Vornado Realty Trust

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K/A

(Amendment No. 1)

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

For the Fiscal Year Ended:	December 31, 2008

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

For the transition period from

Commission File Number:

1-11954

VORNADO REALTY TRUST

(Exact name of Registrant as specified in its charter)

Maryland		22-1657560
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

888 Seventh Avenue, New York, New York		10019
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number including area code:

(212) 894-7000

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

Title of Each Class		Name of Each Exchange on Which Registered
Common Shares of beneficial interest, $.04 par value per share		New York Stock Exchange

Series A Convertible Preferred Shares of beneficial interest, no par value		New York Stock Exchange

Cumulative Redeemable Preferred Shares of beneficial interest, no par value:

8.5% Series B		New York Stock Exchange

8.5% Series C		New York Stock Exchange

7.0% Series E		New York Stock Exchange

6.75% Series F		New York Stock Exchange

6.625% Series G		New York Stock Exchange

6.75% Series H		New York Stock Exchange

6.625% Series I		New York Stock Exchange

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

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

YES x NO o

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

YES o NO x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

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

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

x Large Accelerated Filer		o Accelerated Filer
o Non-Accelerated Filer (Do not check if smaller reporting company)		o Smaller Reporting Company

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

YES o NO x

The aggregate market value of the voting and non-voting common shares held by non-affiliates of the registrant, i.e. by persons other than officers and trustees of Vornado Realty Trust, was $11,989,973,000 at June 30, 2008.

As of February 6, 2009, there were 155,460,522 of the registrant’s common shares of beneficial interest outstanding.

Documents Incorporated by Reference

Part III: Portions of Proxy Statement for Annual Meeting of Shareholders to be held on May 14, 2009.

Explanatory Note

In accordance with Rule 3-09 of Regulation S-X, Vornado Realty Trust (the “Registrant” or “Vornado”) is required to include in its Annual Report on Form 10-K for the year ended December 31, 2008, audited financial statements of Lexington Realty Trust (“Lexington”), an equity method investee in which Vornado owns approximately 17.2% of the outstanding common shares. On February 24, 2009, Vornado filed its annual report for the year ended December 31, 2008 on Form 10-K with the Securities and Exchange Commission indicating on the cover page that it would file an amendment to the Form 10-K to include Lexington’s audited financial statements and related disclosures as soon as practicable after they were available. On March 2, 2009, Lexington filed its Annual Report on Form 10-K for its fiscal year ended December 31, 2008. Accordingly, Vornado is filing this Amendment No. 1 on Form 10-K/A to Vornado’s Form 10-K, filed on February 24, 2009, to incorporate by reference into Item 8, Lexington’s audited financial statements and related disclosures and to include the consent of KPMG LLP, Lexington’s independent registered public accounting firm with respect to its report on such audited financial statements and consent of PricewaterhouseCoopers, LLP. Except as otherwise expressly noted herein, this Amendment No. 1 does not reflect events occurring after the filing of Vornado’s original Form 10-K on February 24, 2009 in any way, except to reflect the changes discussed herein. Accordingly, this Amendment No. 1 should be read in conjunction with Vornado’s original Form 10-K.

INDEX

	Item	Financial Information:	Page Number

PART II.	8.	Financial Statements and Supplementary Data	4
PART IV.	15.	Exhibits and Financial Statement Schedules	63

Signatures			64

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	5

Consolidated Balance Sheets at December 31, 2008 and 2007	6

Consolidated Statements of Income for the years ended December 31, 2008, 2007, and 2006	7

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007, and 2006	8

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006	11

Notes to Consolidated Financial Statements	13

Consolidated Financial Statements of Lexington Realty Trust, Report of Independent Registered Public Accounting Firm thereon and Notes to Such Consolidated Financial Statements (incorporated herein by reference to Item 8 of Lexington Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (file no. 001-12386), filed with the Securities and Exchange Commission on March 2, 2009	Not applicable

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Trustees

Vornado Realty Trust

New York, New York

We have audited the accompanying consolidated balance sheets of Vornado Realty Trust (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in the Index in Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty Trust at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 16 to the consolidated financial statements, effective December 31, 2008, the Company retrospectively adopted the measurement provisions of Emerging Issues Task Force Topic D-98, Classification and Measurement of Redeemable Securities.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

February 24, 2009

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)	December 31,
ASSETS	2008			2007
Real estate, at cost:
Land	$	4,516,141		$	4,576,479
Buildings and improvements		12,146,558			11,523,977
Development costs and construction in progress		1,088,356			821,991
Leasehold improvements and equipment		118,603			106,060
Total		17,869,658			17,028,507
Less accumulated depreciation and amortization		(2,161,093	)		(1,802,055	)
Real estate, net		15,708,565			15,226,452
Cash and cash equivalents		1,526,853			1,154,595
Escrow deposits and restricted cash		375,888			378,732
Marketable securities		334,322			322,992
Accounts receivable, net of allowance for doubtful accounts of $32,834 and $19,151		201,566			168,183
Investments in partially owned entities, including Alexander’s of $137,305 and $122,797		790,154			1,206,742
Investment in Toys “R” Us		293,096			298,089
Mezzanine loans receivable, net of allowance of $46,700 and $57,000		472,539			492,339
Receivable arising from the straight-lining of rents, net of allowance of $5,773 and $3,076		592,726			513,137
Deferred leasing and financing costs, net of accumulated amortization of $168,714 and $123,624		306,748			273,958
Assets related to discontinued operations		110,380			1,632,318
Due from officers		13,185			13,228
Other assets		692,188			798,170
	$	21,418,210		$	22,478,935
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes and mortgages payable	$	8,835,387		$	7,938,457
Convertible senior debentures		2,342,914			2,360,412
Senior unsecured notes		617,816			698,656
Exchangeable senior debentures		494,501			492,857
Revolving credit facility debt		358,468			405,656
Accounts payable and accrued expenses		515,607			480,123
Deferred credit		764,774			848,852
Deferred compensation plan		69,945			67,714
Deferred tax liabilities		19,895			241,895
Liabilities related to discontinued operations		750			1,332,630
Other liabilities		142,777			118,983
Total liabilities		14,162,834			14,986,235
Minority interest, including unitholders in the Operating Partnership		1,590,891			2,074,601
Commitments and contingencies
Shareholders’ equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 33,954,124 and 33,980,362 shares		823,807			825,095
Common shares of beneficial interest: $.04 par value per share; authorized 250,000,000 shares; issued and outstanding 155,285,903 and 153,076,606 shares		6,195			6,140
Additional capital		5,817,380			5,278,717
Earnings less than distributions		(975,998	)		(721,625	)
Accumulated other comprehensive (loss) income		(6,899	)		29,772
Total shareholders’ equity		5,664,485			5,418,099
	$	21,418,210		$	22,478,935

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
(Amounts in thousands, except per share amounts)	2008			2007			2006

REVENUES:
Property rentals	$	2,211,311		$	1,977,023		$	1,544,741
Tenant expense reimbursements		358,437			323,544			260,772
Fee and other income		127,303			109,949			103,587
Total revenues		2,697,051			2,410,516			1,909,100
EXPENSES:
Operating		1,070,118			951,582			737,452
Depreciation and amortization		537,427			441,209			319,066
General and administrative		194,027			189,041			180,167
Impairment losses on development projects and cost of acquisitions not consummated		81,447			10,375			—
Total expenses		1,883,019			1,592,207			1,236,685
Operating income		814,032			818,309			672,415
Income (loss) applicable to Alexander’s		36,671			50,589			(14,530	)
Income (loss) applicable to Toys “R” Us		2,380			(14,337	)		(47,520	)
(Loss) income from partially owned entities		(195,878	)		31,891			60,355
Interest and other investment (loss) income, net		(2,682	)		226,425			255,391
Interest and debt expense (including amortization of deferred financing costs of $17,507, $15,182 and $11,718)		(586,358	)		(569,386	)		(394,571	)
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		7,757			39,493			76,073
Minority interest of partially owned entities		3,263			3,494			1,363
Income before income taxes		79,185			586,478			608,976
Income tax benefit (expense)		204,537			(9,179	)		(491	)
Income from continuing operations		283,722			577,299			608,485
Income from discontinued operations, net of minority interest		154,442			58,389			32,215
Income before allocation to minority limited partners		438,164			635,688			640,700
Minority limited partners’ interest in the Operating Partnership		(21,037	)		(47,508	)		(58,712	)
Perpetual preferred unit distributions of the Operating Partnership		(22,084	)		(19,274	)		(21,848	)
Net income		395,043			568,906			560,140
Preferred share dividends		(57,091	)		(57,177	)		(57,511	)
NET INCOME applicable to common shares	$	337,952		$	511,729		$	502,629


INCOME PER COMMON SHARE – BASIC:
Income from continuing operations	$	1.20		$	2.98		$	3.31
Income from discontinued operations		1.00			0.39			0.23
Net income per common share	$	2.20		$	3.37		$	3.54

INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations	$	1.16		$	2.86		$	3.13
Income from discontinued operations		0.98			0.37			0.22
Net income per common share	$	2.14		$	3.23		$	3.35

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

	Preferred Shares			Common Shares			Additional Capital			Earnings in Excess of (Less Than) Distributions			Accumulated Other Comprehensive Income (Loss)			Shareholders’ Equity			Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
Balance, December 31, 2005	$	834,527		$	5,675		$	4,236,841		$	103,061		$	83,406		$	5,263,510
Cumulative effect of change in accounting principle		—			—			—			(639,447	)		—			(639,447	)
Balance, January 1, 2006		834,527			5,675			4,236,841			(536,386	)		83,406			4,624,063
Net Income		—			—			—			560,140			—			560,140		$	560,140
Dividends paid on common shares ($3.79 per share, including $.54 in special cash dividends)		—			—			—			(537,298	)		—			(537,298	)		—
Dividends paid on Preferred Shares:
Series A Preferred Shares ($3.25 per share)		—			—			—			(604	)		—			(604	)		—
Series D-10 preferred shares ($1.75 per share)		—			—			—			(2,800	)		—			(2,800	)		—
Series E Preferred Shares ($1.75 per share)		—			—			—			(5,250	)		—			(5,250	)		—
Series F Preferred Shares ($1.6875 per share)		—			—			—			(10,125	)		—			(10,125	)		—
Series G Preferred Shares ($1.65625 per share)		—			—			—			(13,250	)		—			(13,250	)		—
Series H Preferred Shares ($1.6875 per share)		—			—			—			(7,594	)		—			(7,594	)		—
Series I Preferred Shares ($1.65625 per share)		—			—			—			(17,888	)		—			(17,888	)		—
Proceeds from the issuance of common shares		—			324			1,004,481			—			—			1,004,805			—
Conversion of Series A Preferred shares to common shares		(5,897	)		7			5,890			—			—			—			—
Deferred compensation shares and options		—			(57	)		(59,209	)		(137,580	)		—			(196,846	)		—
Common shares issued:
Under employees’ share option plan		—			110			75,555			—			—			75,665			—
Upon redemption of Class A Operating Partnership Units, at redemption value		—			23			56,490			—			—			56,513			—
In connection with dividend reinvestment plan		—			1			2,207			—			—			2,208			—
Change in unrealized net gain on securities available for sale		—			—			—			—			70,416			70,416			70,416
Sale of securities available for sale		—			—			—			—			(69,863	)		(69,863	)		—
Common share offering costs		—			—			(411	)		—			—			(411	)
Change in pension plans		—			—			—			—			2,269			2,269			2,269
Adjustments to reflect Class A Operating Partnership Units at redemption value		—			—			(630,732	)		—			—			(630,732	)		—
Other		30			—			536			1			6,735			7,302			6,735
Balance, December 31, 2006	$	828,660		$	6,083		$	4,691,648		$	(708,634	)	$	92,963		$	4,910,720		$	639,560

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED

	Preferred Shares			Common Shares			Additional Capital			Earnings in Excess of (Less Than) Distributions			Accumulated Other Comprehensive Income (Loss)			Shareholders’ Equity			Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
Balance, December 31, 2006	$	828,660		$	6,083		$	4,691,648		$	(708,634	)	$	92,963		$	4,910,720
Net Income		—			—			—			568,906			—			568,906		$	568,906
Dividends paid on common shares ($3.45 per share)		—			—			—			(524,719	)		—			(524,719	)		—
Dividends paid on Preferred Shares:
Series A Preferred Shares ($3.25 per share)		—			—			—			(270	)		—			(270	)		—
Series D-10 preferred shares ($1.75 per share)		—			—			—			(2,800	)		—			(2,800	)		—
Series E Preferred Shares ($1.75 per share)		—			—			—			(5,250	)		—			(5,250	)		—
Series F Preferred Shares ($1.6875 per share)		—			—			—			(10,125	)		—			(10,125	)		—
Series G Preferred Shares ($1.65625 per share)		—			—			—			(13,250	)		—			(13,250	)		—
Series H Preferred Shares ($1.6875 per share)		—			—			—			(7,594	)		—			(7,594	)		—
Series I Preferred Shares ($1.65625 per share)		—			—			—			(17,888	)		—			(17,888	)		—
Conversion of Series A Preferred shares to common shares		(3,565	)		4			3,561			—			—			—			—
Deferred compensation shares and options		—			(17	)		(36,422	)		—			—			(36,439	)		—
Common shares issued:
Under employees’ share option plan		—			30			34,617			—			—			34,647			—
Upon redemption of Class A Operating Partnership Units, at redemption value		—			39			116,046			—			—			116,085			—
In connection with dividend reinvestment plan		—			1			2,030			—			—			2,031			—
Change in unrealized net loss on securities available for sale		—			—			—			—			(38,842	)		(38,842	)		(38,842	)
Sale of securities available for sale		—			—			—			—			(36,563	)		(36,563	)		—
Change in pension plans		—			—			—			—			895			895			895
Adjustments to reflect Class A Operating Partnership Units at redemption value		—			—			467,165			—			—			467,165			—
Other		—			—			72			(1	)		11,319			11,390			11,319
Balance, December 31, 2007	$	825,095		$	6,140		$	5,278,717		$	(721,625	)	$	29,772		$	5,418,099		$	542,278

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED

	Preferred Shares			Common Shares		Additional Capital			Earnings in Excess of (Less Than) Distributions			Accumulated Other Comprehensive Income (Loss)			Shareholders’ Equity			Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
Balance, December 31, 2007	$	825,095		$	6,140	$	5,278,717		$	(721,625	)	$	29,772		$	5,418,099		$	—
Net Income		—			—		—			395,043			—			395,043			395,043
Dividends paid on common shares ($3.65 per share)		—			—		—			(561,981	)		—			(561,981	)		—
Dividends paid on Preferred Shares:
Series A Preferred Shares ($3.25 per share)		—			—		—			(184	)		—			(184	)		—
Series D-10 preferred shares ($1.75 per share)		—			—		—			(2,800	)		—			(2,800	)		—
Series E Preferred Shares ($1.75 per share)		—			—		—			(5,250	)		—			(5,250	)		—
Series F Preferred Shares ($1.6875 per share)		—			—		—			(10,125	)		—			(10,125	)		—
Series G Preferred Shares ($1.65625 per share)		—			—		—			(13,250	)		—			(13,250	)		—
Series H Preferred Shares ($1.6875 per share)		—			—		—			(7,594	)		—			(7,594	)		—
Series I Preferred Shares ($1.65625 per share)		—			—		—			(17,888	)		—			(17,888	)		—
Conversion of Series A Preferred shares to common shares		(1,312	)		2		1,310			—			—			—			—
Deferred compensation shares and options		—			1		11,410			—			—			11,411			—
Common shares issued:
Under employees’ share option plan		—			7		26,897			(30,345	)		—			(3,441	)		—
Upon redemption of Class A Operating Partnership Units, at redemption value		—			40		82,290			—			—			82,330			—
In connection with dividend reinvestment plan		—			1		2,373			—			—			2,374			—
Change in unrealized net loss on securities available for sale		—			—		—			—			(20,150	)		(20,150	)		(20,150	)
Sale of securities available for sale		—			—		—			—			6,128			6,128			6,128
Change in pension plans		—			—		—			—			3,251			3,251			3,251
Adjustments to reflect Class A Operating Partnership Units at redemption value		—			—		404,447			—			—			404,447			—
Conversion of Series F-1 preferred units		—			4		9,996			—			—			10,000			—
Other		24			—		(60	)		1			(25,900	)		(25,935	)		(25,960	)
Balance, December 31, 2008	$	823,807		$	6,195	$	5,817,380		$	(975,998	)	$	(6,899	)	$	5,664,485		$	358,312

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)	Year Ended December 31,
(Amounts in thousands)	2008			2007			2006
Cash Flows from Operating Activities:
Net income	$	395,043		$	568,906		$	560,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization of debt issuance costs		577,338			545,885			413,162
Reversal of H Street deferred tax liability		(222,174	)		—			—
Net gain on sale of Americold Realty Trust		(112,690	)		—			—
Impairment loss – Lexington Realty Trust		107,882			—			—
Amortization of below-market leases, net		(96,176	)		(83,250	)		(23,814	)
Write-off of real estate joint ventures’ development costs		96,037			—			—
Straight-lining of rental income		(91,060	)		(77,699	)		(62,655	)
Impairment loss – marketable equity securities		76,352			—			—
Net gains on sale of real estate		(57,523	)		(64,981	)		(33,769	)
Equity in income of partially owned entities, including Alexander’s and Toys		(47,460	)		(69,656	)		273
Minority limited partners’ interest in the Operating Partnership		37,127			53,565			58,700
Distributions of income from partially owned entities		44,690			24,044			35,911
Net loss (gain) from derivative positions, including McDonalds, Sears Holdings and GMH		33,740			(113,503	)		(153,208	)
Perpetual preferred unit distributions of the Operating Partnership		22,084			19,274			21,848
Impairment losses on development projects and costs of acquisitions not consummated		81,447			10,375			—
Mezzanine loan loss (reversal) accrual		(10,300	)		57,000			—
(Gain) loss on early extinguishment of debt and write-off of unamortized financing costs		(9,820	)		7,670			33,488
Net gains on dispositions of wholly owned and partially owned assets other than depreciable real estate		(7,757	)		(39,493	)		(76,073	)
Minority interest of partially owned entities		(6,838	)		(18,559	)		(20,173	)
Other non-cash adjustments, including amortization of stock-based compensation		47,764			23,373			2,079
Changes in operating assets and liabilities:
Accounts receivable, net		(1,646	)		(25,877	)		24,373
Accounts payable and accrued expenses		(5,207	)		(89,961	)		60,348
Other assets		(39,831	)		(52,478	)		(62,224	)
Other liabilities		6,790			22,690			46,262
Net cash provided by operating activities		817,812			697,325			824,668
Cash Flows from Investing Activities:
Development costs and construction in progress		(598,688	)		(358,748	)		(233,492	)
Proceeds from sales of real estate		390,468			297,234			110,388
Distributions of capital from partially owned entities		218,367			22,541			114,041
Additions to real estate		(207,885	)		(166,319	)		(198,215	)
Purchases of marketable securities		(164,886	)		(152,683	)		(153,914	)
Investments in partially owned entities		(156,227	)		(271,423	)		(233,651	)
Proceeds received from repayment of mezzanine loans receivable		52,470			241,289			172,445
Proceeds from sales of, and return of investment in, marketable securities		51,185			112,779			173,027
Acquisitions of real estate and other		(26,318	)		(2,811,285	)		(1,399,326	)
Cash restricted, including mortgage escrows		12,004			11,652			52,268
Deposits in connection with real estate acquisitions, including pre-acquisition costs		(11,719	)		(27,702	)		(82,753	)
Investments in mezzanine loans receivable		(7,397	)		(217,081	)		(363,374	)
Acquisition of trade shows		(6,003	)		(10,722	)		(17,582	)
Cash received upon consolidation of investments in partially owned entities		1,398			—			—
Proceeds received on settlement of derivatives		—			260,764			135,028
Repayment of officers’ loans		—			2,000			8,600
Net cash used in investing activities		(453,231	)		(3,067,704	)		(1,916,510	)

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

	Year Ended December 31,
(Amounts in thousands)	2008			2007			2006
Cash Flows from Financing Activities:
Proceeds from borrowings		1,721,974			2,954,497			5,151,952
Repayments of borrowings		(993,665	)		(868,055	)		(1,544,076	)
Dividends paid on common shares		(561,981	)		(524,719	)		(537,298	)
Distributions to minority limited partners		(85,419	)		(81,065	)		(188,052	)
Dividends paid on preferred shares		(57,112	)		(57,236	)		(57,606	)
Repurchase of shares related to stock compensation arrangements and associated employee tax withholdings		(31,198	)		(43,396	)		(201,866	)
Proceeds received from exercise of employee share options		29,377			35,083			77,873
Debt issuance costs		(14,299	)		(14,360	)		(37,192	)
Purchase of marketable securities in connection with the legal defeasance of mortgage notes payable		—			(109,092	)		(636,293	)
Proceeds from issuance of common shares		—			—			1,004,394
Redemption of perpetual preferred shares and units		—			—			(45,000	)
Proceeds from issuance of preferred shares and units		—			—			43,819
Net cash provided by financing activities		7,677			1,291,657			3,030,655
Net increase (decrease) in cash and cash equivalents		372,258			(1,078,722	)		1,938,813
Cash and cash equivalents at beginning of year		1,154,595			2,233,317			294,504
Cash and cash equivalents at end of year	$	1,526,853		$	1,154,595		$	2,233,317

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (including capitalized interest of $63,063, $53,648, and $26,195)	$	658,376		$	653,811		$	454,391
Cash payments for taxes	$	22,005		$	36,489		$	8,766

Non-Cash Transactions:
Adjustments to reflect redeemable Class A operating partnership units at redemption value	$	404,447		$	467,165		$	(630,732	)
Conversion of Class A operating partnership units to common shares, at redemption value		82,230			116,085			56,513
Unrealized (loss) gain on securities available for sale		(20,150	)		38,842			70,416
Financing assumed in acquisitions		—			1,405,654			303,703
Marketable securities transferred in connection with the legal defeasance of mortgage notes payable		—			109,092			636,293
Mortgage notes payable legally defeased		—			104,571			612,270
Operating Partnership units issued in connection with acquisitions		—			62,059			—
Increase in assets and liabilities resulting from the consolidation of investments previously accounted for on the equity method (Beverly Connection in November 2008 and H Street in April 2007) :
Real estate, net		197,600			342,764			—
Restricted cash		2,287			369			—
Other assets		3,393			11,648			—
Notes and mortgages payable		100,000			55,272			—
Accounts payable and accrued expenses		2,069			3,101			—
Deferred credit		—			2,407			—
Deferred tax liabilities		—			112,797			—
Other liabilities		—			71			—

See notes to consolidated financial statements.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Organization and Business

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 90.6% of the common limited partnership interest in, the Operating Partnership at December 31, 2008. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

As of December 31, 2008, we own directly or indirectly:

Office Properties:

(i) all or portions of 28 office properties aggregating approximately 16.1 million square feet in the New York City metropolitan area (primarily Manhattan);

(ii) all or portions of 84 office properties aggregating 17.7 million square feet in the Washington, DC / Northern Virginia areas;

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

Retail Properties:

(iv) 176 retail properties in 21 states, Washington, DC and Puerto Rico aggregating approximately 21.9 million square feet, including 3.7 million square feet owned by tenants on land leased from us;

Merchandise Mart Properties:

(v) 8 properties in 5 states and Washington, DC aggregating approximately 8.9 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;

Toys “R” Us, Inc.:

(vi) a 32.7% interest in Toys “R” Us, Inc. which owns and/or operates 1,561 stores worldwide, including 847 stores in the United States and 714 toy stores internationally;

Other Real Estate Investments:

(vii) 32.5% of the common stock of Alexander’s, Inc. (NYSE: ALX), which has seven properties in the greater New York metropolitan area;

(viii) the Hotel Pennsylvania in New York City, consisting of a hotel portion containing 1.0 million square feet with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space;

(ix) mezzanine loans to entities that have significant real estate assets; and

(x) interests in other real estate, including interests in office, industrial and retail properties net leased to major corporations; 6 warehouse/industrial properties in New Jersey containing approximately 1.2 million square feet; and other investments and marketable securities.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Vornado Realty Trust and its majority-owned subsidiary, Vornado Realty L.P. All significant inter-company amounts have been eliminated. We account for unconsolidated partially owned entities on the equity method of accounting. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Significant Accounting Policies

Real Estate: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized. Maintenance and repairs are charged to operations as incurred. For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete. If the cost of the redeveloped property, including the undepreciated net book value of the property carried forward, exceeds the estimated fair value of redeveloped property, the excess is charged to expense. Depreciation is provided on a straight-line basis over the assets’ estimated useful lives which range from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets. Additions to real estate include interest expense capitalized during construction of $63,063,000 and $53,648,000, for the years ended December 31, 2008 and 2007, respectively.

