Exhibit Index on Page 5 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

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

Date of Report (Date of earliest event reported):
January 1, 2002

VORNADO REALTY TRUST
(Exact Name of Registrant as Specified in Its Charter) 

MARYLAND
(State or Other Jurisdiction of
Incorporation) 	1-11954
(Commission File Number) 	22-1657560
(IRS Employer Identification No.)	
Vornado Realty Trust
888 7th Avenue, New York, New York 10019
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (212) 894-7000

N/A
(Former Name or Former Address, if Changed Since Last Report) 
Item 7.	Financial Statements, Pro Forma Financial 
Information and Exhibits. 	

(a)-(b)	Financial Statements and Pro Forma Financial 
Information.	
             Reference is made to the Current Report on Form 8-K filed by Vornado Realty Trust, a Maryland real estate investment trust, with the Securities and Exchange Commission on January 16, 2002 in connection with the consummation of the merger between a wholly-owned subsidiary of Vornado Realty L.P., a Delaware limited partnership and a 79% owned subsidiary of Vornado Realty Trust, through which Vornado Realty Trust conducts its business, and Charles E. Smith Commercial Realty L.P., a Delaware limited partnership. Attached hereto as Exhibits 99.1 and 99.2 and incorporated by reference herein are the required audited financial statements and pro forma financial information, respectively. 
(c)	Exhibits.	
             The following documents are filed as exhibits to this report: 
 	3.1	Eighteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of January 1, 2002. 	

 	10.1	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto. 	

 	10.2	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto. 	

 	10.3	Tax Reporting and Protection Agreement, dated as of December 31, 2001, by and among Vornado Realty Trust, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. 	

 	23.1	Report of Independent Public Accountants 	

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 	99.1	Charles E. Smith Commercial Realty L.P. - Consolidated Financial Statements as of and for the Year Ended December 31, 2001, together with the report of Arthur Andersen LLP. 	

 	99.2	Vornado Realty Trust - Unaudited Pro Forma Consolidated Financial Statements as of and for the Year Ended December 31, 2001. 	

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SIGNATURE 
             Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 
  	VORNADO REALTY TRUST
                 (Registrant)
	
   	By: 	/s/ JOSEPH MACNOW
	
   	  	Name:
Title: 	Joseph Macnow
Executive Vice President --
Finance and Administration,
Chief Financial Officer 	

Date: March 18, 2002 
Exhibit Index 
 	3.1	Eighteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of January 1, 2002. 	

 	10.1	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto. 	

 	10.2	Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto. 	

 	10.3	Tax Reporting and Protection Agreement, dated as of December 31, 2001, by and among Vornado Realty Trust, Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith Commercial Realty L.L.C. 	

 	23.1	Report of Independent Public Accountants 	

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 	99.1	Charles E. Smith Commercial Realty L.P. - Consolidated Financial Statements as of and for the Year Ended December 31, 2001, together with the report of Arthur Andersen LLP. 	

 	99.2	Vornado Realty Trust - Unaudited Pro Forma Consolidated Financial Statements as of and for the Year Ended December 31, 2001. 	

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                                                                     Exhibit 3.1

                                   EIGHTEENTH
                                    AMENDMENT
                                       TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                               VORNADO REALTY L.P.

                  ---------------------------------------------

                           Dated as of January 1, 2002

                  ---------------------------------------------

         THIS EIGHTEENTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF VORNADO REALTY L.P. (this "Amendment") is hereby
adopted by Vornado Realty Trust, a Maryland real estate investment trust
(defined therein as the "General Partner"), as the general partner of Vornado
Realty L.P., a Delaware limited partnership (the "Partnership"). For ease of
reference, capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., as amended by the Amendment to
Second Amended and Restated Agreement of Limited Partnership of Vornado Realty
L.P., dated as of December 16, 1997, and further amended by the Second Amendment
to Second Amended and Restated Agreement of Limited Partnership of Vornado
Realty L.P., dated as of April 1, 1998, and the Third Amendment to Second
Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of November 12, 1998, and the Fourth Amendment to Second Amended and
Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of
November 30, 1998, and the Fifth Amendment to Second Amended and Restated
Agreement of Limited Partnership of Vornado Realty L.P., dated as of March 3,
1999, and the Sixth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of March 17, 1999, and the
Seventh Amendment to Second Amended and Restated Agreement of Limited
Partnership of Vornado Realty L.P., dated as of May 20, 1999, and the Eighth
Amendment to Second Amended and Restated Agreement of Limited Partnership of
Vornado Realty L.P., dated as of May 27, 1999, and the Ninth Amendment to Second
Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of September 3, 1999, and the Tenth Amendment to Second Amended and
Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of
September 3, 1999, and the Eleventh Amendment to Second Amended and Restated
Agreement of Limited Partnership of Vornado Realty L.P., dated as of November
24, 1999, and the Twelfth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May 1, 2000, and the
Thirteenth Amendment to Second Amended and Restated Agreement of Limited
Partnership of Vornado Realty L.P., dated as of May 25, 2000, and the Fourteenth
Amendment to

Second Amended and Restated Agreement of Limited Partnership of Vornado Realty
L.P., dated as of December 8, 2000, and the Fifteenth Amendment to Second
Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of December 15, 2000, the Sixteenth Amendment to Second Amended and
Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of
July 25, 2001, and the Seventeenth Amendment to Second Amended and Restated
Agreement of Limited Partnership of Vornado Realty L.P., dated as of September
21, 2001 (as so amended and as the same may be further amended, the
"Agreement").

         WHEREAS, on October 18, 2001, the Partnership, the General Partner,
Vornado Merger Sub L.P. (the "Merger Sub"), a wholly-owned subsidiary of the
Partnership, Charles E. Smith Commercial Realty L.P., a Delaware limited
partnership ("SCR"), Charles E. Smith Commercial Realty L.L.C., a Delaware
limited liability company and the sole general partner of SCR, Robert H. Smith,
Robert P. Kogod and Charles E. Smith Management, Inc. entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which the parties agreed
to the acquisition of SCR by the Partnership through the merger of Merger Sub
with and into SCR (the "Merger").

