification of Alexander's as a REIT
for each taxable year commencing with its taxable year ending
December 31, 1995; and

- in providing its opinion regarding the qualification of
Alexander's as a REIT for Federal income tax purposes, Shearman &
Sterling is relying, as to certain factual matters, upon
representations received from Alexander's.

Vornado's qualification as a REIT will depend upon the continuing
satisfaction by Vornado and, given Vornado's current ownership interest in
Alexander's, AmeriCold and Two Penn, by Alexander's, AmeriCold and Two Penn, of
the requirements of the Internal Revenue Code relating to qualification for REIT
status. Some of these requirements depend upon actual operating results,
distribution levels, diversity of stock ownership, asset composition, source of
income and record keeping. Accordingly, while Vornado intends to continue to
qualify to be taxed as a REIT, the actual results of Vornado's, Two Penn's,
AmeriCold's or Alexander's operations for any particular year might not satisfy
these requirements. Neither Sullivan & Cromwell LLP nor Shearman & Sterling will
monitor the compliance of Vornado, Two Penn, AmeriCold or Alexander's with the
requirements for REIT qualification on an ongoing basis.

The sections of the Internal Revenue Code applicable to REITs are highly
technical and complex. The following discussion summarizes material aspects of
these sections of the Internal Revenue Code.

As a REIT, Vornado generally will not have to pay Federal corporate
income taxes on its net income that it currently distributes to shareholders.
This treatment substantially eliminates the "double taxation" at the corporate
and shareholder levels that generally results from investment in a regular
corporation.

However, Vornado will have to pay Federal income tax as follows:

- First, Vornado will have to pay tax at regular corporate rates on
any undistributed real estate investment trust taxable income,
including undistributed net capital gains.

- Second, under certain circumstances, Vornado may have to pay the
alternative minimum tax on its items of tax preference.

- Third, if Vornado has (a) net income from the sale or other
disposition of "foreclosure property", as defined in the Internal
Revenue Code, which is held primarily for sale to customers in
the ordinary course of business or (b) other non-qualifying
income from foreclosure property, it will have to pay tax at the
highest corporate rate on that income.

- Fourth, if Vornado has net income from "prohibited transactions",
as defined in the Internal Revenue Code, Vornado will have to pay
a 100% tax on that income. Prohibited transactions are, in
general, certain sales or other dispositions of property, other
than foreclosure property, held primarily for sale to customers
in the ordinary course of business.

- Fifth, if Vornado should fail to satisfy the 75% gross income
test or the 95% gross income test, as discussed below under "--
Requirements for Qualification -- Income Tests", but has
nonetheless maintained its qualification as a REIT because
Vornado has satisfied some other requirements, it will have to
pay a 100% tax on an amount equal to (a) the gross income
attributable to the greater of (i) 75% of Vornado's gross income
over the amount of gross income that is qualifying income for
purposes of the 75% test, and (ii) 90% of Vornado's

gross income (95% for taxable years ending before January 1,
2001) over the amount of gross income that is qualifying income
for purposes of the 95% test, multiplied by (b) a fraction
intended to reflect Vornado's profitability.

- Sixth, if Vornado should fail to distribute during each calendar
year at least the sum of (1) 85% of its real estate investment
trust ordinary income for that year, (2) 95% of its real estate
investment trust capital gain net income for that year and (3)
any undistributed taxable income from prior periods, Vornado
would have to pay a 4% excise tax on the excess of that required
distribution over the amounts actually distributed.

- Seventh, if during the 10-year period beginning on the first day
of the first taxable year for which Vornado qualified as a REIT,
Vornado recognizes gain on the disposition of any asset held by
Vornado as of the beginning of that period, then, to the extent
of the excess of (a) fair market value of that asset as of the
beginning of that period over (b) Vornado's adjusted basis in
that asset as of the beginning of that period, Vornado will have
to pay tax on that gain at the highest regular corporate rate. We
refer to the excess of fair market value over adjusted basis
described in the preceding sentence as "built-in gain".

Notwithstanding the taxation of built-in gain described in the
preceding paragraph of this bullet point, Vornado will not have
to pay tax on recognized built-in gain with respect to assets
held as of the first day of the 10-year period beginning on the
first day of the first taxable year for which Vornado qualified
as a REIT, to the extent that the aggregate amount of that
recognized built-in gain exceeds the net aggregate amount of
Vornado's unrealized built-in gain as of the first day of that
period.

- Eighth, if Vornado acquires any asset from a C corporation in
certain transactions in which Vornado must adopt the basis of the
asset or any other property in the hands of the C corporation as
the basis of the asset in the hands of Vornado, and Vornado
recognizes gain on the disposition of that asset during the
10-year period beginning on the date on which Vornado acquired
that asset, then Vornado will have to pay tax on the built-in
gain at the highest regular corporate rate. A C corporation means
generally a corporation that has to pay full corporate-level tax.