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, and identified intangibles such as above and below-market leases and acquired in-place leases and customer relationships) and acquired liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) 141, Business Combinations and SFAS 142, Goodwill and Other Intangible Assets, and we allocate purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.

Our properties, including any related intangible assets, are individually reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over our anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Our impairment analysis is based on our plans for the asset and the market information available to our management at the time the analysis is prepared. If our estimates of the projected future cash flows, our anticipated holding period for properties, or the estimated fair value of properties change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. In the year ended December 31, 2008, we recognized an aggregate of $78,069,000 of non-cash impairment charges on our wholly owned real estate assets related to certain development projects. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Partially Owned Entities: In determining whether we have a controlling interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which we will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. We have concluded that we do not control a partially owned entity, despite an ownership interest of 50% or greater, if the entity is not considered a variable interest entity and the approval of all of the partners/members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the hiring of a chief executive officer, the commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing secured by assets of the venture. This is the case with respect to our 50% interests in Monmouth Mall, MartParc Wells, MartParc Orleans, 478-486 Broadway, 968 Third Avenue, West 57^th Street properties and 825 Seventh Avenue. We account for investments on the equity method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee. Equity method investments are initially recorded at cost and subsequently adjusted for our share of investees’ net income or loss and cash contributions and distributions made during the year. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.

Our investments in partially owned entities are reviewed for impairment, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. The ultimate realization of our investments in partially owned entities is dependent on a number of factors, including the performance of each investment and market conditions. We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary. In the year ended December 31, 2008, we recognized $203,919,000 of non-cash impairment charges related to investments in partially owned entities, of which $107,882,000 represents our investment in Lexington Realty Trust and the remainder represents our share of certain ventures’ development costs. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

Identified Intangibles: We record acquired intangible assets (including above-market leases, customer relationships and in-place leases) and acquired intangible liabilities (including below–market leases) at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives over the period the assets and liabilities are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

As of December 31, 2008 and 2007, the carrying amounts of identified intangible assets, a component of “other assets” on our consolidated balance sheets, were $525,950,000 and $563,359,000, respectively. In addition, the carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $719,822,000 and $814,098,000, respectively.

Mezzanine Loans Receivable: We invest in mezzanine loans to entities which have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or premium. We accrete or amortize any discounts or premiums over the life of the related loan receivable utilizing the effective interest method, or straight-line method if the result is not materially different. We evaluate the collectibility of both interest and principal of each of our loans, if circumstances warrant, to determine whether they are impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. In the year ended December 31, 2007, we recognized a $57,000,000 non-cash impairment charge on one of our mezzanine loans. Upon sale of a sub-participation in that loan during 2008, we reversed $10,300,000 of the charge recognized in 2007.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Cash and cash equivalents do not include cash escrowed under loan agreements and cash restricted in connection with an officer’s deferred compensation payable. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit. We have not experienced any losses to date on our invested cash.

Allowance for Doubtful Accounts: We periodically evaluate the collectibility of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents. This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. As of December 31, 2008 and 2007, we had $32,834,000 and $19,151,000, respectively, in allowances for doubtful accounts. In addition, as of December 31, 2008 and 2007, we had $5,773,000 and $3,076,000, respectively, in allowances for receivables arising from the straight-lining of rents.

Marketable Securities: We classify debt and equity securities which we intend to hold for an indefinite period of time as securities available-for-sale; equity securities we intend to buy and sell on a short term basis as trading securities; and mandatorily redeemable preferred stock investments which we intend to hold to maturity as securities held–to–maturity. Unrealized gains and losses on trading securities are included in earnings. Unrealized gains and losses on securities available-for-sale are included as a component of shareholders’ equity and other comprehensive income. Realized gains or losses on the sale of securities are recorded based on the weighted average cost of such securities.

We evaluate our portfolio of marketable securities for impairment as of each reporting period. For each of the securities in our portfolio with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a reasonable period of time sufficient for us to recover our cost basis. We also evaluate the near-term prospects for each of these investments in relation to the severity and duration of the decline. In the year ended December 31, 2008, we recognized an aggregate of $76,352,000 of non-cash impairment charges related to investments in marketable securities, which is included as a component of “interest and other investment (loss) income, net” on our consolidated statement of income. Our conclusions were based on the severity and duration of the decline in the market value (“fair value” pursuant to SFAS 157) of these securities and our inability to forecast a recovery in the near term. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

At December 31, 2008 and 2007, our marketable equity securities had an aggregate carrying amount of $120,499,000 and $215,134,000, and an aggregate fair value of $118,438,000 and $226,682,000, respectively. Accordingly, net unrealized (losses) gains were ($2,061,000) and $11,548,000 as of December 31, 2008 and 2007, respectively. At December 31, 2008 and 2007, our held-to-maturity securities had an aggregate carrying amount of $215,884,000 and $96,310,000, and an aggregate fair value of $164,728,000 and $96,310,000, respectively.

Deferred Charges: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate.

Fair Value of Financial Instruments: We have estimated the fair value of all financial instruments reflected in the accompanying consolidated balance sheets at amounts which are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to mezzanine loans and debt). While we chose not to elect the fair value option prescribed by Statement No.159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”), for our financial assets and liabilities that had not been previously measured at fair value, the aggregate fair value of our mezzanine loans receivable was less than its aggregate carrying amount by approximately $55,452,000 as of December 31, 2008 and approximated its carrying amount at December 31, 2007. As of December 31, 2008, the estimated fair value of our consolidated debt was less than its carrying amount by approximately $1,177,806,000. As of December 31, 2007, the carrying amount of our consolidated debt exceeded its fair value by approximately $49,768,000. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of our financial instruments.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Revenue Recognition: We have the following revenue sources and revenue recognition policies:

•

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

•

Percentage Rent — income arising from retail tenant leases that is contingent upon the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with Staff Accounting Bulletin No. 104: Revenue Recognition, which states that this income is to be recognized only after the contingency has been removed (i.e., sales thresholds have been achieved).

•

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

•

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

•

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

•

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

Derivative Instruments and Hedging Activities: SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS 133, we record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Income Taxes: We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We distribute to shareholders 100% of taxable income and therefore, no provision for Federal income taxes is required. Dividend distributions for the year ended December 31, 2008 were characterized, for Federal income tax purposes, as 70.81% ordinary income and 29.19% return of capital. Dividend distributions for the year ended December 31, 2007 were characterized, for Federal income tax purposes, as 61.6% ordinary income and 38.4% long-term capital gain income. Dividend distributions for the year ended December 31, 2006 were characterized, for Federal income tax purposes, as 29.0% ordinary income, 14.8% long-term capital gain income and 56.2% return of capital.

We have elected to treat certain consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable REIT subsidiaries pursuant to an amendment to the Internal Revenue Code that became effective January 1, 2001. Taxable REIT subsidiaries may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to Federal and State income tax at regular corporate tax rates. Our taxable REIT subsidiaries had a combined current income tax liability of approximately $21,357,000 and $15,361,000 for the years ended December 31, 2008 and 2007, respectively, and have immaterial differences between the financial reporting and tax basis of assets and liabilities.

In connection with purchase accounting for H Street, in July 2005 and April 2007 we recorded an aggregate of $222,174,000 of deferred tax liabilities representing the differences between the tax basis and the book basis of the acquired assets and liabilities multiplied by the effective tax rate. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

The following table reconciles net income to estimated taxable income for the years ended December 31, 2008, 2007 and 2006.

(Amounts in thousands)	2008			2007			2006
Net income applicable to common shares	$	337,952		$	511,729		$	502,629
Book to tax differences (unaudited):
Depreciation and amortization		233,426			145,131			118,364
Reversal of deferred tax liability		(202,267	)		—			—
Straight-line rent adjustments		(82,901	)		(70,450	)		(56,690	)
Stock options expense		(71,995	)		(88,752	)		(220,043	)
Derivatives		43,218			131,711			(25,726	)
Earnings of partially owned entities		(50,855	)		12,093			72,534
Net gains on sale of real estate		3,687			(57,386	)		(22,699	)
Compensation deduction for units held in Rabbi Trust		—			—			(171,356	)
Sears Canada dividend		—			—			(72,706	)
Other, net		84,124			37,571			(21,048	)
Estimated taxable income	$	294,389		$	621,647		$	103,259

The net basis of our assets and liabilities for tax reporting purposes is approximately $3.4 billion lower than the amount reported in our consolidated financial statements.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Income Per Share: Basic income per share is computed based on weighted average shares outstanding. Diluted income per share considers the effect of all potentially dilutive share equivalents, including outstanding employee stock options, restricted shares, warrants and convertible or redeemable securities.

Stock-Based Compensation: Stock-based compensation consists of awards to certain employees and officers and consists of stock options, restricted stock, restricted Operating Partnership units and out-performance plan awards. The terms of each of these awards are described in Note 11. Stock-Based Compensation. We account for all stock-based compensation in accordance with SFAS No. 123R, Share-Based Payment (“SFAS 123R”).

Stock option awards

We determine the value of stock option awards, using a binomial valuation model and appropriate market assumptions adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense for stock option awards is recognized on a straight-line basis over the vesting period, which is generally five years.

Restricted stock and Operating Partnership unit awards

Restricted stock awards are valued using the average of the high and low market price of our common shares on the NYSE on the date of grant, adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense is recognized on a straight-line basis over the vesting period, which is generally three to five years. Dividends paid on unvested shares are charged to retained earnings. Dividends on shares that are cancelled or terminated prior to vesting are charged to compensation expense in the period they are cancelled or terminated.

Restricted Operating Partnership unit awards are also valued using the average of the high and low market price of our common shares on the NYSE on the date of grant, adjusted to include an estimated forfeiture factor which is based on history. Compensation expense is recognized over the five year vesting period using a graded vesting attribution model as these awards are subject to the satisfaction of a performance condition. Dividends paid on unvested units are charged to minority interest expense on our consolidated statements of operations. Dividends on units that are cancelled or terminated prior to the satisfaction of the performance condition and vesting are charged to compensation expense in the period they are cancelled or terminated.

Out-performance plan awards

Out-performance plan awards are valued using a risk-free valuation model and appropriate market assumptions as of the date of grant, adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense is recognized over five years using a graded vesting attribution model as these awards are subject to the satisfaction of certain market and performance conditions, in addition to vesting.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

Recently Issued Accounting Literature

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America and expands disclosures about fair value measurements. SFAS 157 was effective for our financial assets and liabilities on January 1, 2008. The FASB has deferred the implementation of the provisions of SFAS 157 relating to certain non-financial assets and liabilities until January 1, 2009. This standard did not materially affect how we determine fair value, but resulted in certain additional disclosures. SFAS 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial assets and liabilities measured at fair value in our consolidated financial statements primarily consist of (i) marketable securities, (ii) the assets of our deferred compensation plan (primarily marketable securities and equity investments in limited partnerships), for which there is a corresponding liability on our consolidated balance sheets and (iii) Class A units of the Operating Partnership, held by third-parties. Financial assets and liabilities measured at fair value as of December 31, 2008 are presented in the table below based on their level in the fair value hierarchy.

				Fair Value Hierarchy⁽¹⁾
(Amounts in thousands)		Total		Level 1	Level 2		Level 3
Marketable securities	$	118,438	$	118,438	$	—	$	—
Deferred compensation plan assets (included in other assets)		69,945		35,769		—		34,176
Interest rate caps (included in other assets)		25		—		25		—
Total Assets	$	188,408	$	154,207	$	25	$	34,176

Class A units (included in minority interest)	$	882,740	$	—	$	882,740	$	—

Deferred compensation plan liabilities	$	69,945	$	35,769	$	—	$	34,176

___________________

(1)

We chose not to elect the fair value option prescribed by SFAS 159, for our financial assets and liabilities that had not been previously measured at fair value. These financial assets and liabilities include our outstanding debt, accounts receivable, accounts payable and investments in partially owned entities.

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships, for which there is a corresponding Level 3 liability to the plan’s participants. The following is a summary of changes in Level 3 deferred compensation plan assets and liabilities, for the year ended December 31, 2008.

(Amounts in thousands)		Beginning Balance		Total Realized/ Unrealized Losses		Purchases, Sales, Other Settlements and Issuances, net			Ending Balance

For the year ended December 31, 2008	$	50,578	$	(15,407	)	$	(995	)	$	34,176

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

In February 2007, the FASB issued SFAS 159, which permits companies to measure many financial instruments and certain other items at fair value. SFAS 159 was effectiveon January 1, 2008. We did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether we will elect this option for any eligible financial instruments we acquire in the future.

In December 2007, the FASB issued Statement No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for all transactions entered into on or after January 1, 2009. The adoption of this standard on January 1, 2009 could materially impact future financial results to the extent that we a cquire significant amounts of real estate, in part because acquisition costs will be expensed as incurred compared to our current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. As of December 31, 2008, as part of our preparation for the adoption of SFAS 160, which is effective for us on January 1, 2009, we have retroactively adopted the measurement provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities. Upon adoption, we adjusted the carrying amounts of the Class A units held by third parties, a component of “minority interest” on our consolidated balance sheets, by recognizing a $639,447,000 increase to the January 1, 2006 balance of “minority interest,” and a corresponding decrease in “earnings in excess of (less than) distributions,” which was accounted for as a cumulative effect adjustment on January 1, 2006. Subsequent adjustments to the carrying amounts of the Class A units, to reflect the change in their redemption value at the end of each reporting period, were recorded to “additional capital.” The adoption of SFAS 160 on January 1, 2009, will not result in the re-classification of the Class A units held by third parties to a component within “shareholders’ equity.”

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133, and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows. SFAS 161 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.	Basis of Presentation and Significant Accounting Policies – continued

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement), (the “FSP”), which is effective for us on January 1, 2009 and requires retroactive application. The adoption of this FSP will affect the accounting for our convertible and exchangeable senior debentures and Series D-13 convertible preferred units. The FSP requires the initial proceeds from the sale of our convertible and exchangeable senior debentures and Series D-13 convertible preferred units to be allocated between a liability component and an equity component. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The adoption of the FSP on January 1, 2009 will result in the recognition of an aggregate unamortized debt discount of $139,937,000 (as of December 31, 2008) in our consolidated balance sheets and additional interest expense in our consolidated statements of income. Our current estimate of the incremental interest expense, net of minority interest, for each reporting period is as follows:

(Amounts in thousands)
For the year ended December 31:
2005	$	3,401
2006		6,062
2007		28,191
2008		36,348
2009		37,379
2010		39,612
2011		40,587
2012		8,219

In May 2008, the FASB issued Statement No. 163, Accounting for Financial Guarantee Insurance Contracts (“SFAS 163”). SFAS 163 was issued to decrease inconsistencies within Statement No. 60, Accounting and Reporting by Insurance Enterprises, and clarify how it applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition of premium revenue and claim liabilities. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-5”). Paragraph 11(a) of SFAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-5 is effective on January 1, 2009. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.	Acquisitions and Investments

There were no material real estate acquisitions or investments during 2008. We completed approximately $4,045,400,000 of real estate acquisitions and investments in 2007. We record the assets (primarily land, building, in-place and above market leases) and liabilities (primarily mortgage debt and below market leases) acquired in real estate acquisitions at their estimated fair values. Below are the details of our 2007 acquisitions.

New York Office:

100 West 33^rd Street, New York City / Manhattan Mall

On January 10, 2007, we acquired the 100 West 33^rd Street, New York City / Manhattan Mall for approximately $689,000,000 in cash. This mixed-use property is located on the entire Sixth Avenue block-front between 32^nd and 33^rd Streets in Manhattan and contains approximately 1,000,000 square feet, including 845,000 square feet of office space and 164,000 square feet of retail space. Included as part of the acquisition were 250,000 square feet of additional air rights. The property is adjacent to our Hotel Pennsylvania. At closing, we completed a $232,000,000 financing secured by the property, which bears interest at LIBOR plus 0.55% and matures in two years with three one-year extension options. The operations of the office component of the property are included in the New York Office segment and the operations of the retail component are included in the Retail segment. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

1290 Avenue of the Americas and 555 California Street

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas, a 2,000,000 square foot Manhattan office building located on the block-front between 51^st and 52^nd Street on Avenue of the Americas, and the three-building 555 California Street complex (“555 California Street”) containing 1,800,000 square feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district. The purchase price for our 70% interest in the real estate was approximately $1.8 billion, consisting of $1.0 billion of cash and $797,000,000 of existing debt. Our share of the debt was comprised of $308,000,000 secured by 1290 Avenue of the Americas and $489,000,000 secured by 555 California Street. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. The operations of 1290 Avenue of the Americas are included in the New York Office segment and the operations of 555 California Street are included in the Other segment. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.	Acquisitions and Investments - continued

Washington, DC Office:

H Street Building Corporation (“H Street”)

In July 2005, we acquired H Street, which owns a 50% interest in real estate assets located in Pentagon City, Virginia and Washington, DC. On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets for approximately $383,000,000, consisting of $322,000,000 in cash and $61,000,000 of existing mortgages. These assets include twin office buildings located in Washington, DC, containing 577,000 square feet, and assets located in Pentagon City, Virginia, comprising 34 acres of land leased to three residential and retail operators, a 1,680 unit high-rise apartment complex and 10 acres of vacant land. Beginning on April 30, 2007, we consolidated the accounts of these entities into our consolidated financial statements and no longer account for them on the equity method.

Further, we agreed to sell approximately 19.6 of the 34 acres of land to one of the existing ground lessees in two closings over a two-year period for approximately $220,000,000. On May 11, 2007, we closed on the sale of 11 of the 19.6 acres for $104,000,000 and received $5,000,000 in cash and a $99,000,000 short-term note. On September 28, 2007, the buyer pre-paid the note in cash and we recognized a net gain on sale of $4,803,000.

BNA Complex

On August 9, 2007, we acquired a three building complex from The Bureau of National Affairs, Inc. (“BNA”) for $111,000,000 in cash. The complex contains approximately 300,000 square feet and is located in Washington’s West End between Georgetown and the Central Business District. We plan to convert two of these buildings into rental apartments. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisitions and Investments – continued

Retail:

Bruckner Plaza, Bronx, New York

On January 11, 2007, we acquired the Bruckner Plaza shopping center, containing 386,000 square feet, for $165,000,000 in cash. Also included as part of the acquisition was an adjacent parcel which is ground leased to a third party. The property is located on Bruckner Boulevard in the Bronx, New York. We consolidated the accounts of this property into our consolidated financial statements from the date of acquisition.

Shopping Center Portfolio Acquisition

On June 26, 2007, we entered into an agreement to acquire a portfolio of 15 shopping centers aggregating approximately 1.9 million square feet for an aggregate purchase price of $351,000,000. The properties are located primarily in Northern New Jersey and Long Island, New York. We have completed the acquisition of nine of these properties for an aggregate purchase price of $250,478,000, consisting of $109,279,000 in cash, $49,599,000 in Vornado Realty L.P. Series G-1 through G-4 convertible preferred units, $12,460,000 of Vornado Realty L.P. Class A units and $79,140,000 of existing mortgage debt. In December 2007, we determined not to complete the acquisition of the remaining six properties and expensed $2,700,000 which is included as a component of “impairment losses on development projects and costs of acquisitions not consummated” on our consolidated statement of income for the year ended December 31, 2007.

Other:

India Real Estate Ventures

In August 2008, we entered into a joint venture with Reliance Industries Limited (“Reliance”) (BSE: RIL), under which each partner has an equal ownership interest, to acquire, develop, and operate retail shopping centers across key cities in India. We are also a partner in four other joint ventures established to develop real estate in India’s major cities. During the year ended December 31, 2008, we funded an aggregate of $50,387,000 in cash to our India ventures, including $7,500,000 to the Reliance venture and $34,077,000 to the India Property Fund L.P. (“IPF”). As of December 31, 2008, our aggregate investment in all of these ventures was $89,295,000 and our remaining capital commitment is approximately $192,000,000. At December 31, 2008 and 2007, our ownership interest in IPF was 36.5% and 50.6%, respectively. Based on the reduction of our ownership interest in 2008, we no longer consolidate the accounts of IPF into our consolidated financial statements and beginning on January 1, 2008 we account for IPF under the equity method.

Filene’s, Boston, Massachusetts

On January 26, 2007, a joint venture in which we have a 50% interest, acquired the Filene’s property located in the Downtown Crossing district of Boston, Massachusetts for approximately $100,000,000 in cash, of which our share was $50,000,000. We account for our investment in the joint venture on the equity method. In the fourth quarter of 2008, the venture deferred the development of this project and accordingly, we wrote-off $37,000,000 for our 50% share of development costs, which is included as a component of “(loss) income from partially owned entities” on our consolidated statement of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.	Discontinued Operations

In accordance with the provisions of SFAS 144, Accounting for the Impairment and Disposal of Long-Lived Assets, we have reclassified the revenues and expenses of properties and businesses sold or to be sold to “income from discontinued operations, net of minority interest” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.