         WHEREAS, as a condition to the closing of the transactions contemplated
in the Merger Agreement, the General Partner and the Partnership have agreed to
amend the Agreement to acknowledge the issuance of the SCR Units (as defined
below) and to make certain other related changes;

         WHEREAS, in connection with the Merger, the Partnership has agreed to
issue 15,612,831 additional Class A Units (such units, the "SCR Units") to those
Persons (other than the Partnership and entities wholly-owned by it) who, prior
to the Merger, held partnership interests in SCR;

         WHEREAS, Section 4.2.A of the Agreement grants the General Partner
authority to cause the Partnership to issue interests in the Partnership to a
person other than the General Partner in one or more classes or series, with
such designations, preferences and relative, participating, optional or other
special rights, powers and duties as may be determined by the General Partner in
its sole and absolute discretion so long as the issuance does not violate
Section 4.2.E of the Agreement;

         WHEREAS, the General Partner has determined that the issuance of the
SCR Units will not violate Section 4.2.E of the Agreement;

         WHEREAS, Section 7.6.A of the Agreement requires, among other things,
that the General Partner obtain the approval of a majority of the disinterested
trustees (or directors) of the General Partner, taking into account the
fiduciary duties of the General

                                       -2-

Partner to the limited partners of the Partnership, before it purchases any
property from any affiliate of the Partnership;

         WHEREAS, immediately prior to the Merger, the Partnership owns,
directly and indirectly, approximately 88% of the outstanding partnership
interests in SCR and SCR is, therefore, an affiliate of the Partnership;

         WHEREAS, on October 1, 2001, the disinterested directors of the General
Partner unanimously approved the Merger;

         WHEREAS, Section 14.1.B of the Agreement grants the General Partner
power and authority to amend the Agreement without the consent of any of the
Partnership's limited partners if the amendment does not adversely affect or
eliminate any right granted to a limited partner pursuant to any of the
provisions of the Agreement specified in Section 14.1.C or Section 14.1.D of the
Agreement as requiring a particular minimum vote; and

         WHEREAS, the General Partner has determined that the amendments
effected hereby do not adversely affect or eliminate any of the limited partner
rights specified in Section 14.1.C or Section 14.1.D of the Agreement as
requiring a particular minimum vote;

         NOW, THEREFORE, the General Partner hereby amends the Agreement as
follows:

         1. Section 4.2 of the Agreement is hereby supplemented by adding the
following paragraph to the end thereof:

         "T. Issuance of SCR Units to SCR Unitholders.

          (1) In connection with the acquisition by the Partnership of limited
     partnership interests in Charles E. Smith Commercial Realty L.P. on January
     1, 2002 pursuant to the Agreement and Plan of Merger, dated October 18,
     2001 among the General Partner, the Partnership, Vornado Merger Sub L.P.,
     Charles E. Smith Commercial Realty L.P. ("SCR"), Charles E. Smith
     Commercial Realty L.L.C., Robert H. Smith, Robert P. Kogod and Charles E.
     Smith Management, Inc., the Partnership issued 15,612,831 Class A Units
     (such Units, the "SCR Units") to the holders of partnership interests in
     SCR (other than the Partnership or any of its subsidiaries or affiliates)
     (the "SCR Unitholders") as reflected on amended Exhibit A attached hereto.
     Notwithstanding any other provision contained in this Agreement, (i)
     holders from time to time of SCR Units shall not participate in any
     distribution (whether cash, securities or in any

                                       -3-

     other form) constituting a "spin-off" of the Partnership's investment in,
     or any of the assets of, Alexander's, Inc. or any of its affiliates if the
     Partnership Record Date for determining partners entitled to participate
     therein is on or before December 31, 2001 and (ii) upon consummation of the
     merger (the "Effective Time") of Vornado Merger Sub L.P. with and into SCR,
     each of the SCR Unitholders listed in the books and records of SCR
     immediately prior to the Effective Time automatically shall be admitted to
     the Partnership as an Additional Limited Partner, regardless of whether or
     not such Person has executed this Agreement or a counterpart signature page
     hereto, and without any further act, approval or vote of any Person. Each
     such Additional Limited Partner shall, upon such admission, be subject to,
     and bound by, this Agreement, including, without limitation, all of the
     terms and conditions of this Agreement and the power of attorney granted in
     Section 15.11 hereof.

          (2) Except as expressly set forth in the third sentence of this
     subsection (2), Holders from time to time of the SCR Units shall not be
     entitled to participate in any distributions in respect of those Units for
     any period prior to their issuance and, notwithstanding any provisions of
     Section 5.1.B of this Agreement to the contrary, in the event that the SCR
     Units are issued on or effective as of any date other than the first day of
     a period to which a distribution is attributable, any distributions to be
     made to holders of the SCR Units in respect of the distribution period in
     which the date of issuance falls shall be prorated based on the actual
     number of days in the entire period to which the distribution is
     attributable and the number of days in the period that the SCR Units were
     outstanding. For clarification, under current practices the Partnership's
     regular quarterly distributions made during any calendar quarter are
     attributable to the immediately preceding calendar quarter. If, at any time
     after the date of issuance of the SCR Units, the General Partner declares
     any distribution in respect of Class A Units other than a regular quarterly
     distribution (any such distribution, a "Special Distribution"), the Special
     Distribution is attributable to any period prior to the date of issuance of
     the SCR Units and the Partnership Record Date for determining partners
     entitled to participate in the distribution is on or after the date of
     issuance of the SCR Units, then the holders of SCR Units shall be entitled
     to participate in that Special Distribution pro rata as if their SCR Units
     had been outstanding for the entire period to which that Special
     Distribution is attributable.