- Ninth, for taxable years beginning after December 31, 2000, if
Vornado receives non-arm's length income from a taxable REIT
subsidiary (as defined under "-- Requirements for Qualification
-- Asset Tests"), or as a result of services provided by a
taxable REIT subsidiary to tenants of Vornado, Vornado will be
subject to a 100% tax on the amount of Vornado's non-arm's length
income.

REQUIREMENTS FOR QUALIFICATION

The Internal Revenue Code defines a REIT as a corporation, trust or
association

- which is managed by one or more trustees or directors;

- the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest;

- which would otherwise be taxable as a domestic corporation, but
for Sections 856 through 859 of the Internal Revenue Code;

- which is neither a financial institution nor an insurance company
to which certain provisions of the Internal Revenue Code apply;

- the beneficial ownership of which is held by 100 or more persons;

- during the last half of each taxable year, not more than 50% in
value of the outstanding stock of which is owned, directly or
constructively, by five or fewer individuals, as defined in the
Internal Revenue Code to include certain entities; and

- which meets certain other tests, described below, regarding the
nature of its income and assets.

The Internal Revenue Code provides that the conditions described in the
first through fourth bullet points above must be met during the entire taxable
year and that the condition described in the fifth bullet point above must be
met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months.

Vornado has satisfied the conditions described in the first through
fifth bullet points of the preceding paragraph and believes that it has also
satisfied the condition described in the sixth bullet point of the preceding
paragraph. In addition, Vornado's declaration of trust provides for restrictions
regarding the ownership and transfer of Vornado's shares of beneficial interest.
These restrictions are intended to assist Vornado in continuing to satisfy the
share ownership requirements described in the fifth and sixth bullet points of
the preceding paragraph. The ownership and transfer restrictions pertaining to
the common shares are described in this prospectus under the heading
"Description of Common Shares -- Restrictions on Ownership of Common Shares."

Vornado owns a number of wholly-owned corporate subsidiaries. Internal
Revenue Code Section 856(i) provides that unless a REIT makes an election to
treat the corporation as a taxable REIT subsidiary, a corporation which is a
"qualified REIT subsidiary", as defined in the Internal Revenue Code, will not
be treated as a separate corporation, and all assets, liabilities, and items of
income, deduction, and credit of a qualified REIT subsidiary will be treated as
assets, liabilities and items of these kinds of the REIT. Thus, in applying the
requirements described in this section, Vornado's qualified REIT subsidiaries
will be ignored, and all assets, liabilities and items of income, deduction, and
credit of these subsidiaries will be treated as assets, liabilities and items of
these kinds of Vornado. Vornado believes that all of its wholly-owned corporate
subsidiaries are qualified REIT subsidiaries.

If a REIT is a partner in a partnership, Treasury regulations provide
that the REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to that share. In addition, the character of the assets and gross
income of the partnership will retain the same character in the hands of the
REIT for purposes of Section 856 of the Internal Revenue Code, including
satisfying the gross income tests and the asset tests. Thus, Vornado's
proportionate share of the assets, liabilities and items of income of any
partnership in which Vornado is a partner, including the operating partnership,
will be treated as assets, liabilities and items of income of Vornado for
purposes of applying the requirements described in this section. Thus, actions
taken by partnerships in which Vornado owns an interest, either directly or
through one or more tiers of partnerships or qualified REIT subsidiaries, can
affect Vornado's ability to satisfy the REIT income and assets tests and the
determination of whether Vornado has net income from prohibited transactions.
See the fourth bullet point on page 26 for a discussion of prohibited
transactions.

INCOME TESTS.

In order to maintain its qualification as a REIT, Vornado annually must
satisfy three gross income requirements.

- First, Vornado must derive at least 75% of its gross income,
excluding gross income from prohibited transactions, for each
taxable year directly or indirectly from investments relating

to real property or mortgages on real property, including "rents
from real property", as defined in the Internal Revenue Code, or
from certain types of temporary investments. Rents from real
property generally include expenses of Vornado that are paid or
reimbursed by tenants.

- Second, at least 95% of Vornado's gross income, excluding gross
income from prohibited transactions, for each taxable year must
be derived from real property investments as described in the
preceding bullet point, dividends, interest and gain from the
sale or disposition of stock or securities, or from any
combination of these types of source.

- Third, for its taxable years before 1998, short-term gain from
the sale or other disposition of stock or securities, gain from
prohibited transactions and gain on the sale or other disposition
of real property held for less than four years, apart from
involuntary conversions and sales of foreclosure property, was
required to represent less than 30% of Vornado's gross income,
including gross income from prohibited transactions, for each of
these taxable years.

Rents that Vornado receives will qualify as rents from real property in
satisfying the gross income requirements for a REIT described above only if the
rents satisfy several conditions.

- First, the amount of rent must not be based in whole or in part
on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from rents
from real property solely because it is based on a fixed
percentage or percentages of receipts or sales.