The net gains resulting from the disposition of the properties below are included in “income from discontinued operations, net of minority interest” on our consolidated statements of income.

424 Sixth Avenue

On March 13, 2006, we sold 424 Sixth Avenue, a 10,000 square foot retail property located in New York City, for $22,000,000, which resulted in a net gain of $9,218,000.

33 North Dearborn Street

On March 14, 2006, we sold 33 North Dearborn Street, a 336,000 square foot office building located in Chicago, Illinois, for $46,000,000, which resulted in a net gain of $4,835,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

1919 South Eads Street

On June 22, 2006, we sold 1919 South Eads Street, a 96,000 square foot office building located in Arlington, Virginia, for $38,400,000, which resulted in a net gain of $17,609,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

Vineland, New Jersey Shopping Center Property

On July 16, 2007, we sold our Vineland, New Jersey shopping center property for $2,774,000 in cash, which resulted in a net gain of $1,708,000.

Crystal Mall Two

On August 9, 2007, we sold Crystal Mall Two, a 277,000 square foot office building located at 1801 South Bell Street in Crystal City for $103,600,000, which resulted in a net gain of $19,893,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

Arlington Plaza

On October 17, 2007, we sold Arlington Plaza, a 188,000 square foot office building located in Arlington, Virginia for $71,500,000, resulting in a net gain of $33,900,000.

Americold Realty Trust (“Americold”)

On March 31, 2008, we sold our 47.6% interest in Americold, our Temperature Controlled Logistics segment for $220,000,000 in cash, which resulted in a net gain of $112,690,000.

Tysons Dulles Plaza

On June 6, 2008, we sold our Tysons Dulles Plaza office building complex for $152,800,000 in cash, which resulted in a net gain of $56,831,000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.	Discontinued Operations – continued

The following table sets forth the assets (primarily the net book value of real estate) related to discontinued operations.

(Amounts in thousands)	December 31,
	2008		2007
H Street – 8.6 acres of land subject to ground leases (see page 24)	$	108,292	$	108,470
Retail Properties		2,088		4,030
Americold		—		1,424,770
Tysons Dulles Plaza		—		95,048
	$	110,380	$	1,632,318

The following table sets forth the liabilities (primarily mortgage debt) related to discontinued operations as of December 31, 2008 and 2007.

(Amounts in thousands)	December 31,
	2008		2007
Americold	$	750	$	1,332,627
Tysons Dulles Plaza		—		3
	$	750	$	1,332,630

The following table sets forth the combined results of discontinued operations for the years ended December 31, 2008, 2007 and 2006.

(Amounts in thousands)	For the Year Ended December 31,
	2008			2007			2006
Total revenues	$	222,361		$	865,584		$	813,665
Total expenses		238,132			872,176			815,219
Net loss		(15,771	)		(6,592	)		(1,554	)
Net gains on sale of real estate		170,213			64,981			33,769
Income from discontinued operations, net of minority interest	$	154,442		$	58,389		$	32,215

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.	Derivative Instruments and Related Marketable Securities

Investment in McDonald’s Corporation (“McDonalds”) (NYSE: MCD)

We owned an economic interest in 14,565,500 McDonalds’ common shares through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on McDonalds’ common shares. These call and put options had an initial weighted-average strike price of $32.66 per share, or an aggregate of $475,692,000 and provided for net cash settlement. Under these agreements, the strike price for each pair of options increased at an annual rate of LIBOR plus 45 basis points and was decreased for dividends received. The options provided us with the same economic gain or loss as if we had purchased the underlying common shares and borrowed the aggregate purchase price at an annual rate of LIBOR plus 45 basis points. Because these options were derivatives and did not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income. During 2006, we sold 2,119,500 of these shares at a weighted average price of $35.49 per share, and acquired an additional 1,250,000 option shares at a weighted average price of $33.08 per share. During 2007, we settled the 13,695,500 remaining option shares and received an aggregate of $260,719,000 in cash. We recognized net gains of $108,821,000 and $138,815,000 in the years ended December 31, 2007 and 2006, respectively, representing income from the mark-to-market of these shares during the period of our ownership through their settlement, net of related LIBOR charges.

In addition to the above, in October 2007, we sold 858,000 McDonald’s common shares for aggregate proceeds of $48,434,000, or $56.45 per share, and recognized a net gain of $23,090,000, representing accumulated appreciation during the period of our ownership. The shares were acquired in 2005 at a weighted average price of $29.54 per share, and were classified as “available-for-sale” marketable equity securities on our consolidated balance sheet.

The aggregate net gain from inception of our investments in McDonalds in 2005 through final settlement in October 2007 was $289,414,000.

Investment in Sears, Roebuck and Co. (“Sears”)

We owned an economic interest in 7,916,900 Sears’ common shares through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on Sears’ common shares. These call and put options had an initial weighted-average strike price of $39.82 per share, or an aggregate of $315,250,000. Under these agreements, the strike price for each pair of options increased at an annual rate of LIBOR plus 45 basis points and was decreased for dividends received. The options provided us with the same economic gain or loss as if we had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points. Because these options were derivatives and did not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income. On March 30, 2005, as a result of the merger between Sears and Kmart and pursuant to the terms of the contract, our derivative position representing 7,916,900 Sears common shares became a derivative position representing 2,491,819 common shares of Sears Holdings, Inc. (“Sears Holdings”) (Nasdaq: SHLD) valued at $323,936,000 based on the then closing share price of $130.00 and $146,663,000 of cash. During 2005 we sold 402,660 of the option shares at a weighted average price of $124.44 per share. During 2006, we settled the remaining 2,089,159 option shares at a weighted average price of $125.43 per share, resulting in a net gain of $18,611,000. The aggregate net gain realized from inception of this investment in 2004 through settlement was $142,877,000.

Investment in Sears Canada, Inc. (“Sears Canada”)

On April 3, 2006, we tendered the 7,500,000 Sears Canada shares we owned to Sears Holdings at the increased tender price of Cdn. $18.00 per share (the equivalent at that time of US $15.68 per share), which resulted in a net gain of $55,438,000, the difference between the tender price, and our carrying amount of $8.29 per share. Together with income recognized in the fourth quarter of 2005 that resulted from a Sears Canada special dividend, the aggregate net gain from inception in 2005 on our $143,737,000 investment was $78,323,000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.	Derivative Instruments and Related Marketable Securities - continued

GMH Communities L.P. Stock Purchase Warrants

We owned warrants to acquire GMH Communities L.P. (“GMH”) common equity. The warrants entitled us to acquire (i) 6,666,667 GMH limited partnership units at an exercise price of $7.50 per unit and (ii) 5,496,724 GMH limited partnership units at an exercise price of $8.22 per unit. The warrants were accounted for as derivative instruments that did not qualify for hedge accounting treatment. Accordingly, the gains or losses resulting form the mark-to-market of the warrants at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income.

On November 3, 2004, we exercised our first tranche of warrants to acquire 6,666,667 limited partnership units at a price of $7.50 per unit, or an aggregate of $50,000,000. On May 2, 2006, the date our remaining GMH warrants were to expire, we received 1,817,247 GMH Communities Trust (NYSE: GCT) (“GCT”) common shares through an automatic cashless exercise, which resulted in the recognition of a net loss of $16,370,000, the difference between the value of the GCT common shares received on May 2, 2006 and GCT’s closing share price of $15.51 on December 31,2005.

6.	Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of December 31, 2008, we own 32.7% of Toys. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. Because Toys’ fiscal year ends on the Saturday nearest January 31, we record our 32.7% share of Toys’ net income or loss on a one-quarter lag basis.

In July 2008, in connection with an audit of Toys’ purchase accounting basis financial statements for its fiscal years 2006 and 2007, it was determined that the purchase accounting basis income tax expense was understated. Our share of this non-cash charge was $14,900,000, which we recognized as part of our equity in Toys’ net loss in the second quarter of 2008. This non-cash charge had no effect on cash actually paid for income taxes or Toys’ previously issued Recap basis consolidated financial statements.

In 2006, Toys closed 87 Toys “R” Us stores in the United States as a result of its store-closing program. Toys incurred restructuring and other charges aggregating approximately $127,000,000 before tax, which includes $44,000,000 for the cost of liquidating the inventory. Our share of the $127,000,000 charge was $42,000,000, of which $27,300,000 had no income statement effect as a result of purchase accounting and the remaining portion relating to the cost of liquidating inventory of approximately $9,100,000 after-tax, was recognized as an expense as part of our equity in Toys’ net income in 2006.

Below is a summary of Toys’ latest available financial information presented on a purchase accounting basis:


(Amounts in millions)
Balance Sheet:	As of November 1, 2008		As of November 3, 2007
Total Assets	$	12,410	$	12,636
Total Liabilities		11,481		11,645
Total Equity		929		991

	For the Twelve Months Ended
Income Statement:	November 1, 2008			November 3, 2007			October 28, 2006
Total Revenue	$	14,090		$	13,646		$	12,205
Net Loss		(13	)		(65	)		(143	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities - continued

Alexander’s, Inc. (NYSE: ALX) (“Alexander’s”)

We owned 32.5% and 32.8% of the outstanding common shares of Alexander’s at December 31, 2008 and 2007, respectively. We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of each year and are automatically renewable. At December 31, 2008 the fair value of our investment in Alexander’s, based on Alexander’s December 31, 2008 closing share price of $254.90, was $421,622,000.

Management and Development Agreements

We receive an annual fee for managing Alexander’s and all of its properties equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Regional Shopping Center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue and (iv) $234,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue.

In addition, we are entitled to a development fee of 6% of development costs, as defined, with minimum guaranteed payments of $750,000 per annum. During the years ended December 31, 2008, 2007 and 2006, we recognized $4,101,000, $4,482,000 and $725,000, respectively, of development fee income.

Leasing Agreements

We provide Alexander’s with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through twentieth year of a lease term and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by Alexander’s tenants. In the event third-party real estate brokers are used, our fee increases by 1% and we are responsible for the fees to the third-parties. We are also entitled to a commission upon the sale of any of Alexander’s assets equal to 3% of gross proceeds, as defined, for asset sales less than $50,000,000, or 1% of gross proceeds, as defined, for asset sales of $50,000,000 or more. The total of these amounts is payable to us in annual installments in an amount not to exceed $4,000,000 with interest on the unpaid balance at one-year LIBOR plus 1.0% (5.19% at December 31, 2008).

Other Agreements

Building Maintenance Services (“BMS”), our wholly-owned subsidiary, supervises the cleaning, engineering and security services at Alexander’s 731 Lexington Avenue and Kings Plaza properties for an annual fee of the costs for such services plus 6%. During the years ended December 31, 2008, 2007 and 2006, we recognized $2,083,000, $3,016,000 and $2,828,000, respectively, of income under these agreements.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities - continued

Lexington Realty Trust (“Lexington”) (NYSE: LXP)

On December 31, 2006, Newkirk Realty Trust (NYSE: NKT) was acquired in a merger by Lexington, a real estate investment trust that invests in, owns and manages commercial properties net leased to major corporations throughout the United States. We owned 10,186,991 Newkirk Master Limited Partnership (“Newkirk MLP”) units (representing a 15.8% ownership interest), which was also acquired by Lexington as a subsidiary and was renamed Lexington Master Limited Partnership (“Lexington MLP”). The units in Newkirk MLP, which we accounted for on the equity method, were converted on a 0.80 for 1 basis into limited partnership units of Lexington MLP, which we also account for on the equity method. In addition, upon the merger, Newkirk terminated its advisory agreement with NKT Advisors, in which we had a 20.0% interest, for an aggregate payment of $12,500,000, of which our share was $2,300,000. On December 31, 2006, we recognized a net gain of $10,362,000, as a result of the merger transactions, which is included on a component of “(loss) income from partially owned entities” on our consolidated statement of income.

In connection with the above transactions, we owned 8,149,592 limited partnership units of Lexington MLP which were exchangeable on a one-for-one basis into Lexington common shares, or a 7.7% limited partnership interest. On October 28, 2008, we acquired 8,000,000 Lexington common shares for $5.60 per share, or $44,800,000. The purchase price consisted of $22,400,000 in cash and a $22,400,000 margin loan recourse only to the 8,000,000 shares acquired. In addition, we exchanged our existing limited partnership units in Lexington MLP for 8,149,592 Lexington common shares. As of December 31, 2008, we own 16,149,592 Lexington common shares, or approximately 17.2% of Lexington’s common equity. We account for our investment in Lexington on the equity method and record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements.

Based on Lexington’s December 31, 2008 closing share price of $5.00, the market value (“fair value” pursuant to SFAS 157) of our investment in Lexington was $80,748,000, or $100,707,000 below the carrying amount on our consolidated balance sheet. We have concluded that our investment in Lexington is “other-than-temporarily” impaired and recorded a $100,707,000 non-cash impairment loss in the fourth quarter of 2008. Together with impairment changes recorded in the nine months ended September 30, 2008, we recognized an aggregate of $107,882,000 of non-cash charges on our investment in Lexington. Our conclusions were based on the recent deterioration in the capital and financial markets and our inability to forecast a recovery in the near-term. These charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

GMH

In June 2008, pursuant to the sale of GMH’s military housing division and the merger of its student housing division with American Campus Communities, Inc. (“ACC”) (NYSE: ACC), we received an aggregate of $105,180,000, consisting of $82,142,000 in cash and 753,126 shares of ACC common stock valued at $23,038,000 based on ACC’s then closing share price of $30.59, in exchange for our entire interest in GMH. We subsequently sold all of the ACC common shares. The above transactions resulted in a net gain of $2,038,000 which is included as a component of “net gains on disposition of wholly owned and partially owned assets other than depreciable real estate” in our consolidated statement of income. The aggregate net income realized from inception of this investment in 2004 through its disposition was $77,000,000.

Real Estate Joint Ventures’ Development Costs

During 2008, we recognized non-cash charges aggregating $96,037,000, for the write-off of our share of certain partially owned entities’ development costs, as these projects were either deferred or abandoned. These charges include $37,000,000 in the fourth quarter of 2008, for our 50% share of costs in connection with the redevelopment of the Filene’s property in Boston, Massachusetts and $23,000,000 in the first quarter of 2008, for our 50% share of costs in connection with the abandonment of the “arena move”/Moynihan East portions of the Farley project. Such charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities – continued

Investments in partially owned entities as of December 31, 2008 and 2007 and income recognized from such investments for the years ended December 31, 2008, 2007 and 2006 are as follows:

Investments:

(Amounts in thousands)	Percentage
	Ownership as of	As of December 31,
	December 31, 2008	2008		2007

Toys	32.7%	$	293,096	$	298,089

Partially owned office buildings (1)	(1)	$	157,468	$	161,411
Lexington (see page 31)	17.2%		80,748		160,868
India real estate ventures	4%-50%		88,858		123,997
Alexander’s	32.5%		137,305		122,797
GMH (sold in June 2008)	—		—		103,260
Beverly Connection (2)	50%		—		91,302
Other equity method investments (3)	(3)		325,775		443,107
		$	790,154	$	1,206,742

____________________________

(1)

Includes interests in 330 Madison Avenue (25%), 825 Seventh Avenue (50%), Fairfax Square (20%), Kaempfer equity interests in three office buildings (2.5% to 5.0%), Rosslyn Plaza (46%) and West 57^th Street properties (50%).

(2)

As of November 13, 2008, our joint venture partner’s failure to contribute its pro rata share of required capital resulted in our ability under the joint venture agreement to assert unilateral control over major business decisions and accordingly, we began to consolidate our investment pursuant to Accounting Research Bulletin (“ARB”) 51, Consolidated Financial Statements.

(3)

Includes interests in Monmouth Mall and redevelopment ventures including Boston Filene’s, Harlem Park and Farley Project.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Investments in Partially Owned Entities – continued

Our Share of Net Income (Loss):	For the Years Ended December 31,
(Amounts in thousands)	2008		2007			2006

Toys:
32.7% share in 2008 and 2007 and 32.9% in 2006: Equity in net loss	$	(5,785	)	$	(20,957	)	$	(56,218	)
Interest and other income		8,165			6,620			8,698
	$	2,380		$	(14,337	)	$	(47,520	)
Alexander’s:
32.5% share in 2008, 32.8% in 2007 and 2006 of:
Equity in net income before reversal (accrual) of stock appreciation rights compensation expense and net gain on sale of condominiums	$	17,484		$	22,624		$	19,120
Reversal (accrual) of stock appreciation rights compensation expense		6,583			14,280			(49,043	)
Net gain on sale of condominiums		—			420			4,580
Equity in net income (loss)		24,067			37,324			(25,343	)
Management and leasing fees		8,503			8,783			10,088
Development fees		4,101			4,482			725
	$	36,671		$	50,589		$	(14,530	)



Lexington (see page 31)	$	(105,630	)⁽¹⁾	$	2,211		$	34,459	⁽²⁾

Beverly Connection ⁽³⁾:
50% share of equity in net loss		(8,706	)⁽⁴⁾		(7,031	)		(8,567	)
Interest and other income		14,450			12,141			10,837
		5,744			5,110			2,270


India Real Estate Ventures:
4% to 50% share of equity in net losses		(3,336	)		—			—

GMH:
13.8% share in 2007 and 13.5% in 2006: Equity in net income (loss)		—			6,463			(1,013	)

H Street non-consolidated entities:
50% share of equity in net income		—			5,923	⁽⁵⁾		11,074	⁽⁶⁾

Other ⁽⁷⁾		(92,656	)⁽⁸⁾		12,184			13,565
	$	(195,878	)	$	31,891		$	60,355

_________________________

See notes on following page.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities – continued

Notes to preceding tabular information (in thousands):

(1)

Includes $107,882 for non-cash impairment charges.

(2)

Includes (i) a $10,362 net gain recognized as a result of the acquisition of Newkirk by Lexington and (ii) $10,842 for our share of Newkirk MLP’s net gains on sale of real estate.

(3)

(4)

Includes $4,100 for the reversal of a non-cash charge recorded by the joint venture in prior periods which, pursuant to paragraph 19(n) of Accounting Principles Board Opinion 18, The Equity Method of Accounting For Investments In Common Stock, should have been eliminated in the determination of our share of the earnings of the venture. In addition, in accordance with EITF 99-10, during the quarter ended September 30, 2008 our partner’s capital account was reduced to zero and, accordingly, we recognized $1,528 of additional net loss for the portion that related to our partner’s pro rata share of the venture’s net loss.

(5)

Represents our 50% share of equity in net income from January 1, 2007 through April 29, 2007. On April 30, 2007, we acquired the remaining 50% interest of these entities and began to consolidate the accounts into our consolidated financial statements and no longer account for this investment under the equity method.

(6)

Prior to the quarter ended June 30, 2006, two 50% owned entities that were contesting our acquisition of H Street impeded our access to their financial information and accordingly, we were unable to record our pro rata share of their earnings. 2006 includes $3,890 for our 50% share of their earnings for the period from July 20, 2005 (date of acquisition) to December 31, 2005.

(7)

Includes our equity in net earnings of partially owned entities, including partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Group LLC and other equity method investments.

(8)

Includes $96,037 for non-cash charges for the write-off of our share of certain partially owned entities’ development costs.

Condensed Combined Financial Information of Partially Owned Entities

The following is a summary of combined financial information for all of our partially owned entities, including Toys, Alexander’s, and Lexington, as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006.

(Amounts in millions)	December 31,
Balance Sheet:	2008		2007
Total Assets	$	23,705	$	24,832
Total Liabilities		19,526		20,611
Total Equity		4,179		4,221

	For the Years Ended December 31,
Income Statement:	2008			2007			2006
Total Revenue	$	15,313		$	14,821		$	13,036
Net Loss		(43	)		(144	)		(19	)

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities - continued

Below is a summary of the debt of partially owned entities as of December 31, 2008 and 2007, none of which is recourse to us.