          (3) Section 8.6 of this Agreement is hereby irrevocably modified with
     respect to all SCR Units such that for any redemption of any such Units
     that will not qualify as either (A) a "block transfer" within the meaning
     of Regulations Section 1.7704-1(e)(2) or any successor provision or (B) a
     transfer that falls within the "lack of actual trading" safe harbor
     available in Regulations Section

                                       -4-

     1.7704-1(j) or any successor provision (any such redemption, a
     "Non-Qualifying Redemption"), the waiting period applicable to the Limited
     Partner between the date the Partnership receives a Notice of Redemption
     for the Limited Partner and the Specified Redemption Date and/or the
     Valuation Date shall be up to sixty (60) days, as determined by the General
     Partner in its sole discretion, and the General Partner shall have all
     requisite power and authority to amend the provisions of Section 8.6 of
     this Agreement applicable in respect of the SCR Units as it deems necessary
     or appropriate to (x) increase the waiting period between the delivery of a
     Notice of Redemption and the Specified Redemption Date and/or the Valuation
     Date to up to sixty (60) days for any Non-Qualifying Redemption and/or (y)
     implement any other amendment to this Agreement intended to make the
     redemption and transfer provisions, with respect to certain redemptions and
     transfers, more similar to the provisions described in Regulations Section
     1.7704-1(f). In furtherance of the foregoing, each SCR Unitholder appoints
     the General Partner, any Liquidator and any authorized officers of the
     General Partner and attorneys-in-fact of each, and each of those acting
     singly, in each case with full power of substitution, as its true and
     lawful agent and attorney-in-fact, with full power and authority in its
     name, place and stead, to execute and deliver any amendment referred to in
     the foregoing sentence on such SCR Unitholder's behalf. The foregoing power
     of attorney is hereby declared to be irrevocable and a power coupled with
     an interest, and it shall survive and not be affected by the death,
     incompetency, dissolution, disability, incapacity, banckruptcy or
     termination of the SCR Unitholder as a Limited Partner and shall extend to
     the SCR Unitholder's heirs, executors, administrators, legal
     representatives, successors and assigns.

          (4) By accepting the SCR Units, each SCR Unitholder covenants and
     agrees that it does not and will not while it owns, directly or indirectly,
     equity interests in the Partnership with an aggregate value equal to or
     exceeding five (5) percent of the total value of the outstanding equity
     interests in the Partnership own, either directly or under the attribution
     rules of Section 318(a) of the Code (as modified by Section 856(d)(5) of
     the Code and using the principles of Section 7704(d)(3)(B) of the Code in
     determining when interests owned, directly or under the attribution rules,
     by a partner in an entity that is treated as a partnership for federal tax
     purposes as owned by such entity), any equity interests in Vornado
     Operating Company, Vornado Operating L.P., or any direct or indirect tenant
     or subtenant of the Partnership or any of its subsidiaries (Vornado
     Operating Company, Vornado Operating L.P., or any direct or indirect tenant
     or subtenant of the Partnership or any of its subsidiaries, collectively,
     the "Vornado Tenants"); provided that the foregoing covenant shall not be
     treated as breached by a Limited Partner unless at such time the ownership
     of equity interests by such Limited Partner in one or more Vornado Tenants
     would cause

                                       -5-

     either (a) the General Partner to fail to qualify as a REIT for purposes of
     Section 856 of the Code or (b) the Partnership to be treated as a publicly
     traded partnership treated as a corporation under Section 7704(a) of the
     Code. If at any time the Limited Partner would, but for the provisions of
     this paragraph (4), own both (i) five (5) percent or more (by value) of the
     outstanding equity interests in the Partnership and (ii) an equity interest
     in one or more Vornado Tenants in breach of the covenant set forth in the
     first sentence of this Section 4.2.T.(4) (applied taking into account the
     proviso in the first sentence of this Section 4.2.T.(4)), then, effective
     immediately prior to such point in time, the smallest portion of the
     interests in the Partnership owned (directly or indirectly) by the Limited
     Partner that is necessary to cause such Limited Partner to be considered to
     own (directly or indirectly) interests in the Partnership with a value that
     is not in excess of four and nine tenths (4.9) percent of the value of the
     Partnership's outstanding equity interests, shall become "Excess Units".
     While interests in the Partnership are Excess Units, such interests will be
     deemed to have been transferred by operation of law to a trust (the
     "Special Trust") for the exclusive benefit of an organization described in
     Section 501(c)(3) of the Code and designated by the General Partner. The
     Partnership, as trustee for the Special Trust, shall be entitled to receive
     all distributions made in respect of Excess Units. Any distributions made
     in respect of Excess Units prior to the discovery that interests in the
     Partnership had become Excess Units shall be repaid by the recipients
     thereof to the Partnership as trustee of the Special Trust. The trustee
     shall exercise all rights associated with interests in the Partnership that
     have become Excess Units during the period that such interests are Excess
     Units. The Partnership shall have the right to transfer the Excess Units
     held in the Special Trust to any person. The Limited Partner (or its
     successor) shall be entitled to receive, from the proceeds of such a
     transfer, an amount not in excess of the lesser of (i) the fair market
     value of the interests that became Excess Units on the date that they
     became Excess Units and (ii) the net consideration received by the
     Partnership for the transfer of the Excess Units after deducting any
     expenses incurred by the Partnership in connection therewith. Excess Units
     shall cease to be treated as Excess Units following such a transfer and
     instead shall have the attributes that existed immediately before becoming
     Excess Units. In the event that a liquidating distribution is made in
     respect of Excess Units, the Limited Partner (or its successor) shall be
     entitled to receive a portion of such distribution not in excess of the
     fair market value of the interests that became Excess Units on the date
     that they became Excess Units. The Partnership agrees that, if it becomes
     aware that partnership interests held by a Limited Partner or any person
     that owns ten (10) percent or more of the capital stock of the Limited
     Partner (in the case of a Limited Partner that is a corporation) or twenty
     five (25) percent or more of the capital or profits interests of a Limited
     Partner (in the case of a Limited Partner that is treated as a partnership
     for U.S. federal income tax

                                       -6-

     purposes) have become Excess Units, then it will make commercially
     reasonable efforts to cause a transfer of such Excess Units as promptly as
     practicable (provided, however, that it shall not be required to incur any
     material expense or expend any significant time or manpower in such
     efforts). The Limited Partner has no liability under this paragraph (4) for
     damages, monetary or otherwise, as a result of a breach of the covenant
     under this paragraph (4) other than having its interests become Excess
     Units under this paragraph (4) and, as a result, being liable to pay over
     any distribution or other amounts which the Limited Partner receives to
     which it is not entitled under the Excess Units provisions of this
     paragraph (4). The General Partner may, in its sole and absolute discretion
     exercised in good faith, take any commercially reasonable and appropriate
     actions to enforce the provisions of this paragraph (4).