- Second, the Internal Revenue Code provides that rents received
from a tenant will not qualify as rents from real property in
satisfying the gross income tests if the REIT, directly or under
the applicable attribution rules, owns a 10% or greater interest
in that tenant; except that for tax years beginning after
December 31, 2000, rents received from a taxable REIT subsidiary
under certain circumstances, qualify as rents from real property
even if Vornado owns more than a 10% interest in the subsidiary.
We refer to a tenant in which Vornado owns a 10% or greater
interest as a "related party tenant."

- Third, if rent attributable to personal property leased in
connection with a lease of real property is greater than 15% of
the total rent received under the lease, then the portion of rent
attributable to the personal property will not qualify as rents
from real property.

- Finally, for rents received to qualify as rents from real
property, the REIT generally must not operate or manage the
property or furnish or render services to the tenants of the
property, other than through an independent contractor from whom
the REIT derives no revenue or through a taxable REIT subsidiary.
However, Vornado may directly perform certain services that
landlords usually or customarily render when renting space for
occupancy only or that are not considered rendered to the
occupant of the property.

Vornado does not derive significant rents from related party tenants.
Vornado also does not and will not derive rental income attributable to personal
property, other than personal property leased in connection with the lease of
real property, the amount of which is less than 15% of the total rent received
under the lease.

Vornado directly performs services for some of its tenants. Vornado does
not believe that the provision of these services will cause its gross income
attributable to these tenants to fail to be treated as rents from real property.
If Vornado were to provide services to a tenant that are other than those
landlords usually or customarily provide when renting space for occupancy only,
amounts received or accrued by Vornado for any of these services will not be
treated as rents from real property for purposes of the REIT

gross income tests. However, the amounts received or accrued for these services
will not cause other amounts received with respect to the property to fail to be
treated as rents from real property unless the amounts treated as received in
respect of the services, together with amounts received for certain management
services, exceed 1% of all amounts received or accrued by Vornado during the
taxable year with respect to the property. If the sum of the amounts received in
respect of the services to tenants and management services described in the
preceding sentence exceeds the 1% threshold, then all amounts received or
accrued by Vornado with respect to the property will not qualify as rents from
real property, even if Vornado provides the impermissible services to some, but
not all, of the tenants of the property.

The term "interest" generally does not include any amount received or
accrued, directly or indirectly, if the determination of that amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term interest solely
because it is based on a fixed percentage or percentages of receipts or sales.

If Vornado fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for that year
if it satisfies the requirements of other provisions of the Internal Revenue
Code that allow relief from disqualification as a REIT. These relief provisions
will generally be available if

- Vornado's failure to meet the income tests was due to reasonable
cause and not due to willful neglect;

- Vornado attaches a schedule of the sources of its income to its
Federal income tax return; and

- any incorrect information on the schedule was not due to fraud
with intent to evade tax.

Vornado might not be entitled to the benefit of these relief provisions,
however. As discussed in the fifth bullet point on page 26, even if these relief
provisions apply, Vornado would have to pay a tax on the excess income.

ASSET TESTS.

Vornado, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets.

- First, at least 75% of the value of Vornado's total assets must
be represented by real estate assets, including (a) real estate
assets held by Vornado's qualified REIT subsidiaries, Vornado's
allocable share of real estate assets held by partnerships in
which Vornado owns an interest and stock issued by another REIT,
(b) for a period of one year from the date of Vornado's receipt
of proceeds of an offering of its shares of beneficial interest
or publicly offered debt with a term of at least five years,
stock or debt instruments purchased with these proceeds and (c)
cash, cash items and government securities.

- Second, not more than 25% of Vornado's total assets may be
represented by securities other than those in the 75% asset
class.

- Third, for taxable years beginning after December 31, 2000, not
more than 20% of Vornado's total assets may constitute securities
issued by taxable REIT subsidiaries and of the investments
included in the 25% asset class, the value of any one issuer's
securities, other than securities issued by another REIT or by a
taxable REIT subsidiary, owned by Vornado may not exceed 5% of
the value of Vornado's total assets. Moreover, Vornado may not
own more than 10% of the vote or value of the outstanding
securities of any one issuer, except for

issuers that are REITs, qualified REIT subsidiaries or taxable
REIT subsidiaries, or debt instruments that are considered
straight debt under a safe harbor provision of the Internal
Revenue Code. For these purposes, a taxable REIT subsidiary is
any corporation in which Vornado owns an interest that joins with
Vornado in making an election to be treated as a "taxable REIT
subsidiary" and certain subsidiaries of a taxable REIT
subsidiary, if the subsidiaries do not engage in certain
activities.

- Fourth, of the investments included in the 25% asset class, the
value of any one issuer's securities, other than securities
issued by another REIT, owned by Vornado may not exceed 5% of the
value of Vornado's total assets and Vornado may not own more than
10% of any one issuer's outstanding voting securities.

The test described in Fourth, above, and not that described in Third,
above, will continue to apply for taxable years of Vornado that begin after
December 31, 2000, only with respect to stock in any corporation owned by
Vornado before July 12, 1999, so long as a taxable REIT subsidiary election is
not made with respect to the corporation and the corporation does not acquire
substantial new assets or engage in a substantial new line of business and
certain other conditions are satisfied.