	100% of Partially Owned Entities Debt at
(Amounts in thousands)	December 31, 2008		December 31, 2007
Toys (32.7% interest) (as of November 1, 2008 and November 3, 2007, respectively):
$1.3 billion senior credit facility, due 2010, (6.14% at December 31, 2008)	$	1,300,000	$	1,300,000
$2.0 billion credit facility, due 2010, LIBOR plus 1.00% - 3.75% (3.57% at December 31, 2008) ($110,000 reserved for outstanding letters of credit)		367,000		489,000
Mortgage loan, due 2010, LIBOR plus 1.30% (2.50% at December 31, 2008)		800,000		800,000
$804 million secured term loan facility, due 2012, LIBOR plus 4.25% (4.83% at December 31, 2008)		797,000		797,000
Senior U.K. real estate facility, due 2013, with interest at 5.02%		568,000		741,000
7.625% bonds, due 2011 (Face value – $500,000)		486,000		481,000
7.875% senior notes, due 2013 (Face value – $400,000)		377,000		373,000
7.375% senior notes, due 2018 (Face value – $400,000)		335,000		331,000
Japan borrowings, due 2009-2011 (weighted average rate of 1.29% at December 31, 2008)		289,000		243,000
4.51% Spanish real estate facility, due 2013		167,000		193,000
$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00% (5.96% at December 31, 2008)		180,000		180,000
Japan bank loans, due 2011-2014, 1.20%-2.80%		158,000		161,000
6.84% Junior U.K. real estate facility, due 2013		101,000		132,000
4.51% French real estate facility, due 2013		81,000		93,000
8.750% debentures, due 2021 (Face value – $22,000)		21,000		21,000
Multi-currency revolving credit facility, due 2010, LIBOR plus 1.50%-2.00%		—		28,000
Other		73,000		60,000
		6,100,000		6,423,000
Alexander’s (32.5% interest):
731 Lexington Avenue mortgage note payable collateralized by the office space, due in March 2014, with interest at 5.33% (prepayable without penalty after December 2013)		373,637		383,670
731 Lexington Avenue mortgage note payable, collateralized by the retail space, due in July 2015, with interest at 4.93% (prepayable without penalty after March 2015)		320,000		320,000
Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at 7.46% (prepayable without penalty after March 2011)		199,537		203,456
Rego Park construction loan payable, due in December 2010, with a one-year extension, LIBOR plus 1.20% (3.08% at December 31, 2008)		181,695		55,786
Rego Park mortgage note payable, due in June 2009, with interest at 7.25% (prepayable without penalty after March 2009)		78,386		79,285
Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable without penalty)		68,000		68,000
		1,221,255		1,110,197
Lexington (7.7% interest) (as of September 30, 2008 and September 30, 2007, respectively): Mortgage loans collateralized by the partnership’s real estate, due from 2008 to 2037, with a weighted average interest rate of 5.65% at September 30, 2008 (various prepayment terms)		2,486,370		3,320,261

GMH – 13.8% interest in mortgage notes payable		—		995,818

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.	Investments in Partially Owned Entities – continued

(Amounts in thousands)	100% of Partially Owned Entities Debt at
Partially owned office buildings:	December 31, 2008		December 31, 2007
Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2011 to 2031, with a weighted average interest rate of 5.69% at December 31, 2008 (various prepayment terms)	$	143,000	$	144,340
100 Van Ness, San Francisco office complex (9% interest) up to $132 million construction loan payable, due in July 2013, LIBOR plus 2.75% with an interest rate floor of 6.50% and interest rate cap of 7.00%		85,249		—
330 Madison Avenue (25% interest) up to $150,000 mortgage note payable, due in June 2015, LIBOR plus 1.50% with interest at 3.38%		70,000		60,000
Fairfax Square (20% interest) mortgage note payable, due in August 2009, with interest at 7.50%		62,815		64,035
Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011, LIBOR plus 1.0% (1.43% at December 31, 2008)		56,680		56,680
West 57^th Street (50% interest) mortgage note payable, due in October 2009, with interest at 4.94% (prepayable without penalty after July 2009)		29,000		29,000
825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014, with interest at 8.07% (prepayable without penalty after April 2014)		21,426		21,808
India Real Estate Ventures:
TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity’s real estate, due from 2009 to 2022, with a weighted average interest rate of 13.38% at December 31, 2008 (various prepayment terms)		148,792		136,431
India Property Fund L.P. (36.5% interest) $120 million secured revolving credit facility, due in December 2009, LIBOR plus 2.75% (4.60% at December 31, 2008)		90,500		—
Waterfront associates, LLC (2.5% interest) construction and land loan up to $250 million payable, due in September 2011 with a six month extension option, LIBOR plus 2.00%-3.00% (3.19% at December 31, 2008)		57,600		—
Verde Realty Master Limited Partnership (8.5% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2037, with a weighted average interest rate of 6.03% at December 31, 2008 (various prepayment terms)		559,840		487,122
Green Courte Real Estate Partners, LLC (8.3% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2015, with a weighted average interest rate of 4.96% at December 31, 2008 (various prepayment terms)		307,098		225,704
Monmouth Mall (50% interest) mortgage note payable, due in September 2015, with interest at 5.44% (prepayable without penalty after July 2015)		165,000		165,000
San Jose, California Ground-up Development (45% interest) construction loan, due in March 2009, with a one-year extension option; $114 million fixed at 4.62%, balance at LIBOR plus 1.75% (4.49% at December 31, 2008)		132,128		101,045
Wells/Kinzie Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		14,800		14,422
Orleans Hubbard Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		10,200		9,045
Other		468,559		452,320

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $3,196,585,000 and $3,289,873,000 as of December 31, 2008 and 2007, respectively.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.	Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of December 31, 2008 and 2007.

(Amounts in thousands)		Interest Rate as of	Carrying Amount as of
Mezzanine Loans Receivable:	Maturity	December 31, 2008	December 31, 2008		December 31, 2007
Equinox (1)	02/13	14.00%	$	85,796	$	73,162
Tharaldson Lodging Companies (2)	04/11	4.68%		76,341		76,219
Riley HoldCo Corp. (3)	02/15	10.00%		74,381		74,268
280 Park Avenue (4)	06/16	10.25%		73,750		73,750
MPH, net of valuation allowance of $46,700 and $57,000, respectively (5)	—	—		19,300		9,000
Other	04/09-07/17	4.75 – 12.0%		142,971		185,940
			$	472,539	$	492,339

_____________________

(1)

On February 10, 2006, we acquired a 50% interest in a $115,000 note issued by Related Equinox Holdings II, LLC (the “Note”), for $57,500 in cash. The Note is secured by a pledge of the stock of Related Equinox Holdings II. Related Equinox Holdings II owns Equinox Holdings Inc., which in turn owns all of the assets and obligations, including the fitness clubs, operated under the Equinox brand. The Note is junior to a $50,000 revolving loan and $280,000 of senior unsecured obligations. The Note is senior to $125,000 of equity contributed by third parties for their acquisition of the Equinox fitness club business. The Note matures on February 15, 2013 and bears paid-in-kind interest at 14% through February 15, 2011, increasing by 3% per annum through maturity. The Note is prepayable at any time after February 15, 2009.

(2)

On June 16, 2006, we acquired an 81.5% interest in a $95,968 mezzanine loan to Tharaldson Lodging Companies for $78,166 in cash. The loan is secured by a 107 hotel property portfolio with brands including Fairfield Inn, Residence Inn, Comfort Inn and Courtyard by Marriott. The loan is subordinate to $671,778 of debt and is senior to approximately $192,000 of other debt and equity. The loan matures in April 2009, with two one-year extensions, provides for a 0.75% placement fee and bears interest at LIBOR plus 4.25% (4.68% at December 31, 2008).

(3)

In 2005, we made a $135,000 loan to Riley HoldCo Corp., consisting of a $60,000 mezzanine loan and a $75,000 fixed rate unsecured loan. During 2006, we were repaid the $60,000 balance of the mezzanine loan with a pre-payment premium of $972, which was recognized as “interest and other investment income” for the year ended December 31, 2006.

(4)

On June 30, 2006, we made a $73,750 mezzanine loan secured by the equity interests in 280 Park Avenue, a 1.2 million square foot office building, located between 48th and 49th Streets in Manhattan. The loan bears interest at 10.25% and matures in June 2016. The loan is subordinate to $1.036 billion of other debt and is senior to approximately $260,000 of equity and interest reserves.

(5)

On June 5, 2007, we acquired a 42% interest in two MPH mezzanine loans totaling $158,700 for $66,000 in cash. The loans, which were due on February 8, 2008 and have not been repaid, are subordinate to $2.9 billion of mortgage and other debt and secured by the equity interests in four New York City properties: Worldwide Plaza, 1540 Broadway office condominium, 527 Madison Avenue and Tower 56. At December 31, 2007, we reduced the net carrying amount of the loans to $9,000 by recognizing a $57,000 non-cash charge in our consolidated statement of income. On April 2, 2008, we sold a sub-participation interest in the loans for $19,300 which resulted in the reduction of our valuation allowance from $57,000 to $46,700 and the recognition of $10,300 of non-cash income in our consolidated statement of income.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.	Identified Intangible Assets

The following summarizes our identified intangible assets (primarily acquired above-market leases) and intangible liabilities (primarily acquired below-market leases) as of December 31, 2008 and December 31, 2007.

(Amounts in thousands)	December 31, 2008			December 31, 2007

Identified intangible assets (included in other assets):
Gross amount	$	784,192		$	726,204
Accumulated amortization		(258,242	)		(162,845	)
Net	$	525,950		$	563,359

Identified intangible liabilities (included in deferred credit):
Gross amount	$	998,179		$	977,455
Accumulated amortization		(278,357	)		(163,357	)
Net	$	719,822		$	814,098

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $96,176,000, $83,292,000 and $23,490,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The estimated annual amortization of acquired below-market leases net of acquired above-market leases for each of the five succeeding years is as follows:

(Amounts in thousands)
2009	$	69,110
2010		62,152
2011		59,187
2012		55,470
2013		47,504

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $86,498,000, $45,764,000 and $21,156,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The estimated annual amortization of all other identified intangible assets, including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years is as follows:

(Amounts in thousands)
2009	$	58,973
2010		56,286
2011		53,879
2012		49,296
2013		42,068

We are a tenant under ground leases for certain properties. Amortization of these acquired below-market leases resulted in an increase to rent expense of $2,654,000, $1,565,000 and $320,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The estimated annual amortization of these below market leases for each of the five succeeding years is as follows:

(Amounts in thousands)
2009	$	2,133
2010		2,133
2011		2,133
2012		2,133
2013		2,133

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Debt

The following is a summary of our debt:

(Amounts in thousands)		Interest Rate at	Balance at
Notes and Mortgages Payable:	Maturity (1)	December 31, 2008	December 31, 2008		December 31, 2007
Fixed Interest:
New York Office:
1290 Avenue of the Americas	01/13	5.97%	$	444,667	$	454,166
350 Park Avenue	01/12	5.48%		430,000		430,000
770 Broadway	03/16	5.65%		353,000		353,000
888 Seventh Avenue	01/16	5.71%		318,554		318,554
Two Penn Plaza	02/11	4.97%		287,386		292,000
909 Third Avenue	04/15	5.64%		214,074		217,266
Eleven Penn Plaza	12/11	5.20%		206,877		210,338

Washington, DC Office:
Skyline Place	02/17	5.74%		678,000		678,000
Warner Building	05/16	6.26%		292,700		292,700
River House Apartment Complex (2)	04/15	5.43%		195,546		46,339
1215 Clark Street, 200 12^th Street & 251 18^th Street	01/25	7.09%		115,440		117,464
Bowen Building	06/16	6.14%		115,022		115,022
Reston Executive I, II and III	01/13	5.57%		93,000		93,000
1101 17^th, 1140 Connecticut, 1730 M and 1150 17^thStreet	08/10	6.74%		87,721		89,514
1550, 1750 Crystal Drive	11/14	7.08%		83,912		86,026
Universal Buildings	04/14	4.88%		59,728		62,613
2345 Crystal Drive	09/08	6.66%		—		58,656
1235 Clark Street	07/12	6.75%		54,128		54,936
2231 Crystal Drive	08/13	7.08%		50,394		52,293
241 18^th Street	10/10	6.82%		46,532		47,445
1750 Pennsylvania Avenue	06/12	7.26%		46,570		47,204
2011 Crystal Drive	10/09	6.88%		38,338		39,135
1225 Clark Street	08/13	7.08%		30,145		31,279
1800, 1851, 1901 South Bell Street	12/11	6.91%		27,801		35,558

Retail:
Cross collateralized mortgages on 42 shopping centers	03/10	7.93%		448,115		455,907
Springfield Mall (including present value of purchase option)	10/12-04/13	5.45%		252,803		256,796
Green Acres Mall (3)	(3)	(3)		—		137,331
Montehiedra Town Center	07/16	6.04%		120,000		120,000
Broadway Mall	07/13	5.40%		94,879		97,050
828-850 Madison Avenue Condominium	06/18	5.29%		80,000		80,000
Las Catalinas Mall	11/13	6.97%		60,766		62,130
Other	05/09-11/34	4.00%-7.33%		159,597		165,299

Merchandise Mart:
Merchandise Mart	12/16	5.57%		550,000		550,000
High Point Complex	08/16	6.34%		220,361		221,258
Boston Design Center	09/15	5.02%		70,740		71,750
Washington Design Center	11/11	6.95%		44,992		45,679

Other:
555 California Street	05/10-09/11	5.97%		720,671		719,568
Industrial Warehouses	10/11	6.95%		25,268		25,656
Total Fixed Interest Notes and Mortgages Payable		5.96%		7,117,727		7,230,932

___________________

See notes on page 41.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.	Debt - continued

(Amounts in thousands)			Interest Rate at	Balance at
Notes and Mortgages Payable:	Maturity (1)	Spread over LIBOR	December 31, 2008	December 31, 2008		December 31, 2007
Variable Interest:
New York Office:
Manhattan Mall	02/12	L+55	1.75%	$	232,000	$	232,000
866 UN Plaza	05/11	L+40	1.84%		44,978		44,978
Washington, DC Office:
2101 L Street (4)	02/13	L+120	1.68%		150,000		—
Courthouse Plaza One and Two	01/15	L+75	2.58%		70,774		74,200
River House Apartments (2)	04/18	(2)	1.78%		64,000		—
Commerce Executive III, IV and V	07/09	L+55	1.98%		50,223		50,223
1999 K Street (5)	12/10	L+130	2.73%		73,747		—
220 20^th Street (6)	01/11	L+115	2.03%		40,701		—
West End 25 (7)	02/11	L+130	3.19%		24,620		—
Retail:
Green Acres Mall (3)	02/13	L+140	3.28%		335,000		—
Bergen Town Center (8)	03/13	L+150	3.41%		228,731		—
Beverly Connection (9)	07/09	L+245	3.70%		100,000		—
Other:
220 Central Park South	11/10	L+235 – L+245	3.82%		130,000		128,998
India Property Fund L.P. (10)	(10)	(10)	—		—		82,500
Other	07/09 – 11/11	Various	3.79%		172,886		94,626
Total Variable Interest Notes and Mortgages Payable			2.85%		1,717,660		707,525
Total Notes and Mortgages Payable			5.36%	$	8,835,387	$	7,938,457

Convertible Senior Debentures:
Due 2027 (11)	04/12		2.85%	$	1,364,805	$	1,376,278
Due 2026 (12)	11/11		3.63%		978,109		984,134
Total Convertible Senior Debentures			3.18%	$	2,342,914	$	2,360,412

Senior Unsecured Notes:
Senior unsecured notes due 2009 (13)	08/09		4.50%	$	168,289	$	249,365
Senior unsecured notes due 2010	12/10		4.75%		199,625		199,436
Senior unsecured notes due 2011	02/11		5.60%		249,902		249,855
Total Senior Unsecured Notes			5.03%	$	617,816	$	698,656

Exchangeable Senior Debentures due 2025	04/12		3.88%	$	494,501	$	492,857

Unsecured Revolving Credit Facilities:
$1.595 billion unsecured revolving credit facility	09/12	L+55⁽¹⁵⁾	1.97%	$	300,000	$	300,000
$.965 billion unsecured revolving credit facility (14) ($44,565 reserved for outstanding letters of credit)	06/11	L+55⁽¹⁵⁾	2.18%		58,468		105,656
Total Unsecured Revolving Credit Facilities			2.00%	$	358,468	$	405,656

____________________________

See notes on the following page.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.	Debt - continued

Notes to preceding tabular information:

(Amounts in thousands)

(1)

Represents the extended maturity for certain loans in which we have the unilateral right, ability and intent to extend. In the case of our convertible and exchangeable debt, represents the earliest date holders may require us to repurchase the debentures.

(2)

On March 12, 2008, we completed a $260,000 refinancing of the River House Apartment Complex. The financing is comprised of a $196,000 interest-only seven-year 5.43% fixed rate mortgage and a $64,000 interest-only ten-year floating rate mortgage at the Freddie Mac Reference Note Rate plus 1.53% (1.78% at December 31, 2008). We retained net proceeds of $205,000 after repaying the existing loan.

(3)

On February 11, 2008, we completed a $335,000 refinancing of the Green Acres regional mall. This interest-only loan has a rate of LIBOR plus 1.40% (3.28% at December 31, 2008) and matures in February 2011, with two one-year extension options. We retained net proceeds of $193,000 after repaying the existing loan.

(4)

On February 26, 2008, we completed a $150,000 financing of 2101 L Street. The loan bears interest at LIBOR plus 1.20% (1.68% at December 31, 2008) and matures in February 2011 with two one-year extension options. We retained net proceeds of $148,000.

(5)

On March 27, 2008, we closed a construction loan providing up to $124,000 to finance the redevelopment of 1999 K Street. The interest-only loan has a rate of LIBOR plus 1.30% (2.73% at December 31, 2008) and matures in December 2010 with two six-month extension options.

(6)

On January 18, 2008, we closed a construction loan providing up to $87,000 to finance the residential redevelopment project at 220 20th Street (formally Crystal Plaza Two). The construction loan bears interest at LIBOR plus 1.15% (2.03% at December 31, 2008) and matures in January 2011 with two six-month extension options.

(7)

On February 20, 2008, we closed a construction loan providing up to $104,000 to finance the residential redevelopment project at 1229-1231 25th Street NW (“West End 25”). The construction loan bears interest at LIBOR plus 1.30% (3.19% at December 31, 2008) and matures in February 2011 with two six-month extension options.

(8)

On March 24, 2008, we closed a construction loan providing up to $290,000 to finance the redevelopment of a portion of the Bergen Town Center. The interest-only loan has a rate of LIBOR plus 1.50% (3.41% at December 31, 2008) and matures in March 2011 with two one-year extension options.

(9)

Beginning in November 2008, we consolidate our investment in Beverly Connection and no longer account for it under the equity method.

(10)

Beginning in the first quarter of 2008, we account for our investment in the India Property Fund on the equity method and no longer consolidate its accounts into our consolidated financial statements, based on the reduction in our ownership interest from 50.6% as of December 31, 2007 to 36.5%.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.	Debt - continued

Notes to preceding tabular information:

(Amounts in thousands)

(11)

On March 21, 2007, Vornado Realty Trust sold $1.4 billion aggregate principal amount of 2.85% convertible senior debentures due 2027, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $1.37 billion. The debentures are redeemable at our option beginning in 2012 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2012, 2017, and 2022 and in certain other limited circumstances. The debentures are convertible, under certain circumstances, for cash and Vornado common shares at an initial conversion rate of 6.1553 common shares per one-thousand dollars of principal amount of debentures. The initial conversion price of $162.46 represented a premium of 30% over the March 21, 2007 closing price for our common shares. The principal amount of debentures will be settled for cash and the amount in excess of the principal defined as the conversion value will be settled in cash or, at our election, Vornado common shares. The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed the payment of the debentures. There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the effective interest method) over the period from the date of issuance to the date of earliest redemption of April 1, 2012. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate.

In November 2008, we purchased $17,300 (aggregate face amounts) of our convertible senior debentures due 2027 for $11,094 in cash.

(12)

On November 20, 2006, we sold $1,000,000 aggregate principal amount of 3.625% convertible senior debentures due 2026, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $980,000. The debentures are convertible, under certain circumstances, for Vornado common shares at a current conversion rate of 6.5168 common shares per $1 of principal amount of debentures. The initial conversion price of $153.45 represented a premium of 30% over the November 14, 2006 closing price for our common shares. The debentures are redeemable at our option beginning in 2011 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2011, 2016, and 2021 and in the event of a change in control. The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed the payment of the debentures. There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the effective interest method) over the period from the date of issuance to the date of earliest redemption of December 1, 2011. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate.

In November 2008, we purchased $10,200 (aggregate face amounts) of our convertible senior debentures due 2026 for $6,987 in cash.

(13)

During 2008, we purchased $81,540 (aggregate face amounts) of our senior unsecured notes due August 15, 2009 for $80,408.

(14)

Lehman Brothers is part of the syndicate of banks under this unsecured revolving credit facility with a total commitment of $35 million. On September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection. All of the banks in the syndicate, except for Lehman Brothers, have funded their pro rata share of a draw we made subsequent to Lehman’s bankruptcy filing.

(15)

Requires the payment of an annual facility fee of 15 basis points.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.	Debt - continued

Our revolving credit facility and senior unsecured notes contain financial covenants which require us to maintain minimum interest coverage ratios and limit our debt to market capitalization ratios. We believe that we have complied with all of our financial covenants as of December 31, 2008.

On May 9, 2006, we executed supplemental indentures with respect to our senior unsecured notes due 2007, 2009 and 2010 (collectively, the “Notes”), pursuant to our consent solicitation statement dated April 18, 2006, as amended. Holders of approximately 96.7% of the aggregate face amount of the Notes consented to the solicitation. The supplemental indentures contain modifications of certain covenants and related defined terms governing the terms of the Notes to make them consistent with corresponding provisions of the covenants and defined terms included in the senior unsecured notes due 2011 issued on February 16, 2006. The supplemental indentures also include a new covenant that provides for an increase in the interest rate of the Notes upon certain decreases in the ratings assigned by rating agencies to the Notes. In connection with the consent solicitation we paid an aggregate fee of $2,241,000 to the consenting note holders, which will be amortized into expense over the remaining term of the Notes. In addition, we incurred advisory and professional fees aggregating $1,415,000, which were expensed in 2006.

The net carrying amount of properties collateralizing the notes and mortgages payable amounted to $11.631 billion at December 31, 2008. As of December 31, 2008, the principal repayments required for the next five years and thereafter are as follows:

(Amounts in thousands)
Year Ending December 31,	Mortgages Payable			Senior Unsecured Debt
2009	$	349,249	$	168,460
2010		977,185		200,000
2011		1,978,996		1,298,268
2012		911,606		2,182,699
2013		1,109,516		—
Thereafter		3,464,965		—

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.

Shareholders’ Equity

Preferred Shares

The following table sets forth the details of our preferred shares of beneficial interest outstanding as of December 31, 2008 and 2007.

(Amounts in thousands, except share and per share amounts)	December 31,
	2008		2007
6.5% Series A: liquidation preference $50.00 per share; authorized 5,750,000 shares; issued and outstanding 54,124 and 80,362 shares	$	2,762	$	4,050
7.0% Series D-10: liquidation preference $25.00 per share; authorized 4,800,000 shares; issued and outstanding 1,600,000 shares		39,982		39,982
7.0% Series E: liquidation preference $25.00 per share; authorized 3,450,000 shares; issued and outstanding 3,000,000 shares		72,248		72,248
6.75% Series F: liquidation preference $25.00 per share; authorized 6,000,000 shares; issued and outstanding 6,000,000 shares		144,720		144,720
6.625% Series G: liquidation preference $25.00 per share; authorized 9,200,000 shares; issued and outstanding 8,000,000 shares		193,135		193,135
6.75% Series H: liquidation preference $25.00 per share; authorized 4,600,000 shares; issued and outstanding 4,500,000 shares		108,559		108,559
6.625% Series I: liquidation preference $25.00 per share; authorized 12,050,000 shares; issued and outstanding 10,800,000 shares		262,401		262,401
	$	823,807	$	825,095

Series A Convertible Preferred Shares of Beneficial Interest

Holders of Series A Preferred Shares of beneficial interest are entitled to receive dividends in an amount equivalent to $3.25 per annum per share. These dividends are cumulative and payable quarterly in arrears. The Series A Preferred Shares are convertible at any time at the option of their respective holders at a conversion rate of 1.38504 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. In addition, upon the satisfaction of certain conditions we, at our option, may redeem the $3.25 Series A Preferred Shares at a current conversion rate of 1.38504 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. At no time will the Series A Preferred Shares be redeemable for cash.

Series D-10 Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series D-10 Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the liquidation preference of $25.00 per share, or $1.75 per Series D-10 Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series D-10 Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. We, at our option, may redeem the Series D-10 Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series D-10 Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

Series E Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series E Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the liquidation preference of $25.00 per share, or $1.75 per Series E Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series E Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after August 20, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series E Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series E Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.