          (5) To the extent that the provisions Articles 7 and 8 of the Tax
     Protection Agreement being entered into by the Partnership concurrently
     with the issuance of the SCR Units (and the related definitions in the Tax
     Protection Agreement and the related Schedules to the Tax Protection
     Agreement), copies of which are attached hereto as Exhibit X, address
     matters addressed in, and/or provide for rights required to be provided for
     in Article VI and/or Exhibit B and Exhibit C to the Agreement, the
     referenced portions of the Tax Protection Agreement constitute amendments
     to Article VI and/or Exhibit B and Exhibit C to the Agreement, as
     applicable, insofar as that Article and/or Exhibit B and Exhibit C apply to
     the SCR Units."

         2. Section 11.3.A of the Agreement is hereby deleted in its entirety
and replaced with the following:

         "A. General. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E and 11.6 below, prior to the first anniversary of the date of issuance,
the Limited Partnership Interest of any Partner may not be offered for sale,
sold, contracted for sale, pledged, transferred or otherwise disposed in whole
or in part, directly, indirectly or beneficially (including without limitation,
through a cash-settled derivative instrument), without the prior written consent
of the General Partner, which consent the General Partner may grant or withhold
in its sole discretion. Any attempt to affect any such sale, pledge, transfer or
other disposition shall be void ab initio. Commencing with the first anniversary
of the date of issuance, but subject to the provisions of Sections 11.3.C,
11.3.D, 11.3.E, 11.4 and 11.6 below, a Limited Partner (other than the General
Partner or the General Partner Entity or any Subsidiary of either of them) may
transfer all or any portion of its Limited Partnership Interest to any person
provided that the Limited Partner obtains the prior written consent of the
General Partner, which consent may be withheld only pursuant to one of the
provisions of Sections 11.3.C, 11.3.D, 11.3.E, 11.4 or 11.6 below or if the
General Partner determines in its sole discretion exercised in good faith that
such a transfer would cause the Partnership or any or all of the

                                       -7-

Partners other than the Limited Partner seeking to transfer its rights as a
Limited Partner to be subject to tax liability as a result of such transfer."

         3. Section 11.6.C of the Agreement is hereby deleted in its entirety
and replaced with the following:

          "C. Timing of Transfers. Transfers pursuant to this Article XI may
          only be made on the first day of a calendar month, unless the General
          Partner otherwise agrees.

         4. Subsection A of Section 12.2 of the Agreement is hereby amended to
read in its entirety as follows:

         "A. General. No Person shall be admitted as an Additional Limited
Partner without the consent of the General Partner, which consent shall be given
or withheld in the General Partner's sole and absolute discretion. A Person who
makes a Capital Contribution to the Partnership in accordance with this
Agreement, including, without limitation, pursuant to Section 4.1.C hereof, or
who acquires or otherwise receives Partnership Units in any permitted transfer
shall be admitted to the Partnership as an Additional Limited Partner only with
the consent of the General Partner and only upon furnishing to the General
Partner such documents or other instruments as the General Partner may require
in its discretion, which may include, among other things, a written instrument,
in a form acceptable to the General Partner, by which that Person confirms to
the General Partner that it has accepted all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 15.11 hereof. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person
and the number of Partnership Units issued to such Person is recorded on the
books and records of the Partnership, following the consent of the General
Partner to such admission. Regardless of the means by which any Additional
Limited Partner is admitted to the Partnership, each Additional Limited Partner
shall, automatically upon such admission, become subject to and bound by all of
the terms and conditions of this Agreement, including, without limitation, the
provisions of Section 15.11 hereof."

         5. Exhibit A of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit A attached hereto as Attachment 1.

         6. Except as expressly amended hereby, the Agreement shall remain in
full force and effect.

                          SIGNATURES ON FOLLOWING PAGE

                                       -8-

         IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date first written above.

                                      VORNADO REALTY TRUST

                                      By: /s/ JOSEPH MACNOW
                                         ---------------------------------------
                                          Name:  Joseph Macnow
                                          Title: Executive Vice President -
                                                 Finance and Administration and
                                                 Chief Financial Officer

Acknowledged and agreed:

CHARLES E. SMITH COMMERCIAL
REALTY L.L.C., as Representative of
each of the persons receiving SCR Units
as described in Section 1 above:

By: /s/ PAUL F. LARNER
   ------------------------------------
   Name:  Paul F. Larner
   Title: Chief Financial Officer

                                                                       Exhibit X

                     TAX REPORTING AND PROTECTION AGREEMENT

                                  BY AND AMONG

                             VORNADO REALTY TRUST,

                              VORNADO REALTY L.P.,

                    CHARLES E. SMITH COMMERCIAL REALTY L.P.,

                                      AND

                  CHARLES E. SMITH COMMERCIAL REALTY, L.L.C.,
                 as Representative of, and for the Benefit of,
                the Holders of Units of Partnership Interest in
                    Charles E. Smith Commercial Realty L.P.

                                  Dated as of
                               December 31, 2001

                     TAX REPORTING AND PROTECTION AGREEMENT

         THIS TAX REPORTING AND PROTECTION AGREEMENT (this "Agreement") is
entered into as of December 31, 2001, by and among VORNADO REALTY TRUST
("Vornado REIT"), a Maryland real estate investment trust and the sole general
partner of Vornado Realty L.P.; VORNADO REALTY L.P., a Delaware limited
partnership ("Vornado OP"); CHARLES E. SMITH COMMERCIAL REALTY L.P., a Delaware
limited partnership ("SCR"); and CHARLES E. SMITH COMMERCIAL REALTY, L.L.C., a
Delaware limited liability company and the sole general partner of SCR ("SCR
GP"), as representative of the current holders of partnership interests in SCR
(other than Vornado CESCR LLC and Vornado CESCR II LLC) (the "SCR Unitholders").
SCR GP is entering into this Agreement in its capacity as a general partner of
SCR, in the capacity as representative of, and for the benefit of, each SCR
Unitholder, and for its own account. Vornado REIT and Vornado OP hereby agree
that each of the SCR Unitholders is a third party beneficiary of this agreement
with all of the rights and privileges set forth herein.