Since March 2, 1995, Vornado has owned more than 10% of the voting
securities of Alexander's. Since April of 1997, Vornado's ownership of
Alexander's has been through the operating partnership rather than direct.
Vornado's ownership interest in Alexander's will not cause Vornado to fail to
satisfy the asset tests for REIT status so long as Alexander's qualified as a
REIT for each of the taxable years beginning with its taxable year ending
December 31, 1995 and continues to so qualify. In the opinion of Shearman &
Sterling, commencing with Alexander's taxable year ended December 31, 1995,
Alexander's has been organized and operated in conformity with the requirements
for qualification and taxation as a REIT under the Internal Revenue Code, and
its proposed method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Internal Revenue
Code. In providing its opinion, Shearman & Sterling is relying upon
representations received from Alexander's.

Since April of 1997, Vornado has also owned, through the operating
partnership, more than 10% of the voting securities of Two Penn. Vornado's
indirect ownership interest in Two Penn will not cause Vornado to fail to
satisfy the asset tests for REIT status so long as Two Penn qualifies as a REIT
for its first taxable year and each subsequent taxable year. Vornado believes
that Two Penn will also qualify as a REIT.

ANNUAL DISTRIBUTION REQUIREMENTS.

Vornado, in order to qualify as a REIT, is required to distribute
dividends, other than capital gain dividends, to its shareholders in an amount
at least equal to (1) the sum of (a) 90% of Vornado's "real estate investment
trust taxable income", computed without regard to the dividends paid deduction
and Vornado's net capital gain, and (b) 90% of the net after-tax income, if any,
from foreclosure property minus (2) the sum of certain items of non-cash income.

For taxable years beginning before January 1, 2001, the required amount
of distributions described above and below was 95% of the amount of Vornado's
income or gain, as the case may be.

In addition, if Vornado disposes of any asset within 10 years of
acquiring it, Vornado will be required to distribute at least 90% of the
after-tax built-in gain, if any, recognized on the disposition of the asset.

These distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before Vornado timely files
its tax return for the year to which they relate and if paid on or before the
first regular dividend payment after the declaration.

To the extent that Vornado does not distribute all of its net capital
gain or distributes at least 90%, but less than 100%, of its real estate
investment trust taxable income, as adjusted, it will have to pay tax on those
amounts at regular ordinary and capital gain corporate tax rates. Furthermore,
if Vornado fails to distribute during each calendar year at least the sum of (a)
85% of its ordinary income for that year, (b) 95% of its capital gain net income
for that year, and (c) any undistributed taxable income from prior periods,
Vornado would have to pay a 4% excise tax on the excess of the required
distribution over the amounts actually distributed.

Vornado intends to satisfy the annual distribution requirements.

From time to time, Vornado may not have sufficient cash or other liquid
assets to meet the 90% distribution requirement due to timing differences
between (a) when Vornado actually receives income and when it actually pays
deductible expenses and (b) when Vornado includes the income and deducts the
expenses in arriving at its taxable income. If timing differences of this kind
occur, in order to meet the 90% distribution requirement, Vornado may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to pay
dividends in the form of taxable stock dividends.

Under certain circumstances, Vornado may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in Vornado's deduction for
dividends paid for the earlier year. Thus, Vornado may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, Vornado will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.

FAILURE TO QUALIFY AS A REIT

If Vornado fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, Vornado will have to pay tax, including
any applicable alternative minimum tax, on its taxable income at regular
corporate rates. Vornado will not be able to deduct distributions to
shareholders in any year in which it fails to qualify, nor will Vornado be
required to make distributions to shareholders. In this event, to the extent of
current and accumulated earnings and profits, all distributions to shareholders
will be taxable to the shareholders as dividend income (which may be subject to
tax at preferential rates) and corporate distributees may be eligible for the
dividends received deduction if they satisfy the relevant provisions of the
Internal Revenue Code. Unless entitled to relief under specific statutory
provisions, Vornado will also be disqualified from taxation as a REIT for the
four taxable years following the year during which qualification was lost.
Vornado might not be entitled to the statutory relief described in this
paragraph in all circumstances.

TAXATION OF HOLDERS OF COMMON SHARES

U.S. SHAREHOLDERS

As used in this section, the term "U.S. shareholder" means a holder of
common shares who, for United States Federal income tax purposes, is

- a citizen or resident of the United States;

- a domestic corporation;

- an estate whose income is subject to United States Federal income
taxation regardless of its source; or

- a trust if a United States court can exercise primary supervision
over the trust's administration and one or more United States
persons have authority to control all substantial decisions of
the trust.