Shareholders’ Equity - continued

Series F Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series F Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series F Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series F Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after November 17, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series F Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series F Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

Series G Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of Series G Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series G Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series G Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after December 22, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series G Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series G Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

Series H Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of the Series H Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series H Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series H Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after June 17, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series H Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series H Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

Series I Cumulative Redeemable Preferred Shares of Beneficial Interest

Holders of the Series I Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series I Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series I Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after August 31, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series I Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series I Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

Accumulated Other Comprehensive Income

Accumulated other comprehensive (loss) income was ($6,899,000) and $29,772,000 as of December 31, 2008 and 2007, respectively, and primarily consists of accumulated unrealized (loss) income from the mark-to-market of marketable equity securities classified as available-for-sale.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.

Stock-based Compensation

Our Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights and performance shares to certain employees and officers. We have approximately 2,400,000 shares available for future grant under the Plan at December 31, 2008.

In March 2006, our Board of Trustees (the “Board”) approved an amendment to the Plan to permit the Compensation Committee of the Board (the “Compensation Committee”) to grant awards in the form of limited partnership units (“OP Units”) of the Operating Partnership. OP Units can be granted either as free-standing awards or in tandem with other awards under the Plan. OP Units may be converted into the Operating Partnership’s Class A common units and, consequently, become convertible by the holder on a one-for-one basis for our common shares or the cash value of such shares at our election.

We account for all stock-based compensation in accordance with SFAS 123R: Stock based compensation expense for the year ended December 31, 2007 and 2006 consists of stock option awards, restricted stock and Operating Partnership unit awards and out-performance plan awards.

2006 Out-Performance Plan

In March 2006, the Board approved the terms of the Vornado Realty Trust 2006 Out-Performance Plan (the “2006 OPP”), a long-term “pay-for-performance” incentive compensation program. The purpose of the 2006 OPP was to further align the interests of our shareholders and management by encouraging our senior officers and employees to create shareholder value. On April 25, 2006, our Compensation Committee approved 2006 OPP awards to a total of 54 employees and officers of the Company, which aggregated 91% of the total 2006 OPP. The fair value of the awards on the date of grant, as adjusted for estimated forfeitures, was approximately $46,141,000 and is being amortized into expense over the five-year vesting period beginning on the date of grant, using a graded vesting attribution model.

Under the 2006 OPP, award recipients share in a performance pool when our total return to shareholders exceeds a cumulative 30% (for a period of 30 consecutive days), including both share appreciation and dividends paid, from a price per share of $89.17 (the average closing price per common share for the 30 trading days prior to March 15, 2006). The size of the pool is 10% of the amount in excess of the 30% benchmark, subject to a maximum cap of $100,000,000. Each award was designated as a specified percentage of the $100,000,000 maximum cap. Awards were issued in the form of a new class of Operating Partnership units (“OPP Units”) and are subject to achieving the performance threshold, time vesting and other conditions. OPP Units are convertible by the holder into an equivalent number of the Operating Partnership’s Class A units, which are redeemable by the holder for Vornado common shares on a one-for-one basis or the cash value of such shares, at our election. All awards earned vest 33.3% on each of March 15, 2009, 2010 and 2011 subject to continued employment. Once a performance pool has been established, each OPP Unit will receive a distribution equal to the distribution paid on a Class A unit, including an amount payable in OPP Units representing distributions paid on a Class A unit during the performance period. As of January 12, 2007, the maximum performance threshold under the Out-Performance Plan was achieved, concluding the performance period.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.

Stock-based Compensation - continued

2008 Out-Performance Plan

On March 31, 2008, our Compensation Committee approved a $75,000,000 out-performance plan (the “2008 OPP”) that requires the achievement of performance objectives against both absolute and relative thresholds. The 2008 OPP establishes a potential performance pool in which 78 members of senior management have the opportunity to share if the total return to our shareholders (the “Total Return”) resulting from both share appreciation and dividends for the four-year period from March 31, 2008 to March 31, 2012 exceeds both an absolute and a relative hurdle. The initial value from which to determine the Total Return is $86.20 per share, a 0.93% premium to the trailing 10-day average closing price on the New York Stock Exchange for our common shares on the date the plan was adopted.

The size of the out-performance pool for the 2008 OPP is 6% of the aggregate “out-performance return” subject to a maximum total award of $75,000,000 (the “Maximum Award”). The “out-performance return” is comprised of (i) 3% of the total dollar value of the Total Return in excess of 10% per annum (the “Absolute Component”), plus (ii) 3% of the total dollar value of the Total Return in excess of the Relative Threshold (the “Relative Component”), based on the SNL Equity REIT Index (the “Index”) over the four-year performance period. In the event that the Relative Component creates a negative award as a result of underperforming the Index, the value of any out-performance award potentially earned under the Absolute Component will be reduced dollar for dollar. In addition, awards potentially earned under the Relative Component will be reduced on a ratable sliding scale to the extent the Total Return is less than 10% per annum and to zero to the extent the Total Return is less than 7% per annum. The size of this out-performance pool, if any, will be determined based on the highest 30-trading day trailing average price of our common shares during the final 150 days of the four-year period. During the four-year performance period, participants are entitled to receive 10% of the common dividends paid on Vornado’s common shares for each OPP unit awarded, regardless of whether the OPP units are ultimately earned.

The 2008 OPP also provides participants an opportunity to earn partial awards during two interim measurement periods (the “Interim Periods”): (a) one for a period consisting of the first two years of the performance period and (b) one for a period consisting of the final two years of the performance period. For each Interim Period, participants may be entitled to share in 40% ($30,000,000) of the maximum $75,000,000 performance pool if the performance thresholds have been met for the applicable Interim Periods on a pro rated basis. The starting share price for the first Interim Period is $86.20 per share. The starting share price for the second Interim Period is equal to the greater of our common share price on March 31, 2010, or the initial starting share price of $86.20 per share less dividends paid during the first two years of the plan. If the maximum award is earned during the first Interim Period, participants lose the potential to earn the second Interim Period award, but not the potential to earn the remainder of the maximum award over the four-year period. The size of any out-performance pool for an Interim Period will be determined based on the highest 30-day trailing average price of our shares during the final 120 days of the applicable Interim Period. Awards earned under the program (including any awards earned for the Interim Periods), will vest 50% on March 31, 2012 and 50% on March 31, 2013. The fair value of the OPP awards on the date of grant, as adjusted for estimated forfeitures, was approximately $21,600,000, and is being amortized into expense over a five-year period beginning on the date of grant through the final vesting period, using a graded vesting attribution model.

For the years ended December 31, 2008, 2007 and 2006, we recognized $16,021,000, $12,734,000 and $8,293,000 of compensation expense, respectively, in connection with our 2006 and 2008 out-performance plans. The remaining unrecognized compensation expense of $29,551,000 will be recognized over a weighted-average period of 2.0 years. Distributions paid on unvested OPP Units are charged to “minority interest expense” on our consolidated statements of income and amounted to $2,918,000, $2,694,000 and $0 in 2008, 2007 and 2006, respectively.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.

Stock-based Compensation - continued

Stock Options

Stock options are granted at an exercise price equal to 100% of the average of the high and low market price of our common shares on the NYSE on the date of grant, generally vest pro-rata over five years and expire 10 years from the date of grant. In 2008, our senior executives were granted options with an exercise price of 17.5% in excess of the average of the high and low market price of our common shares on the NYSE on the date of the grant.

Compensation expense is recognized on a straight-line basis over the vesting period. During the years ended December 31, 2008, 2007, and 2006, we recognized $9,051,000, $4,549,000 and $1,705,000, of compensation expense, respectively, for the portion of stock option awards that vested during each year.

Below is a summary of our stock option activity under the Plan for the year ended December 31, 2008.

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding at January 1, 2008		9,725,311		$	49.41
Granted		2,806,615			101.23
Exercised		(2,420,749	)		35.56
Cancelled		(120,694	)		106.70
Outstanding at December 31, 2008		9,990,483		$	66.64		5.2	$	123,360,000
Options vested and expected to vest at December 31, 2008		9,970,106		$	66.57		5.2	$	123,360,000
Options exercisable at December 31, 2008		5,595,718		$	39.68		2.4	$	123,356,000

The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions for grants in the years ended December 31, 2008, 2007 and 2006.

	December 31,
	2008	2007	2006
Expected volatility	19%	17%	17%
Expected life	7.7 years	5 years	5 years
Risk-free interest rate	3.2%	4.5%	4.4%
Expected dividend yield	4.8%	5.0%	5.0%

The weighted average grant date fair value of options granted during the years ended December 31, 2008, 2007 and 2006 was $6.80, $12.55 and $10.23, respectively. Cash received from option exercises for the years ended December 31, 2008, 2007 and 2006 was $27,587,000, $34,648,000 and $75,665,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006 was $79,997,000, $99,656,000 and $244,694,000, respectively.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.

Stock-based Compensation - continued

Restricted Stock

Restricted stock awards are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant and generally vest over five years. Compensation expense is recognized on a straight-line basis over the vesting period. During the years ended December 31, 2008, 2007 and 2006, we recognized $3,201,000, $4,079,000 and $3,820,000 of compensation expense, respectively, for the portion of restricted stock awards that vested during each year. As of December 31, 2008, there was $3,772,000 of total unrecognized compensation cost related to nonvested shares granted under the Plan. This cost is expected to be recognized over a weighted-average period of 1.74 years. Dividends paid on unvested shares are charged directly to retained earnings and amounted to $308,000, $533,000 and $842,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The total fair value of shares vested during the years ended December 31, 2008, 2007 and 2006 was $4,472,000, $8,907,000 and $6,170,000, respectively.

Below is a summary of restricted stock activity under the Plan for the year ended December 31, 2008.

Non-vested Shares	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at January 1, 2008		159,388		$	70.07
Granted		6,987			85.20
Vested		(75,593	)		57.25
Forfeited		(2,922	)		99.81
Non-vested at December 31, 2008		87,860			81.31

Restricted Operating Partnership Units (“OP Units”)

Restricted OP Units are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant, vest ratably over five years and are subject to a taxable book-up event, as defined. The fair value of these awards on the date of grant, as adjusted for estimated forfeitures, was approximately $7,167,000, $10,696,000, and $3,480,000 for the awards granted in 2008, 2007 and 2006, respectively, and is amortized into expense over the five-year vesting period using a graded vesting attribution model. During the years ended December 31, 2008, 2007 and 2006, we recognized $6,257,000, $5,493,000, and $1,053,000, of compensation expense, respectively, for the portion of Restricted OP Units that vested during last year. As of December 31, 2008, there was $8,150,000 of total remaining unrecognized compensation cost related to non-vested OP units granted under the Plan and the cost is expected to be recognized over a weighted-average period of 1.78 years. Distributions paid on unvested OP Units are charged to “minority interest expense” on our consolidated statements of income and amounted to $938,000, $444,000, and $147,000 in 2008, 2007 and 2006, respectively. The total fair value of units vested during the year ended December 31, 2008 was $1,952,000.

Below is a summary of restricted OP unit activity under the Plan for the year ended December 31, 2008.

Non-vested Units	Units		Weighted-Average Grant-Date Fair Value
Non-vested at January 1,2008	155,028		$	83.37
Granted	112,726			63.58
Vested	(32,993	)		82.55
Forfeited	(1,682	)		62.31
Non-vested at December 31, 2008	233,079			74.07

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.

Retirement Plans

Prior to December 2008, we had two defined benefit pension plans, a Vornado Realty Trust Retirement Plan (“Vornado Plan”) and a Merchandise Mart Properties Pension Plan (“Mart Plan”). The benefits under the Vornado Plan and the Mart Plan (collectively, the “Plans”) were frozen in December 1997 and June 1999, respectively. Benefits under the Plans are or were primarily based on years of service and compensation during employment or on years of credited service and established monthly benefits. Funding policy for the Plans was based on contributions at the minimum amounts required by law. In December 2008, we finalized the termination of the Vornado Plan which resulted in a $4,600,000 pension settlement expense which is included as a component of “general and administrative” expense on our consolidated statement of income. In addition, during the first quarter of 2009, we expect to finalize the termination of the Mart Plan, which will result in the recognition of a $2,800,000 pension settlement expense. The financial results of the Mart Plan, using a December 31, measurement date, are provided below.

Obligations and Funded Status

The following table sets forth the Mart Plan’s funded status and amounts recognized in our balance sheets:



	2008			2007
(Amounts in thousands)
Fair value of plan assets at end of year	$	11,850		$	13,113
Benefit obligation at end of year		13,355			12,430
Funded status at end of year	$	(1,505	)	$	683

Amounts recorded in the consolidated balance sheet:
Other assets (prepaid benefit cost)	$	—		$	683

Other liabilities (accrued benefit cost)	$	(1,505	)	$	—

	Pension Benefits
	Year Ended December 31,
	2008		2007		2006
Amounts recognized in accumulated other comprehensive (loss) income consist of:
Net loss	$	2,488	$	274	$	—

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.

Leases

As lessor:

We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rentals payable monthly in advance. Office building leases generally require the tenants to reimburse us for operating costs and real estate taxes above their base year costs. Shopping center leases provide for the pass-through to tenants the tenants’ share of real estate taxes, insurance and maintenance. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants’ sales. As of December 31, 2008, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an original term of less than one year and rents resulting from the exercise of renewal options, is as follows:

(Amounts in thousands)
Year Ending December 31:
2009	$	1,792,000
2010		1,732,000
2011		1,576,000
2012		1,417,000
2013		1,300,000
Thereafter		7,216,000

These amounts do not include rentals based on tenants’ sales. These percentage rents approximated $7,322,000, $9,379,000, and $7,593,000, for the years ended December 31, 2008, 2007, and 2006, respectively.

None of our tenants accounted for more than 10% of total revenues for the years ended December 31, 2008, 2007 and 2006.

Former Bradlees Locations

Pursuant to the Master Agreement and Guaranty, dated May 1, 1992, we are due $5,000,000 per annum of additional rent from Stop & Shop which was allocated to certain of Bradlees former locations. On December 31, 2002, prior to the expiration of the leases to which the additional rent was allocated, we reallocated this rent to other former Bradlees leases also guaranteed by Stop & Shop. Stop & Shop is contesting our right to reallocate and claims that we are no longer entitled to the additional rent. At December 31, 2008, we are due an aggregate of $30,400,000. We believe the additional rent provision of the guaranty expires at the earliest in 2012 and we are vigorously contesting Stop & Shop’s position.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.

Leases - continued

As lessee:

We are a tenant under operating leases for certain properties. These leases have terms that expire during the next thirty years. Future minimum lease payments under operating leases at December 31, 2008, are as follows:

(Amounts in thousands)
Year Ending December 31:
2009	$	26,346
2010		25,066
2011		24,657
2012		24,865
2013		24,872
Thereafter		1,005,370

Rent expense was $29,320,000, $24,503,000, and $18,655,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

We are also a lessee under capital leases for real estate. Lease terms generally range from 5-20 years with renewal or purchase options. Capitalized leases are recorded at the present value of future minimum lease payments or the fair market value of the property. Capitalized leases are depreciated on a straight-line basis over the estimated life of the asset or life of the related lease, whichever is shorter. Amortization expense on capital leases is included in “depreciation and amortization” on our consolidated statements of income. As of December 31, 2008, future minimum lease payments under capital leases are as follows:

(Amounts in thousands)
Year Ending December 31:
2009	$	706
2010		707
2011		706
2012		707
2013		706
Thereafter		18,134
Total minimum obligations		21,666
Interest portion		(14,878	)
Present value of net minimum payments	$	6,788

At December 31, 2008 and 2007, $6,788,000 and $6,820,000, respectively, representing the present value of net minimum payments are included in “Other Liabilities” on our consolidated balance sheets. Property leased under capital leases had a total cost of $6,216,000, and related accumulated depreciation of $1,717,000 and $1,562,000, at December 31, 2008 and 2007, respectively.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14.

Commitments and Contingencies

Insurance

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”), which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage, including terrorism coverage in effect through September 15, 2009. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

In June 2007 we formed Penn Plaza Insurance Company, LLC (“PPIC”), a wholly owned consolidated subsidiary, to act as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for “certified” acts of terrorism and for nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”). Coverage for “certified” acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Prior to the formation of PPIC, we were uninsured for losses under NBCR coverage. Subsequently, we have $2.0 billion of NBCR coverage under TRIPRA, for which PPIC is responsible for 15% of each NBCR loss and the insurance company deductible of $1,000,000. We are ultimately responsible for any loss borne by PPIC.

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

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

Other Contractual Obligations

At December 31, 2008, there were $44,565,000 of outstanding letters of credit under our $0.965 billion revolving credit facility. Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

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

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $213,352,000. Of this amount, $80,923,000 is committed to IPF and is pledged as collateral to IPF’s lender.

From time to time, we have disposed of substantial amounts of real estate to third parties for which, as to certain properties, we remain contingently liable for rent payments or mortgage indebtedness that we cannot quantify.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14.

Commitments and Contingencies – continued

Litigation

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

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. We are currently engaged in discovery and anticipate that a trial date will be set for some time in 2009. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above. Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump had already received access to the books and records to which he was entitled, with the exception of certain documents which were subsequently delivered to Mr. Trump. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims. In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump has filed a notice appealing the 2007 and 2009 decisions. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H-Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15.

Related Party Transactions

Loan and Compensation Agreements

Pursuant to our annual compensation review in February 2002 with Joseph Macnow, our Chief Financial Officer, the Compensation Committee approved a $2,000,000 loan to Mr. Macnow, which bore interest at the applicable federal rate of 4.65% per annum and was scheduled to mature in June 2007. The loan was funded on July 23, 2002 and was collateralized by assets with a value of not less than two times the loan amount. On March 26, 2007, Mr. Macnow repaid to us his $2,000,000 outstanding loan.

Effective as of April 19, 2007, we entered into a new employment agreement with Mitchell Schear, the President of our Washington, DC Office Division. This agreement, which replaced his prior agreement, was approved by the Compensation Committee of our Board of Trustees and provides for a term of five years and is automatically renewable for one-year terms thereafter. The agreement also provides for a minimum salary of $1,000,000 per year and bonuses and other customary benefits. Pursuant to the terms of the agreement, on April 19, 2007, the Compensation Committee granted options to Mr. Schear to acquire 200,000 of our common shares at an exercise price of $119.94 per share. These options vest ratably over three years beginning in 2010 and accelerate on a change of control or if we terminate his employment without cause or by him for breach by us. The agreement also provides that if we terminate Mr. Schear’s employment without cause or by him for breach by us, he will receive a lump-sum payment equal to one year’s salary and bonus, up to a maximum of $2,000,000.

Transactions with Affiliates and Officers and Trustees of the Company

Alexander’s

We own 32.5% of Alexander’s. Steven Roth, the Chairman of our Board and Chief Executive Officer, and Michael D. Fascitelli, our President, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with management, development and leasing agreements. These agreements are described in Note 6 - Investments in Partially Owned Entities to our consolidated financial statements in this Annual Report on Form 10-K.

On September 9, 2008, Alexander’s Board of Directors declared a special dividend of $7.00 per share, payable on October 30, 2008, to shareholders of record on October 14, 2008. The dividend was attributable to the liquidation of the wholly owned 731 Lexington Avenue taxable REIT subsidiary into Alexander’s. Accordingly, on October 30, we received $11,578,000, which was accounted for as a reduction of our investment in Alexander’s.

On September 15, 2008 and October 14, 2008, Steven Roth, the Chairman of our Board of Directors and Chief Executive Officer, who holds the same positions in Alexander’s, exercised an aggregate of 200,000 of his SARs, which were scheduled to expire on March 4, 2009, and received gross proceeds of $62,809,000.

On March 13, 2007, Michael Fascitelli, our President, who also holds the same position in Alexander’s, exercised 350,000 of his SARs, which were scheduled to expire on March 14, 2007, and he received gross proceeds of $50,465,000.

Interstate Properties (“Interstate”)

Interstate is a general partnership in which Steven Roth, the Chairman of our Board and Chief Executive Officer, is the managing general partner. David Mandelbaum and Russell B. Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2008, Interstate and its partners beneficially owned approximately 8.8% of the common shares of beneficial interest of Vornado and 27.0% of Alexander’s common stock.

We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on sixty days’ notice at the end of the term. We believe based upon comparable fees charged by other real estate companies that the management agreement terms are fair to us. We earned $803,000, $800,000 and $798,000 of management fees under the agreement for the years ended December 31, 2008, 2007 and 2006.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16.

Minority Interest

Minority interest on our consolidated balance sheets aggregated $1,590,891,000 and $2,074,601,000 as of December 31, 2008 and 2007, respectively. Of these balances, $1,177,977,000 and $1,658,303,000, respectively, represent third-party limited partners’ interests in the Operating Partnership; and $412,914,000 and $416,298,000, respectively, represent the minority ownership of consolidated partially owned entities.

Class A units of the Operating Partnership may be tendered for redemption to the Operating Partnership for cash; we, at our option, may assume that obligation and pay the holder either cash or Vornado common shares on a one-for-one basis. Because the number of Vornado common shares outstanding at all times equals the number of Class A units owned by Vornado, the redemption value of each Class A unit is equivalent to the market value of one Vornado common share, and the quarterly distribution to a Class A unitholder is equal to the quarterly dividend paid to a Vornado common shareholder. As of December 31, 2008, as part of our preparation for the adoption of SFAS 160, which is effective for us on January 1, 2009, we have retroactively adopted the measurement provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities, and accordingly, have reduced the carrying amounts of these Class A units by $404,447,000 and $467,165,000, as of December 31, 2008 and 2007, respectively, to reflect the change in their redemption value at the end of each reporting period. The corresponding entries for these adjustments were recorded to “additional capital.” As of December 31, 2008 and 2007, the aggregate redemption value of the then outstanding Class A units of the Operating Partnership owned by third-parties was approximately $882,740,000 and $1,365,874,000, respectively.

Details of Operating Partnership units owned by third-parties that are included in “minority interest” as of December 31, 2008 and 2007 are as follows:

	Outstanding Units at		Per Unit		Preferred or Annual		Conversion
Unit Series	December 31, 2008	December 31, 2007	Liquidation Preference		Distribution Rate		Rate Into Class A Units
Common:
Class A	14,627,005	15,530,125		N/A	$	3.65	N/A
Convertible Preferred:
B-1 Convertible Preferred (1)	139,798	139,798	$	50.00	$	2.50	(1)
B-2 Convertible Preferred (1)	304,761	304,761	$	50.00	$	4.00	(1)
Perpetual Preferred: (2)
7.00% D-10 Cumulative Redeemable	3,200,000	3,200,000	$	25.00	$	1.75	N/A
7.20% D-11 Cumulative Redeemable	1,400,000	1,400,000	$	25.00	$	1.80	N/A
6.55% D-12 Cumulative Redeemable	800,000	800,000	$	25.00	$	1.637	N/A
6.75% D-14 Cumulative Redeemable	4,000,000	4,000,000	$	25.00	$	1.6875	N/A
6.875% D-15 Cumulative Redeemable	1,800,000	1,800,000	$	25.00	$	1.71875	N/A

__________________________________

(1)

Class B-1 and B-2 units are convertible into Class A units at a rate of 100 Class A units for each pairing of 100 Class B-1 units and 218 Class B-2 units. Class B-1 unitholders are entitled to receive, in liquidation, an amount equal to the positive difference, if any, between the amount paid in liquidation for a Class A unit and the amount paid in respect of a Class B-2 unit multiplied by 2.18. Class B-2 unitholders are entitled to receive in liquidation the lesser of $50 per unit or the amount paid in respect of a Class A unit on liquidation divided by 2.18. Class B-1 unitholders receive distributions only if, and to the extent that, we pay quarterly dividends on the Class A units in excess of $0.85 per unit. Class B-2 unitholders are expected to receive quarterly distributions of $0.39 per unit.