         WHEREAS, Vornado REIT, Vornado OP, Vornado Merger Sub L.P. ("Vornado
Merger Sub"), SCR, Robert H. Smith, and Robert P. Kogod have entered into that
certain Agreement and Plan of Merger dated as of October 18, 2001 (the "SCR
Merger Agreement") whereby Vornado REIT and Vornado OP will acquire SCR through
a merger of Vornado Merger Sub with and into SCR, with the existing units of
limited partnership interest in SCR (other than those held by Vornado CESCR LLC
and Vornado CESCR II LLC) (the "Old SCR Units") being converted into units of
limited partnership interest in Vornado OP (the "Vornado OP Units") and the
partners of Vornado Merger Sub becoming the sole interest holders in SCR (the
"Merger");

         WHEREAS, (i) Vornado Merger Sub, which is owned entirely by Vornado OP
and an entity that is owned entirely by Vornado OP and disregarded for federal
income tax purposes, is disregarded as an entity for federal income tax purposes
under Treasury Regulation ss. 301.7701-3, and (ii) following the merger, SCR
will be owned entirely by Vornado OP and another entity that is owned entirely
by Vornado OP and that is disregarded for federal income tax purposes under
Treasury Regulation ss. 301.7701-3, with the result that SCR will be disregarded
as an entity for federal income tax purposes following the Merger, and Vornado
OP will be treated as owning directly all of the assets of SCR, it is intended
for federal income tax purposes that the Merger, regardless of form, be treated
as a contribution by SCR of all of its assets, subject to all of its
liabilities, to Vornado OP in exchange for partnership interests in Vornado OP
under Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"),
followed by a distribution by SCR of those partnership interests in Vornado OP
to the current holders of partnership units in SCR (other than Vornado CESCR LLC
and Vornado CESCR II LLC) in accordance with their respective interests in SCR
in liquidation of SCR; and

         WHEREAS, in accordance with Section 4.2 of the SCR Merger Agreement and
in consideration for the agreement of SCR to consummate the Merger, the parties
desire to enter into this Agreement regarding certain tax matters associated
with the Merger.

         NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein and in
the SCR Merger Agreement, the parties hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         To the extent not otherwise defined herein, capitalized terms used in
this Agreement have the meanings ascribed to them in the Second Amended and
Restated Agreement of Limited Partnership of Vornado Realty L.P. dated October
20, 1997, as amended to the date hereof, a copy of which is attached hereto as
Exhibit A (the "Vornado OP Partnership Agreement").

         704(c) Value: Means the fair market value of each of the Protected
Properties as agreed to by Vornado OP and SCR and as set forth in Schedule 3
hereto.

         Ceiling Rule Disparity: As defined in Section 7(a).

         Cumulative Net Ceiling Rule Disparity: As defined in Section 7(a).

         Curative Allocation: Means, (i) for the Fiscal Year ending December 31,
2002, an amount of income per Non-Rock Spring Protected Unit equal to $1.2613
(which amount shall be prorated for 2002 if the Merger occurs after January 1,
2002, based upon the number of days in 2002 following the Merger divided by
365), (ii) for the Fiscal Year ending December 31, 2003, an amount of income per
Non-Rock Spring Protected Unit equal to $1.4781 and (iii) for each Fiscal Year
following 2003 through and including 2041, an amount of income per Non-Rock
Spring Protected Unit equal to $1.6423 (which amount per Non-Rock Spring
Protected Unit shall be pro rated between the transferor and transferee with
respect to a Non-Rock Spring Protected Unit that is transferred during any
Fiscal Year, based upon the number of days in such Fiscal Year prior to the day
on which such Non-Rock Spring Protected Unit was transferred and the number of
days remaining in such Fiscal Year). If any taxable year of Vornado OP is less
than 365 days, then the Curative Allocation shall be pro rated based upon the
ratio of the number of days in such "short taxable year" to 365.

         Existing Nonrecourse Debt: Means all of the outstanding indebtedness of
SCR and its Subsidiaries at the time of the closing of the Merger that is
treated as a Nonrecourse Liability and that is secured by any of the Protected
Properties (or is treated for purposes of Treasury Regulation ss. 1.752-3(a)(2)
as secured by any of the Protected Properties). The Existing Nonrecourse Debt
and the Protected Properties secured thereby are set forth on Schedule 4
hereto).

         Existing SCR Indebtedness: As defined in Section 2(d)(1).

         Extended Tax Protected Period: As defined in the definition of
Protected Period.

         Guaranteed Amount: Means the aggregate amount of each Guaranteed Debt
that is guaranteed at any time by SCR Partner Guarantors. The Guaranteed Amount
with respect to each Guaranteed Debt as of the date hereof is set forth on
Schedule 8 hereto.

         Guaranteed Debt: Means each of the loans listed on Schedule 8 hereto
that is guaranteed by SCR Partner Guarantors on the date hereof, and any other
loans incurred (or assumed) by Vornado OP or any of its Subsidiaries that are
guaranteed by SCR Partner Guarantors at any time hereafter pursuant to Article 3
hereof.

         Initial Guarantee Shortfall: Means, as to each SCR Partner Guarantor,
the excess of the amount of indebtedness that such SCR Partner Guarantor has
committed to guarantee at the time of the Merger, which amount as to each SCR
Partner Guarantor is set forth on Schedule 9 hereto, over the Scheduled
Guarantee Amount for such SCR Partner Guarantor. The Initial Guarantee Shortfall
for each SCR partner Guarantor as of the date hereof is set forth on Schedule 9
hereto. The Initial Guarantee Shortfall with respect to an SCR Partner Guarantor
shall be reduced as set forth in Section 3(b).

         Lock-up Agreement: Means as to each SCR Unitholder who enters into the
a Lock-Up Agreement in the form of Schedule 6 hereto, such Lock-up Agreement
that such SCR Unitholder has entered into.

         Nonrecourse Liability: Means a "nonrecourse liability" as defined in
Treasury Regulations ss. 1.752-1(a)(2).

         Non-Rock Spring Protected Units: Means all Protected Units other than
the Protected Units issued in the Merger with respect to SCR Units that
previously were issued to the former partners of First Rock Spring Limited
Partnership in connection with the contribution of their interests in First Rock
Spring Limited Partnership to SCR on or about January 31, 2000.

         Other Qualified Indebtedness: As defined in Section 2(d)(1).