As long as Vornado qualifies as a REIT, distributions made by Vornado out
of its current or accumulated earnings and profits, and not designated as
capital gain dividends, will constitute dividends taxable to its taxable U.S.
shareholders as ordinary income. Under recently enacted law, individual U.S.
shareholders will be entitled to the new lower rate on dividends only for the
portion of any distribution equal to Vornado's real estate investment trust
taxable income (taking into account the dividends paid deduction available to
Vornado) and realized built-in gains from Vornado's previous taxable year less
any taxes paid by Vornado on these items during Vornado's previous taxable year.
Individual U.S. shareholders should consult their own tax advisors to determine
the impact of this new legislation. Distributions of this kind will not be
eligible for the dividends received deduction in the case of U.S. shareholders
that are corporations. Distributions made by Vornado that Vornado properly
designates as capital gain dividends will be taxable to U.S. shareholders as
gain from the sale of a capital asset held for more than one year, to the extent
that they do not exceed Vornado's actual net capital gain for the taxable year,
without regard to the period for which a U.S. shareholder has held his shares.
Thus, with certain limitations, capital gain dividends received by an individual
U.S. shareholder may be eligible for preferential rates of taxation. U.S.
shareholders that are corporations may, however, be required to treat up to 20%
of certain capital gain dividends as ordinary income.

To the extent that Vornado makes distributions not designated as capital
gain dividends, in excess of its current and accumulated earnings and profits,
these distributions will be treated first as a tax-free return of capital to
each U.S. shareholder. Thus, these distributions will reduce the adjusted basis
which the U.S. shareholder has in his shares for tax purposes by the amount of
the distribution, but not below zero. Distributions in excess of a U.S.
shareholder's adjusted basis in his shares will be taxable as capital gains,
provided that the shares have been held as a capital asset. For purposes of
determining the portion of distributions on separate classes of shares that will
be treated as dividends for Federal income tax purposes, current and accumulated
earnings and profits will be allocated to distributions resulting from priority
rights of preferred shares before being allocated to other distributions.

Dividends authorized by Vornado in October, November, or December of any
year and payable to a shareholder of record on a specified date in any of these
months will be treated as both paid by Vornado and received by the shareholder
on December 31 of that year, provided that Vornado actually pays the dividend on
or before January 31 of the following calendar year. Shareholders may not
include in their own income tax returns any net operating losses or capital
losses of Vornado.

U.S. shareholders holding shares at the close of Vornado's taxable year
will be required to include, in computing their long-term capital gains for the
taxable year in which the last day of Vornado's taxable year falls, the amount
that Vornado designates in a written notice mailed to its shareholders. Vornado
may not designate amounts in excess of Vornado's undistributed net capital gain
for the taxable year. Each U.S. shareholder required to include the designated
amount in determining the shareholder's long-term capital gains will be deemed
to have paid, in the taxable year of the inclusion, the tax paid by Vornado in
respect of the undistributed net capital gains. U.S. shareholders to whom these
rules apply will be allowed a credit or a refund, as the case may be, for the
tax they are deemed to have paid. U.S. shareholders will increase their basis in
their shares by the difference between the amount of the includible gains and
the tax deemed paid by the shareholder in respect of these gains.

Distributions made by Vornado and gain arising from a U.S. shareholder's
sale or exchange of shares will not be treated as passive activity income. As a
result, U.S. shareholders generally will not be able to apply any passive losses
against that income or gain.

When a U.S. shareholder sells or otherwise disposes of shares, the
shareholder will recognize gain or loss for Federal income tax purposes in an
amount equal to the difference between (a) the amount of cash and the fair
market value of any property received on the sale or other disposition, and (b)
the holder's adjusted basis in the shares for tax purposes. This gain or loss
will be capital gain or loss if the U.S. shareholder has held the shares as a
capital asset. The gain or loss will be long-term gain or loss if the U.S.
shareholder has held the shares for more than one year. Capital gain of an
individual U.S. shareholder is generally taxed at preferential rates. In
general, any loss recognized by a U.S. shareholder when the shareholder sells or
otherwise disposes of shares of Vornado that the shareholder has held for six
months or less, after applying certain holding period rules, will be treated as
a long-term capital loss, to the

extent of distributions received by the shareholder from Vornado which were
required to be treated as long-term capital gains.

BACKUP WITHHOLDING.

Vornado will report to its U.S. shareholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, backup withholding may apply to a
shareholder with respect to dividends paid unless the holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. The IRS
may also impose penalties on a U.S. shareholder that does not provide Vornado
with his correct taxpayer identification number. A shareholder may credit any
amount paid as backup withholding against the shareholder's income tax
liability. In addition, Vornado may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their non-foreign
status to Vornado.

TAXATION OF TAX-EXEMPT SHAREHOLDERS.

The IRS has ruled that amounts distributed as dividends by a REIT
generally do not constitute unrelated business taxable income when received by a
tax-exempt entity. Based on that ruling, provided that a tax-exempt shareholder
is not one of the types of entity described in the next paragraph and has not
held its shares as "debt financed property" within the meaning of the Internal
Revenue Code, and the shares are not otherwise used in a trade or business, the
dividend income from shares will not be unrelated business taxable income to a
tax-exempt shareholder. Similarly, income from the sale of shares will not
constitute unrelated business taxable income unless the tax-exempt shareholder
has held the shares as "debt financed property" within the meaning of the
Internal Revenue Code or has used the shares in a trade or business.