(2)

Holders may tender for redemption to the Operating Partnership for cash at their stated redemption amount; we, at our option, may assume that obligation and pay the hold either cash or Vornado preferred shares on a one-for-one basis. These units are redeemable at our option after the 5th anniversary of the date of issuance (ranging from November 2008 to December 2011).

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17.

Income Per Share

The following table provides a reconciliation of both net income and the number of common shares used in the computation of (i) basic income per common share - which utilizes the weighted average number of common shares outstanding without regard to dilutive potential common shares, and (ii) diluted income per common share - which includes the weighted average common shares and dilutive share equivalents. Potentially dilutive share equivalents include our Series A convertible preferred shares, employee stock options and restricted share awards, exchangeable and convertible senior debentures, as well as Operating Partnership convertible preferred units.

(Amounts in thousands, except per share amounts)	Year Ended December 31,
	2008			2007			2006

Numerator:
Income from continuing operations, net of minority interest in the Operating Partnership	$	240,601		$	510,517		$	527,925
Income from discontinued operations, net of minority interest		154,442			58,389			32,215
Net income		395,043			568,906			560,140
Preferred share dividends		(57,091	)		(57,177	)		(57,511	)
Numerator for basic income per share – net income applicable to common shares		337,952			511,729			502,629
Impact of assumed conversions:
Series A convertible preferred share dividends		—			277			631
Convertible preferred unit distributions		—			—			485
Numerator for diluted income per share – net income applicable to common shares	$	337,952		$	512,006		$	503,745
Denominator:
Denominator for basic income per share – weighted average shares		153,900			151,949			142,145
Effect of dilutive securities (1):
Employee stock options and restricted share awards		4,219			6,491			7,829
Series A convertible preferred shares		—			118			269
Convertible preferred units		—			—			168
Denominator for diluted income per share – adjusted weighted average shares and assumed conversions		158,119			158,558			150,411
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations	$	1.20		$	2.98		$	3.31
Income from discontinued operations		1.00			0.39			0.23
Net income per common share	$	2.20		$	3.37		$	3.54
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations	$	1.16		$	2.86		$	3.13
Income from discontinued operations		0.98			0.37			0.22
Net income per common share	$	2.14		$	3.23		$	3.35

____________________

(1)	The effect of dilutive securities in the years ended December 31, 2008, 2007 and 2006 excludes an aggregate of 25,420, 22,272 and 21,900 weighted average common share equivalents, respectively, as their effect was anti-dilutive.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18.

Summary of Quarterly Results (Unaudited)

The following summary represents the results of operations for each quarter in 2008, 2007 and 2006:

			Net Income (loss) Applicable			Income (loss) Per Common Share (2)
	Revenues		to Common Shares (1)			Basic			Diluted
(Amounts in thousands, except share amounts)
2008
December 31	$	696,259	$	(216,786	)	$	(1.40	)	$	(1.40	)
September 30		677,145		31,430			0.20			0.20
June 30		674,365		125,386			0.82			0.79
March 31		649,282		397,922			2.60			2.47

2007
December 31	$	657,166	$	90,923		$	0.60		$	0.57
September 30		637,078		116,546			0.77			0.74
June 30		583,220		151,625			1.00			0.96
March 31		533,052		152,635			1.01			0.96

2006
December 31	$	513,441	$	105,427		$	0.73		$	0.69
September 30		482,429		113,632			0.80			0.76
June 30		465,594		148,765			1.05			0.99
March 31		447,636		134,805			0.96			0.91

______________________________

(1)

Fluctuations among quarters resulted primarily from the mark-to-market of derivative instruments, net gains on sale of real estate and wholly owned and partially owned assets other than depreciable real estate and from seasonality of business operations.

(2)

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

19.

Impairment Losses on Development Projects and Costs of Acquisitions Not Consummated

Below is a summary of non-cash Impairment losses on development projects and costs of acquisitions not consummated.

	For the Year Ended December 31,
		2008		2007
Impairment loss on residential condominium projects	$	50,625	$	—
Write-down of land held for development		12,500		—
Cost of acquisitions not consummated ⁽¹⁾		3,378		10,375
Other write-downs on development projects		14,944		—
	$	81,447	$	10,375

______________________________

(1)

2008 primarily represents costs related to the Hudson Rail Yards acquisition not consummated. 2007 primarily represents costs related to the Equity Office Properties Trust acquisition not consummated.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information

The financial information summarized below is presented by reportable operating segment, consistent with how we review and manage our businesses.

(Amounts in thousands)	For the Year Ended December 31, 2008
	Total			New York Office			Washington, DC Office ⁽²⁾			Retail			Merchandise Mart ⁽²⁾			Toys			Other ⁽⁴⁾
Property rentals	$	2,024,075		$	722,445		$	509,377		$	349,763		$	245,400		$	—		$	197,090
Straight-line rents:
Contractual rent increases		58,159			28,023			6,764			16,622			5,954			—			796
Amortization of free rent		32,901			14,743			10,778			4,156			2,703			—			521
Amortization of acquired below- market leases, net		96,176			60,355			4,423			26,765			161			—			4,472
Total rentals		2,211,311			825,566			531,342			397,306			254,218			—			202,879
Tenant expense reimbursements		358,437			135,788			61,523			128,496			18,567			—			14,063
Fee and other income:
Tenant cleaning fees		56,416			71,833			—			—			—			—			(15,417	)
Management and leasing fees		13,397			6,411			8,940			1,673			349			—			(3,976	)
Lease termination fees		8,634			3,088			2,635			2,281			630			—			—
Other		48,856			15,699			22,360			2,603			7,059			—			1,135
Total revenues		2,697,051			1,058,385			626,800			532,359			280,823			—			198,684
Operating expenses		1,070,118			439,012			220,139			201,397			137,971			—			71,599
Depreciation and amortization		537,427			190,925			137,255			92,353			51,833			—			65,061
General and administrative		194,027			20,217			26,548			29,866			29,254			—			88,142
Impairment losses on development projects and costs of acquisitions not consummated		81,447			—			—			595			—			—			80,852
Total expenses		1,883,019			650,154			383,942			324,211			219,058			—			305,654
Operating income (loss)		814,032			408,231			242,858			208,148			61,765			—			(106,970	)
Income applicable to Alexander’s		36,671			763			—			650			—			—			35,258
Income applicable to Toys		2,380			—			—			—			—			2,380			—
(Loss) income from partially owned entities		(195,878	)		5,319			6,173			9,721			1,106			—			(218,197	)
Interest and other investment income, net		(2,682	)		2,288			2,116			494			356			—			(7,936	)
Interest and debt expense		(586,358	)		(139,146	)		(126,508	)		(86,787	)		(52,148	)		—			(181,769	)
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		7,757			—			—			—			—			—			7,757
Minority interest of partially owned entities		3,263			(4,762	)		—			157			(125	)		—			7,993
Income (loss) before income taxes		79,185			272,693			124,639			132,383			10,954			2,380			(463,864	)
Income tax benefit (expense)		204,537			—			220,973			(82	)		(1,206	)		—			(15,148	)
Income (loss) from continuing operations		283,722			272,693			345,612			132,301			9,748			2,380			(479,012	)
Income (loss) from discontinued operations, net		154,442			—			59,068			(448	)		—			—			95,822
Income (loss) before allocation to minority limited partners		438,164			272,693			404,680			131,853			9,748			2,380			(383,190	)
Minority limited partners’ interest in the Operating Partnership		(21,037	)		—			—			—			—			—			(21,037	)
Perpetual preferred unit distributions of the Operating Partnership		(22,084	)		—			—			—			—			—			(22,084	)
Net income (loss)		395,043			272,693			404,680			131,853			9,748			2,380			(426,311	)
Interest and debt expense ⁽³⁾		782,394			132,406			130,310			102,600			53,072			147,812			216,194
Depreciation and amortization ⁽³⁾		710,526			181,699			143,989			98,238			52,357			136,634			97,609
Income tax expense (benefit) ⁽³⁾		(142,415	)		—			(220,965	)		82			1,260			59,652			17,556
EBITDA⁽¹⁾	$	1,745,548		$	586,798		$	458,014		$	332,773		$	116,437		$	346,478		$	(94,952	)
Percentage of EBITDA by segment		100.0	%		33.6	%		26.2	%		19.1	%		6.7	%		19.8	%		(5.4	)%
Balance Sheet Data:
Real estate, at cost	$	17,869,658		$	5,362,129		$	4,583,519		$	4,576,729		$	1,344,093		$	—		$	2,003,188
Investments in partially owned entities		1,083,250			129,934			115,121			20,079			6,969			293,096			518,051
Total Assets		21,418,210			5,287,544			3,934,039			3,733,586			1,468,470			293,096			6,701,475

_________________

See notes on page 62.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information - continued

(Amounts in thousands)	For the Year Ended December 31, 2007
	Total			New York Office			Washington, DC Office ⁽²⁾			Retail			Merchandise Mart ⁽²⁾			Toys			Other ⁽⁴⁾
Property rentals	$	1,816,698		$	640,739		$	455,416		$	328,911		$	237,199		$	—		$	154,433
Straight-line rents:
Contractual rent increases		42,431			13,281			11,856			12,257			4,193			—			844
Amortization of free rent		34,602			15,935			14,115			1,138			1,836			—			1,578
Amortization of acquired below-market leases, net		83,292			47,861			4,615			25,960			193			—			4,663
Total rentals		1,977,023			717,816			486,002			368,266			243,421			—			161,518
Tenant expense reimbursements		323,544			125,940			45,138			120,756			19,570			—			12,140
Fee and other income:
Tenant cleaning fees		46,238			58,837			—			—			—			—			(12,599	)
Management and leasing fees		15,713			4,928			12,539			1,770			7			—			(3,531	)
Lease termination fees		7,453			3,500			453			2,823			677			—			—
Other		40,545			16,239			16,299			2,257			6,997			—			(1,247	)
Total revenues		2,410,516			927,260			560,431			495,872			270,672			—			156,281
Operating expenses		951,582			395,357			183,776			172,557			131,332			—			68,560
Depreciation and amortization		441,209			150,268			117,496			78,286			47,105			—			48,054
General and administrative		189,041			17,252			27,629			27,476			28,168			—			88,516
Costs of acquisitions not consummated		10,375			—			—			—			—			—			10,375
Total expenses		1,592,207			562,877			328,901			278,319			206,605			—			215,505
Operating income (loss)		818,309			364,383			231,530			217,553			64,067			—			(59,224	)
Income applicable to Alexander’s		50,589			757			—			812			—			—			49,020
Loss applicable to Toys “R” Us		(14,337	)		—			—			—			—			(14,337	)		—
Income from partially owned entities		31,891			4,799			8,728			9,041			1,053			—			8,270
Interest and other investment income		226,425			2,888			5,982			534			390			—			216,631
Interest and debt expense		(569,386	)		(133,804	)		(126,163	)		(78,234	)		(52,237	)		—			(178,948	)
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		39,493			—			—			—			—			—			39,493
Minority interest of partially owned entities		3,494			(3,583	)		—			96			—			—			6,981
Income (loss) before income taxes		586,478			235,440			120,077			149,802			13,273			(14,337	)		82,223
Income tax expense		(9,179	)		—			(2,909	)		(185	)		(969	)		—			(5,116	)
Income (loss) from continuing operations		577,299			235,440			117,168			149,617			12,304			(14,337	)		77,107
Income (loss) from discontinued operations, net		58,389			—			62,481			6,397			—			—			(10,489	)
Income (loss) before allocation to minority limited partners		635,688			235,440			179,649			156,014			12,304			(14,337	)		66,618
Minority limited partners’ interest in the Operating Partnership		(47,508	)		—			—			—			—			—			(47,508	)
Perpetual preferred unit distributions of the Operating Partnership		(19,274	)		—			—			—			—			—			(19,274	)
Net income (loss)		568,906			235,440			179,649			156,014			12,304			(14,337	)		(164	)
Interest and debt expense ⁽³⁾		823,030			131,418			131,013			89,537			53,098			174,401			243,563
Depreciation and amortization ⁽³⁾		676,660			147,340			132,302			82,002			47,711			155,800			111,505
Income tax expense (benefit) ⁽³⁾		4,234			—			6,738			185			969			(10,898	)		7,240
EBITDA⁽¹⁾	$	2,072,830		$	514,198		$	449,702		$	327,738		$	114,082		$	304,966		$	362,144

Balance Sheet Data:
Real estate, at cost	$	17,028,507		$	5,279,314		$	4,408,459		$	4,079,292		$	1,301,532		$	––		$	1,959,910
Investments in partially owned entities		1,504,831			146,784			120,561			111,152			6,283			298,089			821,962
Total Assets		22,478,935			5,091,848			3,315,333			3,056,915			1,475,876			298,089			9,240,874

_________________

See notes on page 62.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information - continued

(Amounts in thousands)	For the Year Ended December 31, 2006
	Total			New York Office			Washington, DC Office ⁽²⁾			Retail			Merchandise Mart ⁽²⁾			Toys			Other ⁽⁴⁾
Property rentals	$	1,458,201		$	487,421		$	394,997		$	264,727		$	224,341		$	—		$	86,715
Straight-line rents:
Contractual rent increases		31,947			4,431			13,632			7,908			6,142			—			(166	)
Amortization of free rent		31,103			7,245			16,155			5,080			2,623			—			—
Amortization of acquired below- market leases, net		23,490			976			4,178			15,513			43			—			2,780
Total rentals		1,544,741			500,073			428,962			293,228			233,149			—			89,329
Tenant expense reimbursements		260,772			102,488			34,618			101,737			17,810			—			4,119
Fee and other income:
Tenant cleaning fees		33,779			42,317			—			—			—			—			(8,538	)
Management and leasing fees		10,256			1,111			7,643			1,463			39			—			—
Lease termination fees		29,362			25,188			2,798			371			1,005			—			—
Other		30,190			12,307			11,247			1,588			4,963			—			85
Total revenues		1,909,100			683,484			485,268			398,387			256,966			—			84,995
Operating expenses		737,452			301,583			152,121			130,520			103,644			—			49,584
Depreciation and amortization		319,066			98,474			106,592			50,806			42,132			—			21,062
General and administrative		180,167			16,942			34,074			21,683			26,572			—			80,896
Total expenses		1,236,685			416,999			292,787			203,009			172,348			—			151,542
Operating income (loss)		672,415			266,485			192,481			195,378			84,618			—			(66,547	)
(Loss) income applicable to Alexander’s		(14,530	)		772			—			716			—			—			(16,018	)
Loss applicable to Toys “R” Us		(47,520	)		—			—			—			—			(47,520	)		—
Income from partially owned entities		60,355			3,844			13,302			5,950			1,076			—			36,183
Interest and other investment income		255,391			913			1,782			812			275			—			251,609
Interest and debt expense		(394,571	)		(84,134	)		(97,972	)		(79,202	)		(28,672	)		—			(104,591	)
Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate		76,073			—			—			—			—			—			76,073
Minority interest of partially owned entities		1,363			—			—			84			5			—			1,274
Income (loss) before income taxes		608,976			187,880			109,593			123,738			57,302			(47,520	)		177,983
Income tax (expense) benefit		(491	)		—			(1,066	)		—			575			—			—
Income (loss) from continuing operations		608,485			187,880			108,527			123,738			57,877			(47,520	)		177,983
Income (loss) from discontinued operations, net		32,215			—			25,714			9,206			5,682			—			(8,387	)
Income (loss) before allocation to minority limited partners		640,700			187,880			134,241			132,944			63,559			(47,520	)		169,596
Minority limited partners’ interest in the Operating Partnership		(58,712	)		—			—			—			—			—			(58,712	)
Perpetual preferred unit distributions of the Operating Partnership		(21,848	)		—			—			—			—			—			(21,848	)
Net income (loss)		560,140			187,880			134,241			132,944			63,559			(47,520	)		89,036
Interest and debt expense ⁽³⁾		692,496			86,861			107,477			89,748			29,551			196,259			182,600
Depreciation and amortization ⁽³⁾		542,515			101,976			125,674			56,168			42,717			137,176			78,804
Income tax (benefit) expense ⁽³⁾		(11,848	)		—			8,976			—			(575	)		(22,628	)		2,379
EBITDA⁽¹⁾	$	1,783,303		$	376,717		$	376,368		$	278,860		$	135,252		$	263,287		$	352,819
Balance Sheet Data:
Real estate, at cost	$	11,607,078		$	3,283,405		$	3,501,927		$	2,825,156		$	1,272,883		$	––		$	723,707
Investments in partially owned entities		1,440,124			106,394			286,108			143,028			6,547			317,145			580,902
Total Assets		17,954,281			3,733,819			2,427,378			2,507,452			1,580,691			317,145			7,387,796

_________________

See notes on following page.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information - continued

Notes to preceding tabular information:

(1)

EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” Management considers EBITDA a supplemental measure for making decisions and assessing the un-levered performance of its segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, management utilizes this measure to make investment decisions as well as to compare the performance of its assets to that of its peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2)	As of January 1, 2008, we transferred the operations and financial results related to 409 3^rd Street, NW (Washington Office Center) from the Merchandise Mart segment to the Washington, DC Office segment for both the current and prior periods presented.

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

(4)	Other EBITDA is comprised of:

(Amounts in thousands)	For the Year Ended December 31,
	2008			2007			2006
Alexander’s	$	64,683		$	78,375		$	14,130
555 California Street (acquired 70% interest in May 2007)		48,316			34,073			—
Hotel Pennsylvania		42,269			37,941			27,495
Lexington		35,150			24,539			51,737
GMH (sold in June 2008)		—			22,604			10,737
Industrial warehouses		5,264			4,881			5,582
Other investments		6,321			7,322			13,253
		202,003			209,735			122,934
Non-cash asset write-downs:
Investment in Lexington		(107,882	)		—			—
Marketable equity securities		(76,352	)		—			—
Real estate development costs:
Partially owned entities		(96,037	)		—			—
Wholly owned entities (including costs of acquisitions not consummated)		(80,852	)		(10,375	)		—
MPH mezzanine loan loss reversal (accrual)		10,300			(57,000	)		—
Derivative positions in marketable equity securities		(33,740	)		113,503			111,107
Corporate general and administrative expenses		(77,763	)		(76,799	)		(76,071	)
Investment income and other, net		89,971			182,201			209,118
Minority limited partners’ interest in the Operating Partnership		(21,037	)		(47,508	)		(58,712	)
Perpetual preferred unit distributions of the Operating Partnership		(22,084	)		(19,274	)		(21,848	)
Discontinued operations of Americold (including a $112,690 net gain on sale in 2008)		118,521			67,661			66,291
	$	(94,952	)	$	362,144		$	352,819

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this report:

The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K/A, Amendment No. 1.

The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this Annual Report on Form 10-K/A, Amendment No. 1.

		Pages in this Annual Report on Form 10-K/A
II--Valuation and Qualifying Accounts--years ended December 31, 2008, 2007 and 2006		65
III--Real Estate and Accumulated Depreciation as of December 31, 2008		66

Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto.

The Exhibit Index attached hereto is herein incorporated by reference. The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K/A, Amendment No. 1.

Exhibit No.
23.1			Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP
23.2			Consent of Independent Registered Public Accounting Firm – KPMG LLP
23.3			Consent of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP
31.1			Rule 13a-14 (a) Certification of Chief Executive Officer
31.2			Rule 13a-14 (a) Certification of Chief Financial Officer
32.1			Section 1350 Certification of the Chief Executive Officer
32.2			Section 1350 Certification of the Chief Financial Officer

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.

		VORNADO REALTY TRUST
		(Registrant)


Date: March 2, 2009	By:	/s/ Joseph Macnow
		Joseph Macnow, Executive Vice President – Finance and Administration and Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

December 31, 2008

(Amounts in Thousands)

Column A	Column B		Column C			Column D			Column E
Description	Balance at Beginning of Year		Additions Charged Against Operations			Uncollectible Accounts Written-off			Balance at End of Year


Year Ended December 31, 2008: Allowance for doubtful accounts	$	79,227	$	20,931	(1)	$	(14,851	)(2)	$	85,307
Year Ended December 31, 2007: Allowance for doubtful accounts	$	18,199	$	65,680	(1)	$	(4,652	)	$	79,227
Year Ended December 31, 2006: Allowance for doubtful accounts	$	21,202	$	2,844		$	(5,847	)	$	18,199
________________________

(1)

2007 includes a $57,000 allowance on one of our investments in a mezzanine loan, of which $10,300 was reversed in 2008 upon sale of a participation in that loan.

(2)

Includes $9,482 for tenants that filed for bankruptcy, of which $5,135 relates to Circuit City.