         Protected Units: Means those Vornado OP Units issued to the SCR
Unitholders in connection with the Merger, or any partnership interests in
Vornado OP (or any other entity that is treated as a partnership for federal
income tax purposes) thereafter issued by Vornado OP to the SCR Unitholders in
exchange for such Protected Units or with respect to such Protected Units. The
term Protected Units shall not include any other Vornado OP Units hereafter
acquired by an SCR Unitholder, whether from Vornado OP (except as described in
the immediately preceding sentence) or otherwise.

         Protected Properties: Means, except as otherwise specifically provided
herein, those properties and assets set forth on Schedule 2 hereto 1/ and any
other

- --------------------
(1)     The Protected Properties will include all buildings and land in which
SCR owns a direct or indirect interest at the time of the Merger, all
partnership or LLC interests owned directly or indirectly by SCR at the time of
the Merger, the management business

                                                            [Footnote continued]

properties or assets hereafter acquired by Vornado OP or any direct or
indirect Subsidiary of Vornado OP that are treated as "substituted basis
property" as defined in Section 7701(a)(42) of the Code with respect to such
Protected Properties.

         Protected Period: Means with respect to each SCR Unitholder, the period
ending at 12:01 A.M. on January 1, 2012 (the "Initial Ten-Year Period"),
provided, however, that the Protected Period with respect to each SCR Unitholder
who enters into a Lock-Up Agreement in the form of Schedule 6 hereto shall be
extended for an additional 10-year period, which shall end at 12:01 A.M. on
January 1, 2022 (the additional 10-year period is referred to as the "Extended
Tax Protected Period"), provided further that in the event of the death of all
of Robert H. Smith, Robert P. Kogod, Clarice R. Smith and Arlene R. Kogod (a)
during the Initial Ten-Year Period, no SCR Unitholder shall have an Extended Tax
Protected Period beyond the Initial Ten-Year Period or (b) after the Initial
Ten-Year Period, the Extended Tax Protected Period shall terminate with respect
to each SCR Unitholder on the date of death of the last to survive of Robert H.
Smith, Clarice R. Smith, Robert P. Kogod, or Arlene R. Kogod. In addition, the
Extended Tax Protected Period shall be subject to early termination as set forth
in Article 12 below.

         Qualified Guarantee: As defined in Section 3(b).

         Qualified Guarantee Indebtedness: As defined in Section 3(b).

         Qualified Replacement Indebtedness: As defined in Section 2(d)(1).

         SCR Merger Closing Date: Means December 31, 2001.

         SCR Partner Guarantors: Means those SCR Unitholders who, as of the time
of the determination, have guaranteed any portion of any of the Guaranteed Debt.
The SCR Partner Guarantors as of the date hereof, the aggregate amount of all
Guaranteed Debt that each such SCR Partner has guaranteed as of the date hereof,
and each SCR Partner Guarantor's dollar amount share of the Guaranteed Amount
with respect to each Guaranteed Debt as of the date hereof are set forth on
Schedules 8 and 9 hereto.

         SCR Unitholders: Means the SCR Unitholders set forth on Schedule 1
hereto,2/ and any Person who holds Protected Units who acquires such Protected
Units

- --------------------
[Footnote continued]

conducted by SCR and all stock or securities of any corporate entity to which
all or any portion of such management business is transferred in connection with
or following the Merger and in which Vornado OP owns a direct or indirect
interest.

(2)     The term SCR Unitholders shall include each SCR Unitholder that receives
Vornado OP Units in the Merger.

from an SCR Unitholder in a transaction in which gain or loss is not
recognized in whole or in part for federal income tax purposes and in which such
transferee's adjusted basis, as determined for federal income tax purposes, is
determined in whole or in part by reference to the adjusted basis of the SCR
Unitholder in such Protected Units.

         Scheduled Guarantee Amount: Means, as to each SCR Partner Guarantor,
the aggregate amount of all Guaranteed Debt that, as of the SCR Merger Closing
Date, such SCR Partner Guarantor shall have guaranteed. The Scheduled Guarantee
Amount for each such SCR Partner Guarantor is set forth on Schedule 9 to this
Agreement. The Scheduled Guarantee Amount for an SCR Partner Guarantor shall be
increased by the amount of any Qualified Guarantee Indebtedness guaranteed by
such SCR Partner Guarantor pursuant to Section 3(b). The Scheduled Guarantee
Amount for an SCR Partner Guarantor shall be reduced only if (i) such SCR
Partner Guarantor notifies Vornado OP in writing that the Scheduled Guarantee
Amount is thereafter to be reduced (which notice shall not affect any guarantees
then existing by the SCR Partner Guarantor but, as to the dollar amount of the
reduction specified in such notice, shall relieve Vornado OP of its obligation
under this Agreement to maintain the Guaranteed Debt with respect to such SCR
Partner Guarantor or to offer replacement debt to be guaranteed by the SCR
Partner Guarantor), or (ii) in the event that any Guaranteed Debt is to be
repaid or refinanced and Vornado OP offers in writing to the SCR Partner
Guarantor the opportunity to enter into a Qualified Guarantee with respect to
other Qualified Guarantee Indebtedness that meets all of the conditions set
forth in Section 3(e) and the other applicable provisions of Article 3, the SCR
Partner Guarantor fails, within 30 days after receipt of such offer from Vornado
OP, to execute a guarantee with respect to such replacement Guaranteed Debt
(provided that the amount of the reduction in the Scheduled Guarantee Amount
with respect to such SCR Partner Guarantor shall not exceed the lesser of the
dollar amount of the guarantee offered by Vornado and not accepted by the SCR
Partner Guarantor or such SCR Partner Guarantor's share of the Guaranteed Amount
with respect to the Guaranteed Debt being repaid or refinanced).

         Subsidiary: Means any partnership, limited liability company, trust or
other entity either (a) whose disposition of a Protected Property or any direct
or indirect interest in a Protected Property or (b) a direct or indirect
disposition of an interest in which by Vornado OP would result in the allocation
of taxable gain to one or more SCR Unitholders pursuant to Section 704(c) of the
Code and the Treasury Regulations thereunder.

         Successor Partnership: As defined in Section 2(b).