Income from an investment in Vornado's shares will constitute unrelated
business taxable income for tax-exempt shareholders that are social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans exempt from Federal income
taxation under the applicable subsections of Section 501(c) of the Internal
Revenue Code, unless the organization is able to properly deduct amounts set
aside or placed in reserve for certain purposes so as to offset the income
generated by its shares. Prospective investors of the types described in the
preceding sentence should consult their own tax advisors concerning these "set
aside" and reserve requirements.

Notwithstanding the foregoing, however, a portion of the dividends paid by
a "pension-held REIT" will be treated as unrelated business taxable income to
any trust which

- is described in Section 401(a) of the Internal Revenue Code;

- is tax-exempt under Section 501(a) of the Internal Revenue Code; and

- holds more than 10% (by value) of the equity interests in the REIT.

Tax-exempt pension, profit-sharing and stock bonus funds that are
described in Section 401(a) of the Internal Revenue Code are referred to below
as "qualified trusts." A REIT is a "pension-held REIT" if:

- it would not have qualified as a REIT but for the fact that Section
856(h)(3) of the Internal Revenue Code provides that stock owned by
qualified trusts will be treated, for purposes of the "not closely
held" requirement, as owned by the beneficiaries of the trust
(rather than by the trust itself); and

- either (a) at least one qualified trust holds more than 25% by value
of the interests in the REIT or (b) one or more qualified trusts,
each of which owns more than 10% by value of the interests in the
REIT, hold in the aggregate more than 50% by value of the interests
in the REIT.

The percentage of any REIT dividend treated as unrelated business taxable
income to a qualifying trust is equal to the ratio of (a) the gross income of
the REIT from unrelated trades or businesses, determined as though the REIT were
a qualified trust, less direct expenses related to this gross income, to (b) the
total gross income of the REIT, less direct expenses related to the total gross
income. A de minimis exception applies where this percentage is less than 5% for
any year. Vornado does not expect to be classified as a pension-held REIT.

The rules described above under the heading "U.S. shareholders" concerning
the inclusion of Vornado's designated undistributed net capital gains in the
income of its shareholders will apply to tax-exempt entities. Thus, tax-exempt
entities will be allowed a credit or refund of the tax deemed paid by these
entities in respect of the includible gains.

NON-U.S. SHAREHOLDERS

The rules governing U.S. Federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and estates or trusts
that in either case are not subject to United States Federal income tax on a net
income basis, which we call "non-U.S. shareholders", are complex. The following
discussion is only a limited summary of these rules. Prospective non-U.S.
shareholders should consult with their own tax advisors to determine the impact
of U.S. Federal, state and local income tax laws with regard to an investment in
common shares, including any reporting requirements.

ORDINARY DIVIDENDS.

Distributions, other than distributions that are treated as attributable
to gain from sales or exchanges by Vornado of U.S. real property interests, as
discussed below, and other than distributions designated by Vornado as capital
gain dividends, will be treated as ordinary income to the extent that they are
made out of current or accumulated earnings and profits of Vornado. A
withholding tax equal to 30% of the gross amount of the distribution will
ordinarily apply to distributions of this kind to non-U.S. shareholders, unless
an applicable tax treaty reduces that tax. However, if income from the
investment in the shares is treated as effectively connected with the non-U.S.
shareholder's conduct of a U.S. trade or business or is attributable to a
permanent establishment that the non-U.S. shareholder maintains in the U.S. if
that is required by an applicable income tax treaty as a condition for
subjecting the non-U.S. shareholder to U.S. taxation on a net income basis, tax
at graduated rates will generally apply to the non-U.S. shareholder in the same
manner as U.S. shareholders are taxed with respect to dividends, and the 30%
branch profits tax may also apply if the shareholder is a foreign corporation.
Vornado expects to withhold U.S. tax at the rate of 30% on the gross amount of
any dividends, other than dividends treated as attributable to gain from sales
or exchanges of U.S. real property interests and capital gain dividends, paid to
a non-U.S. shareholder, unless (a) a lower treaty rate applies and the required
form evidencing eligibility for that reduced rate is filed with Vornado or the
appropriate withholding agent or (b) the non-U.S. shareholder files an IRS Form
W-8 ECI or a successor form with Vornado or the appropriate withholding agent
claiming that the distributions are effectively connected with the non-U.S.
shareholder's conduct of a U.S. trade or business.

Distributions to a non-U.S. shareholder that are designated by Vornado at
the time of distribution as capital gain dividends which are not attributable to
or treated as attributable to the disposition by Vornado of a U.S. real property
interest generally will not be subject to U.S. Federal income taxation, except
as described below.

RETURN OF CAPITAL.