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C					COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)							Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land			Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
Office Buildings
New York
Manhattan
1290 Avenue of the Americas	$	444,666		$	515,539		932,629	$	6,964		515,539	$	939,593	$	1,455,132	$	48,061	1963	2007	(4)
350 Park		430,000			265,889		363,381		7,005		265,889		370,386		636,275		19,104	1960	2006	(4)
One Penn Plaza		-			-		412,169		141,215		-		553,384		553,384		147,616	1972	1998	(4)
100 W.33rd St (Manhattan Mall)		159,361			242,776		247,970		1,432		242,776		249,402		492,178		12,249	1911	2007	(4)
Two Penn Plaza		287,386			53,615		164,903		85,471		52,689		251,300		303,989		77,267	1968	1997	(4)
770 Broadway		353,000			52,898		95,686		72,857		52,898		168,543		221,441		50,263	1907	1998	(4)
90 Park Avenue		-			8,000		175,890		28,606		8,000		204,496		212,496		60,442	1964	1997	(4)
888 Seventh Avenue		318,554			-		117,269		91,163		-		208,432		208,432		53,571	1980	1998	(4)
640 Fifth Avenue		-			38,224		25,992		107,230		38,224		133,222		171,446		35,607	1950	1997	(4)
Eleven Penn Plaza		206,877			40,333		85,259		41,972		40,333		127,231		167,564		38,895	1923	1997	(4)
1740 Broadway		-			26,971		102,890		36,323		26,971		139,213		166,184		32,838	1950	1997	(4)
909 Third Avenue		214,075			-		120,723		27,814		-		148,537		148,537		39,545	1969	1999	(4)
150 East 58th Street		-			39,303		80,216		26,031		39,303		106,247		145,550		30,303	1969	1998	(4)
595 Madison Avenue		-			62,731		62,888		15,523		62,731		78,411		141,142		18,795	1968	1999	(4)
866 United Nations Plaza		44,978			32,196		37,534		12,313		32,196		49,847		82,043		18,348	1966	1997	(4)
20 Broad Street		-			-		28,760		21,876		-		50,636		50,636		11,359	1956	1998	(4)
40 Fulton Street		-			15,732		26,388		4,110		15,732		30,498		46,230		9,441	1987	1998	(4)
689 Fifth Avenue		-			19,721		13,446		10,437		19,721		23,883		43,604		7,129	1925	1998	(4)
330 West 34th Street		-			-		8,599		11,403		-		20,002		20,002		6,370	1925	1998	(4)
40-42 Thompson Street		-			6,503		10,057		375		6,503		10,432		16,935		865	1928	2005	(4)
1540 Broadway Garage		-			4,086		8,914		-		4,086		8,914		13,000		558	1990	2006	(4)
Other		-			-		5,548		18,880		-		24,428		24,428		2,300
Total New York		2,458,897			1,424,517		3,127,111		769,000		1,423,591		3,897,037		5,320,628		720,926

Washington, DC
2011-2451 Crystal Drive		88,732			100,935		409,920		86,464		100,228		497,091		597,319		100,531	1984-1989	2002	(4)
Warner Building		292,700			70,853		246,169		21,347		81,983		256,386		338,369		21,945	1992	2005	(4)
2001 Jefferson Davis Highway, 2100/2200 Crystal Drive, 223 23rd Street, 2221 South Clark Street, 2100 Crystal Drive Retail		40,701			57,213		131,206		142,840		48,657		282,602		331,259		34,011	1964-1969	2002	(4)
1550-1750 Crystal Drive/ 241-251 18th Street		130,444			64,817		218,330		38,033		64,652		256,528		321,180		55,995	1974-1980	2002	(4)
H Street Apartments		259,546			118,421		125,078		46,461		138,696		151,264		289,960		5,651		2007	(4)
Skyline Place (6 buildings)		442,500			41,986		221,869		20,637		41,862		242,630		284,492		49,329	1973-1984	2002	(4)
1215, 1225 S. Clark Street/ 200, 201 12th Street S.		145,594			47,594		177,373		21,371		47,465		198,873		246,338		42,742	1983-1987	2002	(4)
1800, 1851 and 1901 South Bell Street		27,801			37,551		118,806		16,114		37,551		134,920		172,471		26,028	1968	2002	(4)
2101 L Street		150,000			32,815		51,642		69,234		39,768		113,923		153,691		2,938	1975	2003	(4)
Bowen Building		115,022			30,077		98,962		1,631		30,176		100,494		130,670		9,313	2004	2005	(4)
2200-2300 Courthhouse Plaza		70,774			-		105,475		24,177		-		129,652		129,652		26,611	1988-1989	2002	(4)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
1999 K Street		73,747		55,438		3,012		63,234		-		121,684		121,684		-		2006	(4)
1875 Connecticut Ave NW		30,770		36,303		82,004		832		35,886		83,253		119,139		7,589	1963	2007	(4)
1229-1231 25th Street		24,620		67,049		5,039		37,647		-		109,735		109,735		-		2007	(4)
Reston Executive		93,000		15,424		85,722		7,299		15,380		93,065		108,445		19,376	1987-1989	2002	(4)
One Skyline Tower		100,800		12,266		75,343		15,339		12,231		90,717		102,948		17,329	1988	2002	(4)
H Street - North 10-1D Land Parcel		-		104,473		55		(9,971	)	90,522		4,035		94,557		1		2007	(4)
1825 Connecticut Ave NW		28,958		33,090		61,316		(769	)	32,726		60,911		93,637		11,395	1956	2007	(4)
409 3rd Street		-		10,719		69,658		7,258		10,719		76,916		87,635		21,187	1990	1998	(4)
Commerce Executive		50,213		13,401		58,705		12,711		13,363		71,454		84,817		15,865	1985-1989	2002	(4)
1235 S. Clark Street		54,128		15,826		53,894		10,884		15,826		64,778		80,604		10,238	1981	2002	(4)
Seven Skyline Place		134,700		10,292		58,351		(3,607	)	10,262		54,774		65,036		11,970	2001	2002	(4)
1150 17th Street		29,659		23,359		24,876		13,823		24,723		37,335		62,058		8,198	1970	2002	(4)
Crystal City Hotel		-		8,000		47,191		5,108		8,000		52,299		60,299		5,518	1968	2004	(4)
1750 Penn Avenue		46,570		20,020		30,032		1,244		21,170		30,126		51,296		6,306	1964	2002	(4)
1101 17th Street		24,561		20,666		20,112		8,151		21,818		27,111		48,929		6,312	1963	2002	(4)
H Street Ground Leases		-		71,893		-		(26,893	)	45,000		-		45,000		-		2007	(4)
1227 25th Street		-		16,293		24,620		1,194		17,047		25,060		42,107		875		2007	(4)
1140 Connecticut Avenue		18,166		19,017		13,184		6,899		19,801		19,299		39,100		5,033	1966	2002	(4)
1730 M. Street		15,336		10,095		17,541		8,704		10,687		25,653		36,340		6,350	1963	2002	(4)
Democracy Plaza I		-		-		33,628		(304)		-		33,324		33,324		10,130	1987	2002	(4)
1726 M Street		-		9,450		22,062		150		9,455		22,207		31,662		1,244	1964	2006	(4)
Crystal City Shop		-		-		20,465		5,779		-		26,244		26,244		4,682	2004	2004	(4)
1101 South Capitol Street		-		11,541		178		57		11,597		179		11,776		96		2007	(4)
South Capital		-		4,009		6,273		(5,074	)	-		5,208		5,208		-		2005	(4)
H Street		-		1,763		641		35		1,763		676		2,439		57		2005	(4)
Tysons Dulles		-		19,146		79,095		(98,241	)	-		-		-		-	1986-1990	2002	(4)
1707 H Street		-		27,058		1,002		(28,060	)	-		-		-		-		2007	(4)
Other		-		-		51,767		(41,063	)	-		10,704		10,704		-
Total Washington, DC		2,489,042		1,238,853		2,850,596		480,675		1,059,014		3,511,110		4,570,124		544,845

New Jersey
Paramus		-		-		-		23,134		1,033		22,101		23,134		11,785	1967	1987	(4)

California
555 California Street		720,671		221,903		899,839		10,747		221,903		910,586		1,132,489		48,086	1922/1969/1970	2007	(4)

Total Office Buildings		5,668,610		2,885,273		6,877,546		1,283,556		2,705,541		8,340,834		11,046,375		1,325,642

Shopping Centers
California
Los Angeles (Beverly Connection)		100,000		72,996		131,510		-		72,996		131,510		204,506		6,907		2005	(4)
Sacramento		-		3,897		31,370		-		3,897		31,370		35,267		2,405		2006	(4)
San Francisco (The Cannery)		18,561		20,100		11,923		2,521		20,100		14,444		34,544		550		2007	(4)
Walnut Creek (1149 S. Main St)		-		2,699		19,930		-		2,699		19,930		22,629		1,528		2006	(4)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
Pasadena		-		-		18,337		152		-		18,489		18,489		849		2007	(4)
San Francisco (3700 Geary Blvd)		-		11,857		4,444		27		11,857		4,471		16,328		345		2006	(4)
Signal Hill		-		10,218		3,118		-		10,218		3,118		13,336		172		2006	(4)
Redding		-		3,075		3,030		13		3,075		3,043		6,118		167		2006	(4)
Walnut Creek (1556 Mount Diablo Blvd)		-		5,909		-		53		5,909		53		5,962		-		2007	(4)
Merced		-		1,829		2,022		216		1,829		2,238		4,067		135		2006	(4)
San Bernadino (1522 E. Highland Ave)		-		1,651		1,810		-		1,651		1,810		3,461		200		2004	(4)
Orange		-		1,487		1,746		-		1,487		1,746		3,233		193		2004	(4)
Vallejo		-		-		3,123		-		-		3,123		3,123		174		2006	(4)
Corona		-		-		3,073		-		-		3,073		3,073		339		2004	(4)
Westminster		-		1,673		1,192		-		1,673		1,192		2,865		132		2004	(4)
San Bernadino (648 W. 4th St)		-		1,597		1,119		-		1,597		1,119		2,716		124		2004	(4)
Costa Mesa (2180 Newport Blvd)		-		2,239		308		-		2,239		308		2,547		34		2004	(4)
Mojave		-		-		2,250		-		-		2,250		2,250		248		2004	(4)
Ontario		-		713		1,522		-		713		1,522		2,235		168		2004	(4)
Barstow		-		856		1,367		-		856		1,367		2,223		151		2004	(4)
Colton		-		1,239		954		-		1,239		954		2,193		105		2004	(4)
Anaheim		-		1,093		1,093		-		1,093		1,093		2,186		121		2004	(4)
Rancho Cucamonga		-		1,051		1,051		-		1,051		1,051		2,102		116		2004	(4)
Garden Grove		-		795		1,254		-		795		1,254		2,049		138		2004	(4)
Costa Mesa (707 W. 19th St)		-		1,399		635		-		1,399		635		2,034		70		2004	(4)
Calimesa		-		504		1,463		-		504		1,463		1,967		162		2004	(4)
Santa Ana		-		1,565		377		-		1,565		377		1,942		42		2004	(4)
Moreno Valley		-		639		1,156		-		639		1,156		1,795		128		2004	(4)
Fontana		-		518		1,100		-		518		1,100		1,618		122		2004	(4)
Rialto		-		434		1,173		-		434		1,173		1,607		129		2004	(4)
Desert Hot Springs		-		197		1,355		-		197		1,355		1,552		150		2004	(4)
Beaumont		-		206		1,321		-		206		1,321		1,527		146		2004	(4)
Colton		-		1,157		332		-		1,157		332		1,489		37		2004	(4)
Yucaipa		-		663		426		-		663		426		1,089		47	2008	2004	(4)
Riverside (9155 Jurupa Road)		-		251		783		-		251		783		1,034		86		2004	(4)
Riverside (5571 Mission Blvd)		-		209		704		-		209		704		913		76		2004	(4)
Total California		118,561		154,716		258,371		2,982		154,716		261,353		416,069		16,496

Colorado
Littleton		-		5,867		2,557		-		5,867		2,557		8,424		141		2006	(4)
Grand Junction		-		2,321		2,071		-		2,321		2,071		4,392		115		2006	(4)
Total Colorado		-		8,188		4,628		-		8,188		4,628		12,816		256

Connecticut
Waterbury		5,683	*	667		4,504		4,876		667		9,380		10,047		4,476	1965	1965	(4)
Newington		6,030	*	2,421		1,200		475		2,421		1,675		4,096		514	1969	1969	(4)
Total Connecticut		11,713		3,088		5,704		5,351		3,088		11,055		14,143		4,990

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
Florida
Coral Springs		-		3,942		2,326		160		3,942		2,486		6,428		128		2006	(4)
Tampa		-		3,871		2,532		-		3,871		2,532		6,403		140		2006	(4)
Vero Beach		-		2,194		1,908		-		2,194		1,908		4,102		106		2006	(4)
Total Florida		-		10,007		6,766		160		10,007		6,926		16,933		374

Illinois
Bourbonnais		-		2,379		3,792		-		2,379		3,792		6,171		209		2006	(4)
Lansing		-		2,264		1,128		-		2,264		1,128		3,392		62		2006	(4)
Total Illinois		-		4,643		4,920		-		4,643		4,920		9,563		271

Iowa
Dubuque		-		-		1,568		-		-		1,568		1,568		87		2006	(4)

Maryland
Rockville		14,344		3,470		20,599		208		3,470		20,807		24,277		1,969		2005	(4)
Baltimore (Towson)		10,489	*	581		3,227		7,794		581		11,021		11,602		3,404	1968	1968	(4)
Annapolis		-		-		9,652		-		-		9,652		9,652		1,551		2005	(4)
Wheaton		-		-		5,691		-		-		5,691		5,691		314		2006	(4)
Glen Burnie		5,398	*	462		2,571		523		462		3,094		3,556		2,468	1958	1958	(4)
Total Maryland		30,231		4,513		41,740		8,525		4,513		50,265		54,778		9,706

Massachusetts
Dorchester		-		2,797		4,023		10,820		13,617		4,023		17,640		222		2006	(4)
Springfield		2,878	*	-		2,471		3,237		2,797		2,911		5,708		415	1993	1966	(4)
Chicopee		-		13,617		-		(12,722	)	895		-		895		-	1969	1969	(4)
Cambridge		-		895		-		(641	)	-		254		254		11			(4)
Total Massachusetts		2,878		17,309		6,494		694		17,309		7,188		24,497		648

Michigan
Roseville		-		30		6,128		1,373		30		7,501		7,531		1,136		2005	(4)
Battle Creek		-		1,340		2,273		-		1,340		2,273		3,613		126		2006	(4)
Midland		-		-		141		86		-		227		227		11		2006	(4)
Total Michigan		-		1,370		8,542		1,459		1,370		10,001		11,371		1,273

New Hampshire
Salem		-		6,083		-		-		6,083		-		6,083		-		2006	(4)

New Jersey
Paramus (Bergen Town Center)		228,731		19,884		81,723		286,758		23,525		364,840		388,365		11,296	1957	2003	(4)
North Bergen (Tonnelle Ave)				24,493		-		41,507		16,012		49,988		66,000		51	2006	2006	(4)
Union (Springfield Avenue)		-		19,700		45,090		-		19,700		45,090		64,790		1,697		2007	(4)
East Rutherford		-		-		35,274		-		-		35,274		35,274		997		2007	(4)
Garfield		-		96		8,068		22,847		45		30,966		31,011		15,814	1979	1998	(4)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
East Hanover I and II		25,136	*	2,232		18,241		7,602		2,671		25,404		28,075		10,820	1962	1962	(4)
Lodi (Washington Street)		10,738		7,606		13,125		227		7,606		13,352		20,958		1,353		2004	(4)
Englewood		12,380		2,300		17,245		1		2,300		17,246		19,546		651		2007	(4)
Bricktown		15,015	*	1,391		11,179		6,176		1,391		17,355		18,746		8,562	1968	1968	(4)
Totowa		27,201	*	1,102		11,994		4,479		1,099		16,476		17,575		10,250	1957/1999	1957	(4)
Hazlet		-		7,400		9,412		-		7,400		9,412		16,812		355		2007	(4)
Carlstadt		7,690		-		16,457		-		-		16,457		16,457		468		2007	(4)
North Plainfield		10,023	*	500		13,983		1,546		500		15,529		16,029		9,072	1955	1989	(4)
East Brunswick II (339-341 Route 18 S.)		-		2,098		10,949		2,643		2,098		13,592		15,690		6,742	1972	1972	(4)
Manalapan		11,540	*	725		7,189		7,748		1,046		14,616		15,662		7,937	1971	1971	(4)
Marlton		11,221	*	1,611		3,464		8,287		1,611		11,751		13,362		4,820	1973	1973	(4)
Union (Route 22 and Morris Ave)		30,892	*	3,025		7,470		2,006		3,025		9,476		12,501		3,978	1962	1962	(4)
Hackensack		23,033	*	692		10,219		963		692		11,182		11,874		7,931	1963	1963	(4)
Cherry Hill		13,809	*	5,864		2,694		2,114		5,864		4,808		10,672		3,558	1964	1964	(4)
Watchung		12,464	*	4,178		5,463		811		4,441		6,011		10,452		2,618	1994	1959	(4)
South Plainfield		-		-		10,044		24		-		10,068		10,068		378		2007	(4)
Eatontown		-		4,653		4,999		279		4,653		5,278		9,931		440		2005	(4)
Dover		6,767	*	559		6,363		2,867		559		9,230		9,789		4,871	1964	1964	(4)
Lodi (Route 17 N.)		8,647	*	238		9,446		-		238		9,446		9,684		2,183	1999	1975	(4)
East Brunswick I (325-333 Route 18 S.)		20,965	*	319		6,220		2,792		319		9,012		9,331		7,916	1957	1957	(4)
Jersey City		17,633	*	652		7,495		329		652		7,824		8,476		1,773	1965	1965	(4)
Morris Plains		11,088	*	1,104		6,411		604		1,104		7,015		8,119		6,597	1961	1985	(4)
Middeltown		15,147	*	283		5,248		1,280		283		6,528		6,811		4,400	1963	1963	(4)
Woodbridge		20,362	*	1,509		2,675		1,774		1,539		4,419		5,958		2,001	1959	1959	(4)
Delran		5,919	*	756		4,468		587		756		5,055		5,811		4,538	1972	1972	(4)
Lawnside		9,757	*	851		3,164		1,426		851		4,590		5,441		3,402	1969	1969	(4)
Kearny		3,443	*	309		3,376		1,152		309		4,528		4,837		2,651	1938	1959	(4)
Turnersville		3,763	*	900		1,342		856		900		2,198		3,098		2,021	1974	1974	(4)
North Bergen (Kennedy Blvd)		3,651	*	2,308		636		34		2,308		670		2,978		329	1993	1959	(4)
Montclair		1,773	*	66		419		381		66		800		866		631	1972	1972	(4)
Bordentown		7,430	*	-		-		-		-		-		-		-	1958	1958	(4)
Total New Jersey		576,218		119,404		401,545		410,100		115,563		815,486		931,049		153,101

New York
Bronx (Bruckner Blvd)		-		66,100		259,503		582		66,100		260,085		326,185		12,975		2007	(4)
Valley Stream (Green Acres Mall)		335,000		147,172		134,980		41,422		146,969		176,605		323,574		34,275	1956	1997	(4)
Manhattan Mall		72,639		88,595		113,473		55,488		88,595		168,961		257,556		5,592		2007	(4)
Hicksville (Broadway Mall)		94,879		126,324		48,904		2,316		126,324		51,220		177,544		3,724		2005	(4)
Huntington		16,073		21,200		33,667		-		21,200		33,667		54,867		958		2007	(4)
Mount Kisco		29,992		22,700		26,700		-		22,700		26,700		49,400		546		2007	(4)
Poughkeepsie		-		12,733		12,026		20,976		7,632		38,103		45,735		638		2005	(4)
Staten Island		17,448		11,446		21,262		221		11,446		21,483		32,929		2,647		2004	(4)
Inwood		-		12,419		19,097		500		12,419		19,597		32,016		1,958		2004	(4)
Queens (99-01 Queens Blvd)		-		7,839		20,392		1,766		7,839		22,158		29,997		2,384		2004	(4)
Bronx (Gun Hill Road)		-		6,427		11,885		9,148		4,485		22,975		27,460		288		2005	(4)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C					COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)							Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land			Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
West Babylon		6,687			6,720		13,786		97		6,720		13,883		20,603		618		2007	(4)
Dewitt		-			-		7,546		-		-		7,546		7,546		423		2006	(4)
Freeport (437 E. Sunrise Highway)		13,630		*	1,231		4,747		1,454		1,231		6,201		7,432		4,412	1981	1981	(4)
Oceanside		-			2,710		2,306		-		2,710		2,306		5,016		87		2007	(4)
Albany (Menands)		5,726		*	460		2,091		2,412		460		4,503		4,963		3,146	1965	1965	(4)
Buffalo (Amherst)		6,453		*	636		4,056		26		636		4,082		4,718		3,709	1968	1968	(4)
Rochester (Henrietta)		-			-		2,647		1,096		-		3,743		3,743		3,017	1971	1971	(4)
Rochester		-			2,172		-		-		2,172		-		2,172		-	1966	1966	(4)
Freeport (240 Sunrise Highway)		-			-		-		260		-		260		260		17		2005	(4)
Commack		-			-		43		-		-		43		43		1		2006	(4)
New Hyde Park		6,879		*	-		4		-		-		4		4		126	1970	1976	(4)
Manhattan
1540 Broadway		-			105,914		214,208		-		105,914		214,208		320,122		13,238		2006	(4)
828-850 Madison Avenue		80,000			107,937		28,261		-		107,937		28,261		136,198		2,532		2005	(4)
4 Union Square South		-			24,079		55,220		343		24,079		55,563		79,642		6,301	1965/2004	1993	(4)
478-482 Broadway					20,000		13,375		20,577		20,000		33,952		53,952		509		2007	(4)
40 East 66th Street		-			13,616		34,635		-		13,616		34,635		48,251		2,482		2005	(4)
25 W. 14th Street		-			29,169		17,878		341		29,169		18,219		47,388		2,183		2004	(4)
155 Spring Street		-			13,700		30,544		441		13,700		30,985		44,685		1,295		2007	(4)
435 7th Avenue		-			19,893		19,091		37		19,893		19,128		39,021		3,057		1997	(4)
692 Broadway		-			6,053		22,908		779		6,053		23,687		29,740		1,983		2005	(4)
715 Lexington Avenue		-			-		26,903		-		-		26,903		26,903		2,876	1923	2001	(4)
211-217 Columbus Avenue		-			18,907		7,316		385		18,907		7,701		26,608		633		2005	(4)
677-679 Madison Avenue		-			13,070		9,640		319		13,070		9,959		23,029		605		2006	(4)
431 7th Avenue		-			16,700		2,751		-		16,700		2,751		19,451		115		2007	(4)
484-486 Broadway		-			10,000		6,688		1,845		6,916		11,617		18,533		202		2007	(4)
1135 Third Avenue		-			7,844		7,844		-		7,844		7,844		15,688		2,157		1997	(4)
387 West Broadway		-			5,858		7,662		364		5,858		8,026		13,884		920		2004	(4)
488 8th Avenue		-			10,650		1,767		133		10,650		1,900		12,550		49		2007	(4)
148 Spring Street		-			7,629		3,957		6		7,629		3,963		11,592		65		2008	(4)
150 Spring Street		-			5,295		4,763		84		5,295		4,847		10,142		79		2008	(4)
386 West Broadway		4,518			2,624		6,160		-		2,624		6,160		8,784		620		2004	(4)
484 8th Avenue		-			3,856		762		-		3,856		762		4,618		225		1997	(4)
825 7th Avenue		-			1,483		697		-		1,483		697		2,180		204		1997	(4)
Total New York		689,924			981,161		1,262,145		163,418		970,831		1,435,893		2,406,724		123,871