         Taxes: Means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments and estimated taxes, assessments,
deficiencies, levies, imposts, duties, withholdings, or other similar charges of
every kind, character or description imposed by any governmental authorities,
and any interest, penalties or additions to tax imposed thereon or in connection
therewith.

                                    ARTICLE 2
              RESTRICTIONS ON DISPOSITIONS OF PROTECTED PROPERTIES

         (a) General Prohibition on Disposition. Vornado OP agrees for the
benefit of each SCR Unitholder, for the term of the Protected Period applicable
to such SCR Unitholder, not to directly or indirectly sell, exchange, transfer,
or otherwise dispose of any Protected Property or any interest therein (without
regard to whether such disposition is voluntary or involuntary). Without
limiting the foregoing, the term "sale, exchange, transfer or disposition" by
Vornado OP shall be deemed to include, and the prohibition shall extend to:

         (i)     any direct or indirect disposition by any direct or indirect
                 Subsidiary (including SCR) of any Protected Property or any
                 interest therein;

         (ii)    any direct or indirect disposition by Vornado OP of all or any
                 portion of its interest in SCR;

         (iii)   any direct or indirect disposition by Vornado OP or any
                 Subsidiary of Vornado OP of all or any portion of its interest
                 in any entity that (A) was a Subsidiary of SCR or (B) is a
                 Subsidiary of Vornado and owns a direct or indirect interest in
                 a Protected Property (which prohibition shall include, without
                 limitation, any transaction involving a distribution or deemed
                 distribution by a Subsidiary to Vornado OP under Section 731 of
                 the Code);

         (iv)    any direct or indirect distribution by Vornado OP of any
                 Protected Property (or any direct or indirect interest therein)
                 that is subject to Section 704(c)(1)(B) of the Code and the
                 Treasury Regulations thereunder; and

         (v)     any distribution by Vornado OP to an SCR Unitholder that is
                 subject to Section 737 of the Code and the Treasury Regulations
                 thereunder (except as, and to the extent, permitted under
                 Section 2(f) below);

Without limiting the foregoing, a disposition shall include any transfer,
voluntary or involuntary, in a foreclosure proceeding, pursuant to a deed in
lieu of foreclosure, or in a bankruptcy proceeding, except as set forth in
Section 2(d) below. This Section 2(a) shall not be violated by an actual or
deemed distribution of money (within the meaning of Section 731 of the Code) by
Vornado OP that results in the recognition of gain solely by reason of Section
731 of the Code.

         (b) Exceptions Where No Gain Recognized. Notwithstanding the
restriction set forth in Section 2(a), Vornado OP or any Subsidiary (including
SCR) may dispose of a Protected Property (or an interest therein) if such
disposition qualifies as a like-kind exchange under Section 1031 of the Code, or
an involuntary conversion under Section 1033 of the Code, or other transaction
(including, but not limited to, a contribution of property to any entity that
qualifies for the nonrecognition of gain under Section 721 or Section 351 of the
Code, or a merger or consolidation of Vornado OP (or SCR, as applicable) with or
into another entity that qualifies for taxation as a "partnership" for federal
income tax purposes (a "Successor Partnership")) that, as to each of the
foregoing, does not result in the recognition of any taxable income or gain to

any SCR Unitholder with respect to any of the Protected Units; provided,
however, that:

         (1)     in the event of a disposition under Section 1031 or Section
                 1033 of the Code, any property that is acquired in exchange for
                 or as a replacement for a Protected Property shall thereafter
                 be considered a Protected Property;

         (2)     in the case of a Section 1031 like-kind exchange, if such
                 exchange is with a "related party" within the meaning of
                 Section 1031(f)(3) of the Code, any direct or indirect
                 disposition by such related party of the Protected Property or
                 any other transaction prior to the expiration of the two (2)
                 year period following such exchange that would cause Section
                 1031(f)(1) to apply with respect to the Protected Property
                 (including by reason of the application of Section 1031(f)(4))
                 shall be considered a violation of Section 2(a) by Vornado OP;

         (3)     if the Protected Property is transferred to another entity in a
                 transaction in which gain or loss is not recognized, the direct
                 and indirect interest of Vornado OP in such entity shall
                 thereafter be considered a Protected Property, and if the
                 acquiring entity's disposition of the Protected Property would
                 cause an SCR Unitholder to recognize gain or loss as a result
                 thereof, the transferred Protected Property still shall be
                 considered a Protected Property;

         (4)     if Vornado OP directly or indirectly receives any property that
                 is in whole or in part a "substituted basis property" as
                 defined in Section 7701(a)(42) of the Code with respect to a
                 Protected Property (including, without limitation, a Protected
                 Property by reason of clause (3) above), such substituted basis
                 property shall thereafter be considered a Protected Property;

         (5)     in the event that at the time of the exchange or other
                 disposition the Protected Property is secured, directly or
                 indirectly, by indebtedness that is guaranteed by an SCR
                 Unitholder (or for which an SCR Unitholder otherwise has
                 personal liability) and that is not then in default and the
                 transferee is not a Subsidiary of Vornado OP that both is more
                 than 50% owned, directly or indirectly by Vornado OP and is and
                 will continue to be under the legal control of Vornado OP
                 (which shall include a partnership or limited liability company
                 in which Vornado OP or a wholly owned subsidiary of Vornado OP
                 is the sole managing general partner or sole managing member,
                 as applicable), (a) either (I) such indebtedness shall be
                 repaid in full or (II) Vornado shall obtain from the lenders
                 with respect to such indebtedness a full and complete release
                 of liability for each of the SCR Unitholders that has
                 guaranteed, or otherwise has liability for, such indebtedness,
                 and (b) if such indebtedness is a Guaranteed Debt and the
                 Protected Period of the SCR Partner Guarantors with respect to
                 such Guaranteed Debt shall not have expired, Vornado OP shall
                 comply with its covenants set forth in Article 3 below with
                 respect to such Guaranteed Debt and the SCR

                 Partner Guarantors that are considered to have liability for
                 such Guaranteed Debt (determined under Section 3(d), treating
                 such events as a repayment of the Guaranteed Debt); and

         (6)     in the event of a merger or consolidation involving Vornado OP
                 (or any Subsidiary) and a Successor Partnership, the Successor
                 Partnership shall have agreed in writing for the benefit of the
                 SCR Unitholders that all of the restrictions of this Article 2
                 shall continue to apply with respect to the Protected
                 Properties.