Distributions in excess of Vornado's current and accumulated earnings and
profits, which are not treated as attributable to the gain from Vornado's
disposition of a U.S. real property interest, will not be taxable to a non-U.S.
shareholder to the extent that they do not exceed the adjusted basis of the
non-U.S. shareholder's shares. Distributions of this kind will instead reduce
the adjusted basis of the shares. To the extent that distributions of this kind
exceed the adjusted basis of a non-U.S. shareholder's shares, they will give
rise to tax liability if the non-U.S. shareholder otherwise would have to pay
tax on any gain from the sale or disposition of its shares, as described below.
If it cannot be determined at the time a distribution is made whether the
distribution will be in excess of current and accumulated earnings and profits,
withholding will apply to the distribution at the rate applicable to dividends.
However, the non-U.S. shareholder may seek a refund of these amounts from the
IRS if it is subsequently determined that the distribution was, in fact, in
excess of current accumulated earnings and profits of Vornado.

CAPITAL GAIN DIVIDENDS.

For any year in which Vornado qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by Vornado of U.S. real property
interests will be taxed to a non-U.S. shareholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980, as amended. Under this
statute, these distributions are taxed to a non-U.S. shareholder as if the gain
were effectively connected with a U.S. business. Thus, non-U.S. shareholders
will be taxed on the distributions at the normal capital gain rates applicable
to U.S. shareholders, subject to any applicable alternative minimum tax and
special alternative minimum tax in the case of individuals. Vornado is required
by applicable Treasury regulations under this statute to withhold 35% of any
distribution that Vornado could designate as a capital gain dividend. However,
if Vornado designates as a capital gain dividend a distribution made before the
day Vornado actually effects the designation, then although the distribution may
be taxable to a non-U.S. shareholder, withholding does not apply to the
distribution under this statute. Rather, Vornado must effect the 35% withholding
from distributions made on and after the date of the designation, until the
distributions so withheld equal the amount of the prior distribution designated
as a capital gain dividend. The non-U.S. shareholder may credit the amount
withheld against its U.S. tax liability.

SALES OF SHARES.

Gain recognized by a non-U.S. shareholder upon a sale or exchange of
common shares generally will not be taxed under the Foreign Investment in Real
Property Tax Act if Vornado is a "domestically controlled REIT", defined
generally as a REIT, less than 50% in value of whose stock is and was held
directly or indirectly by foreign persons at all times during a specified
testing period. Vornado believes that it is and will continue to be a
domestically controlled REIT, and, therefore, that taxation under this statute
generally will not apply to the sale of Vornado shares. However, gain to which
this statute does not apply will be taxable to a non-U.S. shareholder if
investment in the shares is treated as effectively connected with the non-U.S.
shareholder's U.S. trade or business or is attributable to a permanent
establishment that the non-U.S. shareholder maintains in the U.S. if that is
required by an applicable income tax treaty as a condition for subjecting the
non-U.S. shareholder to U.S. taxation on a net income basis. In this case, the
same treatment will apply to the non-U.S. shareholder as to U.S. shareholders
with respect to the gain. In addition, gain to which the Foreign Investment in
Real Property Tax Act does not apply will be taxable to a non-U.S. shareholder
if the non-U.S. shareholder is a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, or maintains an office or a fixed place of business
in the United States to which the gain is attributable. In this case, a 30% tax
will apply to the nonresident alien individual's capital gains. A similar rule
will apply to capital gain dividends to which this statute does not apply.

If Vornado were not a domestically controlled REIT, tax under the Foreign
Investment in Real Property Tax Act would apply to a non-U.S. shareholder's sale
of shares only if the selling non-U.S. shareholder owned more than 5% of the
class of shares sold at any time during a specified period. This

period is generally the shorter of the period that the non-U.S. shareholder
owned the shares sold or the five-year period ending on the date when the
shareholder disposed of the shares. If tax under this statute applies to the
gain on the sale of shares, the same treatment would apply to the non-U.S.
shareholder as to U.S. shareholders with respect to the gain, subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals.

FEDERAL ESTATE TAXES

Common shares held by a non-U.S. shareholder at the time of death will be
included in the shareholder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

BACKUP WITHHOLDING AND INFORMATION REPORTING

If you are a non-U.S. shareholder, you are generally exempt from backup
withholding and information reporting requirements with respect to:

- dividend payments and

- the payment of the proceeds from the sale of common shares effected
at a United States office of a broker,

as long as the income associated with these payments is otherwise exempt from
United States federal income tax, and:

- the payor or broker does not have actual knowledge or reason to know
that you are a United States person and you have furnished to the
payor or broker:

-- a valid Internal Revenue Service Form W-8BEN or an acceptable
substitute form upon which you certify, under penalties of
perjury, that you are a non-United States person, or

-- other documentation upon which it may rely to treat the
payments as made to a non-United States person in accordance
with U.S. Treasury regulations, or

- you otherwise establish an exemption.