Pennsylvania
Wilkes Barre		21,165			6,053		26,646		-		6,053		26,646		32,699		583		2007	(4)
Philadelphia		8,246	*		933		23,650		6,069		933		29,719		30,652		5,853	1977	1994	(4)
Allentown		21,403	*		334		15,580		289		334		15,869		16,203		10,158	1957	1957	(4)
Bensalem		5,915	*		2,727		6,698		1,806		2,727		8,504		11,231		2,123	1972/1999	1972	(4)
Bethlehem		3,744	*		827		5,200		568		839		5,756		6,595		5,669	1966	1966	(4)
Wyomissing		-			-		2,646		2,265		-		4,911		4,911		1,387		2005	(4)
York		3,785	*		409		2,568		1,811		409		4,379		4,788		3,016	1970	1970	(4)
Broomall		9,001	*		850		2,171		749		850		2,920		3,770		2,792	1966	1966	(4)

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
Lancaster		-		3,140		63		483		3,140		546		3,686		395	1966	1966	(4)
Upper Mooreland		6,400	*	683		1,868		900		683		2,768		3,451		2,494	1974	1974	(4)
Glenolden		6,752	*	850		1,820		471		850		2,291		3,141		1,660	1975	1975	(4)
Levittown		3,025	*	183		1,008		364		183		1,372		1,555		1,368	1964	1964	(4)
Springfield		-		-		254		-		-		254		254		-		2005	(4)
Total Pennsylvania		89,436		16,989		90,172		15,775		17,001		105,935		122,936		37,498

South Carolina
Charleston		-		-		3,854		-		-		3,854		3,854		213		2006	(4)

Tennessee
Antioch		-		1,613		2,530		-		1,613		2,530		4,143		140		2006	(4)

Texas
Texarkana		-		-		485		28		-		513		513		27		2006	(4)

Utah
Ogden		-		1,818		2,578		-		1,818		2,578		4,396		102		2007	(4)

Virginia
Springfield (Springfield Mall)		180,642		35,168		265,964		21,481		35,173		287,440		322,613		19,751		2006	(4)
Norfolk		-		-		3,927		15		-		3,942		3,942		1,360		2005	(4)
Total Virginia		180,642		35,168		269,891		21,496		35,173		291,382		326,555		21,111

Washington
Bellingham		-		1,942		2,265		-		1,942		2,265		4,207		90		2005	(4)

Washington, DC
3040 M Street		-		7,830		27,490		45		7,830		27,535		35,365		1,996		2006	(4)

Wisconsin
Fond Du Lac		-		-		186		100		-		286		286		22		2006	(4)

Puerto Rico
Las Catalinas		60,766		15,280		64,370		7,523		15,280		71,893		87,173		18,371	1996	2002	(4)
Montehiedra		120,000		9,182		66,751		3,252		9,267		69,918		79,185		20,556	1996	1997	(4)
Total Puerto Rico		180,766		24,462		131,121		10,775		24,547		141,811		166,358		38,927

Total Retail Properties		1,880,369		1,400,304		2,532,995		640,908		1,386,235		3,187,972		4,574,207		411,199

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

COLUMN A	COLUMN B		COLUMN C				COLUMN D		COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
			Initial cost to company (1)						Gross amount at which carried at close of period										Life on which depreciation
Description	Encumbrances		Land		Buildings and improvements		Costs capitalized subsequent to acquisition		Land		Buildings and improvements		Total (2)		Accumulated depreciation and amortization		Date of construction (3)	Date acquired	in latest income statement is computed
Merchandise Mart Properties
Illinois
Merchandise Mart, Chicago		550,000		64,528		319,146		165,368		64,535		484,507		549,042		116,281	1930	1998	(4)
350 North Orleans, Chicago		-		14,238		67,008		83,167		14,246		150,167		164,413		42,105	1977	1998	(4)
527 W. Kinzie, Chicago		-		5,166		-		-		5,166		-		5,166		-
Total Illinois		550,000		83,932		386,154		248,535		83,947		634,674		718,621		158,386

Washington, DC
Washington Design Center		44,992		12,274		40,662		13,558		12,274		54,220		66,494		14,377	1919	1998	(4)

North Carolina
Market Square Complex,
High Point		220,361		13,038		102,239		78,508		15,047		178,738		193,785		42,353	1902 - 1989	1998	(4)

New York
7 West 34th Street		-		34,614		94,167		35,745		34,614		129,912		164,526		23,564	1901	2000	(4)
MMPI Piers		-		-		-		3,990		-		3,990		3,990		-		2008	(4)
Total New York		-		34,614		94,167		39,735		34,614		133,902		168,516		23,564

Massachusetts
Boston Design Center		70,740		-		93,915		5,946		-		99,861		99,861		7,808	1918	2005	(4)

California
Gift and Furniture Mart,
Los Angeles		-		10,141		43,422		23,277		10,141		66,699		76,840		14,080	1958	2000	(4)

Total Merchandise Mart		886,093		153,999		760,559		409,559		156,023		1,168,094		1,324,117		260,568

Warehouse/Industrial
New Jersey
East Hanover		25,268		576		7,752		7,793		691		15,430		16,121		13,827	1972	1972	(4)

Other Properties
Wasserman		150,486		28,052		-		244,139		87,702		184,489		272,191		11,048		2005	(4)
Hotel Pennsylvania		-		29,903		121,712		57,341		29,903		179,053		208,956		49,879	1919	1997	(4)
220 Central Park South		130,000		115,720		16,420		63,262		115,720		79,682		195,402		13,413		2005	(4)
40 East 66th Residential		-		29,199		85,798		(5,124)		32,114		77,759		109,873		2,118		2005	(4)
677-679 Madison		-		1,462		1,058		1,293		2,212		1,601		3,813		87		2006	(4)
Total Other Properties		280,486		204,336		224,988		360,911		267,651		522,584		790,235		76,545

Leasehold Improvements
Equipment and Other		-		-		-		118,603		-		118,603		118,603		73,312
TOTAL
December 31, 2008		8,740,826		4,644,488		10,403,840		2,821,330		4,516,141		13,353,517		17,869,658		2,161,093

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

*These encumbrances are cross-collateralized under a blanket mortgage in the amount of 448,115,000 as of December 31, 2008.

Notes:

(1)

Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations) unless acquired subsequent to that date see Column H.

(2)

The net basis of the Company’s assets and liabilities for tax purposes is approximately 3.4 billion lower than the amount reported for financial statement purposes.

(3)

Date of original construction –– many properties have had substantial renovation or additional construction –– see Column D.

(4)

Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to forty years.

VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

(AMOUNTS IN THOUSANDS)

The following is a reconciliation of real estate assets and accumulated depreciation:

	Year Ended December 31,
	2008		2007		2006
Real Estate
Balance at beginning of period	$	17,028,507	$	11,607,078	$	9,584,512
Additions during the period:
Land		95,980		1,956,602		552,381
Buildings & improvements		1,087,944		3,617,881		1,860,881
		18,212,431		17,181,561		11,997,774
Less: Assets sold and written-off		342,773		153,054		390,696
Balance at end of period	$	17,869,658	$	17,028,507	$	11,607,078

Accumulated Depreciation
Balance at beginning of period	$	1,802,055	$	1,440,656	$	1,200,865
Additions charged to operating expenses		407,753		445,150		353,473
Additions due to acquisitions		—		20,817		—
		2,209,808		1,906,623		1,554,338
Less: Accumulated depreciation on assets sold and written-off		48,715		104,568		113,682
Balance at end of period	$	2,161,093	$	1,802,055	$	1,440,656

EXHIBIT INDEX

Exhibit No.
3.1		-	Articles of Restatement of Vornado Realty Trust, as filed with the State Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated by reference to Exhibit 3.75 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007	*

3.2		-	Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 - Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*

3.3		-	Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*

3.4		-	Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*

3.5		-	Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998	*

3.6		-	Third Amendment to the Partnership Agreement, dated as of November 12, 1998 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 30, 1998	*

3.7		-	Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on February 9, 1999	*

3.8		-	Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on March 17, 1999	*

3.9		-	Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*

3.10		-	Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*

3.11		-	Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on July 7, 1999	*

3.12		-	Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999	*

3.13		-	Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 25, 1999	*

	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

3.14		-	Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 23, 1999	*

3.15		-	Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on May 19, 2000	*

3.16		-	Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 16, 2000	*

3.17		-	Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 - Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on December 28, 2000	*

3.18		-	Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 - Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001	*

3.19		-	Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*

3.20		-	Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 - Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 12, 2001	*

3.21		-	Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 001-11954), filed on March 18, 2002	*

3.22		-	Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002	*

3.23		-	Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by reference to Exhibit 3.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003	*

3.24		-	Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 - Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on November 7, 2003	*

3.25		-	Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 – Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004	*

3.26		-	Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on June 14, 2004	*

3.27		-	Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 – Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*

	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

3.28		-	Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 – Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on January 26, 2005	*

3.29		-	Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*

3.30		-	Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2004	*

3.31		-	Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on January 4, 2005	*

3.32		-	Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 21, 2005	*

3.33		-	Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on September 1, 2005	*

3.34		-	Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 - Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on September 14, 2005	*

3.35		-	Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 000-22685), filed on May 8, 2006	*

3.36		-	Thirty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006	*

3.37		-	Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on May 3, 2006	*

3.38		-	Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006	*

3.39		-	Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007	*

3.40		-	Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*

	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

3.41		-	Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*

3.42		-	Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*

3.43		-	Fortieth Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 27, 2007	*

3.44		-	Forty-First Amendment to Second Amended and Restated Agreement of Limited Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (file No. 001-11954), filed on May 6, 2008	*

4.1		-	Indenture and Servicing Agreement, dated as of March 1, 2000, among Vornado Finance LLC, LaSalle Bank National Association, ABN Amro Bank N.V. and Midland Loan Services, Inc. - Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*

4.2		-	Indenture, dated as of June 24, 2002, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.1 to Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on June 24, 2002	*

4.3		-	Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-11954), filed on April 28, 2005	*

4.4		-	Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on November 27, 2006	*

			Certain instruments defining the rights of holders of long-term debt securities of Vornado Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange Commission, upon request, copies of any such instruments.

10.1	**	-	Vornado Realty Trust’s 1993 Omnibus Share Plan - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 331-09159), filed on July 30, 1996	*

10.2	**	-	Vornado Realty Trust’s 1993 Omnibus Share Plan, as amended - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-29011), filed on June 12, 1997	*

10.3		-	Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference to Vornado, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992	*

	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

10.4		-	Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29, 1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*

10.5		-	Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*

10.6		-	Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993	*

10.7	**	-	Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to Exhibit 10.4 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997	*

10.8		-	Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 1, 2000, between Entities named therein (as Mortgagors) and Vornado (as Mortgagee) - Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*

10.9	**	-	Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2005 – Incorporated by reference to Exhibit 10.15 to Vornado Realty Trust Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006	*

10.10	**	-	Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust - Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on March 9, 2000	*

10.11		-	Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E. Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod, individually, and Charles E. Smith Management, Inc. - Incorporated by reference to Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on January 16, 2002	*

10.12		-	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002	*

10.13		-	Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002	*

10.14	**	-	Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 001-11954), filed on May 1, 2002	*

10.15	**	-	First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002	*

	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

10.16		-	Registration Rights Agreement, dated as of July 21, 1999, by and between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002	*

10.17		-	Form of Registration Rights Agreement between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002	*

10.18		-	Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*

10.19		-	59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*

10.20		-	Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*

10.21		-	59th Street Management and Development Agreement, dated as of July 3, 2002, by and between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(2) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002	*

10.22		-	Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5 of Interstate Properties’ Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed on May 30, 2002	*

10.23	**	-	Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216) filed December 26, 2002	*

10.24		-	Registration Rights Agreement by and between Vornado Realty Trust and Bel Holdings LLC dated as of November 17, 2003 – Incorporated by reference to Exhibit 10.68 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on March 3, 2004	*

10.25		-	Registration Rights Agreement, dated as of May 27, 2004, by and between Vornado Realty Trust and 2004 Realty Corp. – Incorporated by reference to Exhibit 10.75 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*

10.26		-	Registration Rights Agreement, dated as of December 17, 2004, by and between Vornado Realty Trust and Montebello Realty Corp. 2002 – Incorporated by reference to Exhibit 10.76 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*

10.27	**	-	Form of Stock Option Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.


10.28	**	-	Form of Restricted Stock Agreement between the Company and certain employees – Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on February 25, 2005	*

10.29	**	-	Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated February 22, 2005 and effective as of January 1, 2005 – Incorporated by reference to Exhibit 10.76 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 001-11954), filed on April 28, 2005	*

10.30		-	Contribution Agreement, dated May 12, 2005, by and among Robert Kogod, Vornado Realty L.P. and certain Vornado Realty Trust’s affiliates – Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006	*

10.31	**	-	Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on May 2, 2006	*

10.32	**	-	Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006	*

10.33	**	-	Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on May 1, 2006	*

10.34		-	Revolving Credit Agreement, dated as of June 28, 2006, among the Operating Partnership, the banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citicorp North America, Inc., as Syndication Agents, Deutsche Bank Trust Company Americas, Lasalle Bank National Association, and UBS Loan Finance LLC, as Documentation Agents and Vornado Realty Trust – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on June 28, 2006	*

10.35	**	-	Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006	*

10.36	**	-	Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed on August 1, 2006	*

10.37		-	Guaranty, made as of June 28, 2006, by Vornado Realty Trust, for the benefit of JP Morgan Chase Bank – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006	*

10.38	**	-	Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan – Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on October 31, 2006	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

10.39	**	-	Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007	*

10.40	**	-	Amendment to 59^th Street Real Estate Retention Agreement, dated January 1, 2007, by and among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 001-11954), filed on February 27, 2007	*

10.41		-	Stock Purchase Agreement between the Sellers identified and Vornado America LLC, as the Buyer, dated as of March 5, 2007 – Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954), filed on May 1, 2007	*

10.42	**	-	Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19, 2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954), filed on May 1, 2007	*

10.43		-	Revolving Credit Agreement, dated as of September 28, 2007, among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks signatory thereto, each as a Bank, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A. as Syndication Agent, Citicorp North America, Inc., Deutsche Bank Trust Company Americas, and UBS Loan Finance LLC as Documentation Agents, and J.P. Morgan Securities Inc. and Bank of America Securities LLC as Lead Arrangers and Bookrunners. - Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007	*

10.44		-	Second Amendment to Revolving Credit Agreement, dated as of September 28, 2007, by and among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages thereof, and J.P. Morgan Chase Bank N.A., as Administrative Agent for the Banks - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on October 4, 2007	*

10.45	**	-	Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-11954) filed on February 26, 2008	*

10.46	**	-	Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008	*

10.47	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 29, 2008 – Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

10.48	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow, dated December 29, 2008 – Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*
	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

10.49	**	-	Amendment to Employment Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008 – Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

10.50	**	-	Amendment to Indemnification Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008 – Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

10.51	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N. Schear, dated December 29, 2008 – Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

10.52	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated December 29, 2008 – Incorporated by reference to Exhibit 10.52 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

10.53	**	-	Amendment to Employment Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated December 29, 2008 – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

12		-	Computation of Ratios – Incorporated by reference to Exhibit 12 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

21		-	Subsidiaries of the Registrant – Incorporated by reference to Exhibit 21 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-11954) filed on February 24, 2009	*

23.1		-	Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP

23.2		-	Consent of Independent Registered Public Accounting Firm – KPMG LLP

23.3		-	Consent of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP

31.1		-	Rule 13a-14 (a) Certification of the Chief Executive Officer

31.2		-	Rule 13a-14 (a) Certification of the Chief Financial Officer

32.1		-	Section 1350 Certification of the Chief Executive Officer

32.2		-	Section 1350 Certification of the Chief Financial Officer


	* **		_______________________ Incorporated by reference. Management contract or compensatory agreement.

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of our report dated February 24, 2009, relating to the consolidated financial statements and financial statement schedules of Vornado Realty Trust, appearing in this Amendment No. 1 to the Annual Report on Form 10-K/A of Vornado Realty Trust, and our report dated February 24, 2009 relating to the effectiveness of Vornado Realty Trust’s internal control over financial reporting, appearing in the Annual Report on Form 10-K of Vornado Realty Trust for the year ended December 31, 2008:

Registration Statement No. 333-68462 on Form S-8

Amendment No. 1 to Registration Statement No. 333-36080 on Form S-3

Registration Statement No. 333-64015 on Form S-3

Amendment No.1 to Registration Statement No. 333-50095 on Form S-3

Registration Statement No. 333-52573 on Form S-8

Registration Statement No. 333-29011 on Form S-8

Registration Statement No. 333-09159 on Form S-8

Registration Statement No. 333-76327 on Form S-3

Amendment No.1 to Registration Statement No. 333-89667 on Form S-3

Registration Statement No. 333-81497 on Form S-8

Registration Statement No. 333-102216 on Form S-8

Amendment No.1 to Registration Statement No. 333-102215 on Form S-3

Amendment No.1 to Registration Statement No. 333-102217 on Form S-3

Registration Statement No. 333-105838 on Form S-3

Registration Statement No. 333-107024 on Form S-3

Registration Statement No. 333-109661 on Form S-3

Registration Statement No. 333-114146 on Form S-3

Registration Statement No. 333-114807 on Form S-3

Registration Statement No. 333-121929 on Form S-3

Amendment No. 1 to Registration Statement No. 333-120384 on Form S-3

Registration Statement No. 333-126963 on Form S-3

Registration Statement No. 333-139646 on Form S-3

Registration Statement No. 333-141162 on Form S-3

Registration Statement No. 333-150592 on Form S-3

Registration Statement No. 333-150593 on Form S-8

and in the following joint registration statements of Vornado Realty Trust and Vornado Realty L.P. :

Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3

Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3

Registration Statement No. 333-108138 on Form S-3

Registration Statement No. 333-122306 on Form S-3

Registration Statement No. 333-138367 on Form S-3

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 2, 2009

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Trustees and Shareholders

Lexington Realty Trust:

We consent to the incorporation by reference in the registration statements of Vornado Realty Trust, as listed in Appendix I, of our reports dated March 1, 2009, with respect to the consolidated balance sheets of Lexington Realty Trust and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008 and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2008, not included herein, which reports appear in the Annual Report on Form 10-K for the year ended December 31, 2008 of Lexington Realty Trust. The consolidated financial statements of Lex-Win Concord LLC (“Concord”), a 50 percent-owned investee company, were audited by other auditors whose report has been furnished to us, and our opinion on the Company’s consolidated financial statements, insofar as it relates to the amounts included for Concord, is based solely on the report of the other auditors.

/s/ KPMG LLP

New York, New York

March 1, 2009

Appendix I

Registration statements of Vornado Realty Trust:

Registration Statement No. 333-68462 on Form S-8

Amendment No. 1 to Registration Statement No. 333-36080 on Form S-3

Registration Statement No. 333-64015 on Form S-3

Amendment No.1 to Registration Statement No. 333-50095 on Form S-3

Registration Statement No. 333-52573 on Form S-8

Registration Statement No. 333-29011 on Form S-8

Registration Statement No. 333-09159 on Form S-8

Registration Statement No. 333-76327 on Form S-3

Amendment No.1 to Registration Statement No. 333-89667 on Form S-3

Registration Statement No. 333-81497 on Form S-8

Registration Statement No. 333-102216 on Form S-8

Amendment No.1 to Registration Statement No. 333-102215 on Form S-3

Amendment No.1 to Registration Statement No. 333-102217 on Form S-3

Registration Statement No. 333-105838 on Form S-3

Registration Statement No. 333-107024 on Form S-3

Registration Statement No. 333-109661 on Form S-3

Registration Statement No. 333-114146 on Form S-3

Registration Statement No. 333-114807 on Form S-3

Registration Statement No. 333-121929 on Form S-3

Amendment No. 1 to Registration Statement No. 333-120384 on Form S-3

Registration Statement No. 333-126963 on Form S-3

Registration Statement No. 333-139646 on Form S-3

Registration Statement No. 333-141162 on Form S-3

Registration Statement No. 333-150592 on Form S-3

Registration Statement No. 333-150593 on Form S-8

Joint registration statements of Vornado Realty Trust and Vornado Realty L.P. :

Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3

Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3

Registration Statement No. 333-108138 on Form S-3

Registration Statement No. 333-122306 on Form S-3

Registration Statement No. 333-138367 on Form S-3

EXHIBIT 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the following Registration Statements of Vornado Realty Trust and subsidiaries of our report dated March 1, 2009 relating to the financial statements of Lex-Win Concord LLC, which is incorporated by reference in this Form 10-K/A.

Registration Statement No. 333-68462 on Form S-8

Amendment No. 1 to Registration Statement No. 333-36080 on Form S-3

Registration Statement No. 333-64015 on Form S-3

Amendment No.1 to Registration Statement No. 333-50095 on Form S-3

Registration Statement No. 333-52573 on Form S-8

Registration Statement No. 333-29011 on Form S-8

Registration Statement No. 333-09159 on Form S-8

Registration Statement No. 333-76327 on Form S-3

Amendment No.1 to Registration Statement No. 333-89667 on Form S-3

Registration Statement No. 333-81497 on Form S-8

Registration Statement No. 333-102216 on Form S-8

Amendment No.1 to Registration Statement No. 333-102215 on Form S-3

Amendment No.1 to Registration Statement No. 333-102217 on Form S-3

Registration Statement No. 333-105838 on Form S-3

Registration Statement No. 333-107024 on Form S-3

Registration Statement No. 333-109661 on Form S-3

Registration Statement No. 333-114146 on Form S-3

Registration Statement No. 333-114807 on Form S-3

Registration Statement No. 333-121929 on Form S-3

Amendment No. 1 to Registration Statement No. 333-120384 on Form S-3

Registration Statement No. 333-126963 on Form S-3

Registration Statement No. 333-139646 on Form S-3

Registration Statement No. 333-141162 on Form S-3

Registration Statement No. 333-150592 on Form S-3

Registration Statement No. 333-150593 on Form S-8

and in the following joint registration statements of Vornado Realty Trust and Vornado Realty L.P. :

Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3

Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3

Registration Statement No. 333-108138 on Form S-3

Registration Statement No. 333-122306 on Form S-3

Registration Statement No. 333-138367 on Form S-3

/s/ PricewaterhouseCoopers, LLP

Boston, Massachusetts

March 1, 2009

EXHIBIT 31.1

CERTIFICATION

I, Steven Roth, certify that:

I have reviewed this Annual Report on Form 10-K/A of Vornado Realty Trust;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	March 2, 2009
	/s/ Steven Roth
	Steven Roth
	Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Joseph Macnow, certify that:

I have reviewed this Annual Report on Form 10-K/A of Vornado Realty Trust;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	March 2, 2009
	/s/ Joseph Macnow
	Joseph Macnow
	Executive Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Vornado Realty Trust (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 10-K/A for year ended December 31, 2008 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


March 2, 2009		/s/ Steven Roth
	Name:	Steven Roth
	Title:	Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)


March 2, 2009		/s/ Joseph Macnow
	Name:	Joseph Macnow
	Title:	Chief Financial Officer