Payment of the proceeds from the sale of common shares effected at a
foreign office of a broker generally will not be subject to information
reporting or backup withholding. However, a sale of common shares that is
effected at a foreign office of a broker will be subject to information
reporting and backup withholding if:

- the proceeds are transferred to an account maintained by you in the
United States,

- the payment of proceeds or the confirmation of the sale is mailed to
you at a United States address, or

- the sale has some other specified connection with the United States
as provided in U.S. Treasury regulations,

In addition, a sale of common shares will be subject to information
reporting if it is effected at a foreign office of a broker that is:

- a United States person,

- a controlled foreign corporation for United States tax purposes,

- a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for
a specified three-year period, or

- a foreign partnership, if at any time during its tax year:

-- one or more of its partners are "U.S. persons", as defined in
U.S. Treasury regulations, who in the aggregate hold more than
50% of the income or capital interest in the partnership, or

-- such foreign partnership is engaged in the conduct of a United
States trade or business,

unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.

You generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund claim
with the Internal Revenue Service.

OTHER TAX CONSEQUENCES

State or local taxation may apply to Vornado and its shareholders in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of Vornado and
its shareholders may not conform to the Federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in Vornado.

PLAN OF DISTRIBUTION

The selling shareholders and their pledgees, donees, transferees or other
successors in interest may offer and sell, from time to time, some or all of the
common shares covered by this prospectus. We have registered the common shares
covered by this prospectus for offer and sale by the selling shareholders so
that those shares may be freely sold to the public by them. Registration of the
common shares covered by this prospectus does not mean, however, that those
shares necessarily will be offered or sold. We will not receive any proceeds
from any sale of the common shares by the selling shareholders. We will pay all
costs, expenses and fees in connection with the registration of the common
shares, including fees of our counsel and accountants, fees payable to the SEC
and listing fees. We estimate those fees and expenses to be approximately
$53,999. The selling shareholders will pay all underwriting discounts and
commissions and similar selling expenses, if any, attributable to the sale of
the common shares covered by this prospectus.

The selling shareholders and their pledgees, donees, transferees or other
successors in interest may sell the common shares covered by this prospectus
from time to time, at market prices prevailing at the time of sale, at prices
related to market prices, at a fixed price or prices subject to change or at
negotiated prices, by a variety of methods including the following:

- in privately negotiated transactions;

- through broker-dealers, who may act as agents or principals;

- in a block trade in which a broker-dealer will attempt to sell a
block of common shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction;

- through one or more underwriters on a firm commitment or
best-efforts basis;

- directly to one or more purchasers;

- through agents; or

- in any combination of the above.

In effecting sales, brokers or dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate. Broker-dealer
transactions may include:

- purchases of the common shares by a broker-dealer as principal and
resales of the common shares by the broker-dealer for its account
under this prospectus;

- ordinary brokerage transactions; or

- transactions in which the broker-dealer solicits purchasers.

At any time a particular offer of the common shares covered by this
prospectus is made, a revised prospectus or prospectus supplement, if required,
will be distributed which will state the aggregate amount of common shares
covered by this prospectus being offered and the terms of the offering,
including the name or names of any underwriters, dealers, brokers or agents, any
discounts, commissions, concessions and other items constituting compensation
from the selling shareholders and any discounts, commissions or concessions
allowed or reallowed or paid to dealers. Any prospectus supplement, and, if
necessary, a post-effective amendment to the registration statement of which
this prospectus is a part will be filed with the SEC to reflect the disclosure
of additional information with respect to the distribution of the common shares
covered by this prospectus.

In connection with the sale of the common shares covered by this
prospectus through underwriters, underwriters may receive compensation in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of common shares for whom they may act as agent. Underwriters
may sell to or through dealers, and these dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and
commissions from the purchasers for whom they may act as agent.

The common shares are listed on the NYSE under the symbol "VNO."

Any underwriters, broker-dealers or agents participating in the
distribution of the common shares covered by this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any
commissions received by any of those underwriters, broker-dealers or agents may
be deemed to be underwriting commissions under the Securities Act of 1933.

Some of the common shares covered by this prospectus may be sold in
private transactions or under Rule 144 under the Securities Act of 1933 rather
than under this prospectus.

We may agree to indemnify certain of the selling shareholders against
certain liabilities, including liabilities under the Securities Act of 1933. The
selling shareholders may also agree to indemnify us against certain liabilities,
including liabilities under the Securities Act of 1933, for information they
furnished to us for use in this prospectus.

EXPERTS

The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this prospectus by reference from
Vornado's annual report on Form 10-K for the year ended December 31, 2002 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to Vornado's
adoption of SFAS No. 142 "GOODWILL AND OTHER INTANGIBLE ASSETS" on January 1,
2002), and have been so incorporated in reliance upon the report of Deloitte &
Touche LLP given upon their authority as experts in accounting and auditing.

VALIDITY OF THE COMMON SHARES

The validity of the common shares issued under this prospectus will be
passed upon for Vornado by Venable, Baetjer and Howard, LLP, Baltimore,
Maryland, Maryland counsel to Vornado.