         (c) Mergers. Any merger or consolidation involving Vornado OP or any
Subsidiary of Vornado OP, whether or not Vornado OP is the surviving entity in
such merger or consolidation, that results in an SCR Unitholder being required
to recognize part or all of the gain that would have been recognized for federal
income tax purposes upon a fully taxable disposition of one or more Protected
Properties at the time of the Merger shall be deemed to be a disposition of the
Protected Properties for purposes of Section 2(a).

         (d) Exceptions for Certain Foreclosures, Bankruptcies and Involuntary
Transfers. Notwithstanding the restriction set forth in Section 2(a), and in
addition to the exceptions set forth in Section 2(b), Vornado OP or any
Subsidiary (including SCR) may dispose of a Protected Property (or an interest
therein), without such disposition being considered to be a violation of Article
2 or Vornado OP incurring any liability under Article 5 as a result of this
Article 2, as follows:

         (1)     pursuant to the foreclosure of a loan secured, directly or
                 indirectly, by a Protected Property, or in connection with the
                 bankruptcy of an entity owning a direct or indirect interest in
                 the Protected Property if all of the following conditions are
                 satisfied (A) if a foreclosure, the foreclosure (I) is of
                 indebtedness that was incurred by SCR prior to the time of the
                 Merger and was in place at the time of the Merger ("Existing
                 SCR Indebtedness"), (II) is of indebtedness incurred to
                 refinance Existing SCR Indebtedness and the amount of such
                 replacement indebtedness at the time it was incurred did not
                 exceed the sum of the then outstanding Existing SCR
                 Indebtedness being refinanced, plus all costs (including
                 prepayment fees, "breakage" payments and similar costs)
                 incurred in connection with such refinancing and such
                 replacement indebtedness was provided by an institutional
                 lender in connection with its business of lending money
                 ("Qualified Replacement Indebtedness"), or (III) is of
                 indebtedness that, at the time incurred, did not exceed (taking
                 into account all other indebtedness then outstanding and either
                 secured by the Protected Property or owed by the entity
                 incurring such indebtedness and its direct or indirect
                 subsidiaries) seventy percent (70%) of the fair market value of
                 the Protected Property at such time (as determined in good
                 faith by Vornado OP) ("Other Qualified Indebtedness"); (B) if a
                 bankruptcy, the only indebtedness of the entity in bankruptcy
                 for borrowed money (other than obligations to trade creditors
                 incurred in the ordinary course of business) is Existing SCR
                 Indebtedness, Qualified Replacement Indebtedness and/or Other

                 Qualified Indebtedness; (C) at all times from the time of the
                 Merger to the time of the foreclosure or bankruptcy, as
                 applicable, the direct or indirect percentage ownership
                 interest of Vornado OP in the Protected Property was not less
                 than the lesser of fifty-one percent (51%) or the percentage
                 interest of SCR in such Protected Property at the time of the
                 Merger; (D) Vornado OP at all times since the Merger shall have
                 had and shall have exercised the legal right to control the
                 operations of the Protected Property (and any entities through
                 which Vornado OP owns a direct or indirect interest therein);
                 (E) if such Existing SCR Indebtedness, Qualified Replacement
                 Indebtedness, or Other Qualified Indebtedness shall have
                 matured, Vornado OP shall have used commercially reasonable
                 efforts commencing a commercially reasonable period prior to
                 the stated maturity of such indebtedness to cause such
                 indebtedness to be refinanced, provided that such refinancing
                 can be obtained on commercially reasonable terms; and (F)
                 Vornado OP shall have used commercially reasonable efforts
                 (considering its own best interests) to prevent such
                 foreclosure or bankruptcy (provided that such required efforts
                 shall not include contributing capital or otherwise providing
                 funds to repay such indebtedness);

         (2)     an event (other than a foreclosure or bankruptcy, unless such
                 foreclosure satisfies clause (1) above) described in Section
                 1033 of the Code, other than a disposition resulting from or
                 made in connection with the mere threat or imminence of a
                 requisition or condemnation; provided that Vornado OP agrees to
                 cause any real property purchases that it and/or its
                 Subsidiaries undertake and complete after the occurrence of the
                 event described in this Section 2(d)(2) and prior to the
                 expiration of the applicable replacement period under Section
                 1033 (determined taking into account Section 1033(g) of the
                 Code) and that otherwise would qualify as replacement property
                 for purposes of Section 1033 of the Code with respect to the
                 Protected Property to be treated as replacement acquisitions
                 for the purposes of this Section 2(d)(2) (other than
                 acquisitions made with Vornado OP Units, acquisitions made as
                 part of a Section 1031 exchange and acquisitions made as part
                 of another Section 1033 transaction.

         (e) Issuances of Additional Equity Interests. Notwithstanding Section
2(a), the issuance of additional partnership interests in Vornado OP pursuant to
the Vornado Partnership Agreement shall not be considered to be prohibited by
this Section 2 unless such partnership interests are in a form that either their
issuance, or any exercise by a holders of any rights thereunder, would be
considered to result in a direct or indirect taxable disposition by Vornado OP
or any Subsidiary of one or more of the Protected Properties or any interest
therein (determined taking into account, without limitation, Sections
704(c)(1)(B), 707(a), and 737 of the Code and the Treasury Regulations
thereunder).

         (f) Limited Exception for Certain Distributions by Vornado OP. Section
2(a)(v) shall not be construed to prohibit any distribution of property (such
as, but not limited to, debt securities and equity securities in a corporation,
a limited liability

company, or another partnership) made by Vornado OP with respect to Vornado OP
Units so long as all of the following conditions are satisfied:

         (i)     the distributed property received by each holder of Protected
                 Units is registered under the Securities Exchange Act of 1934,
                 is listed for trading on the New York Stock Exchange, the
                 NASDAQ National Market System, or another comparable national
                 exchange or market system, and is freely transferable by the
                 recipient thereof under the applicable federal and state
                 securities laws; and

         (ii)    any gain required to be recognized by a holder of Protected
                 Units by reason of such distribution does not exceed the fair
                 market value of the distributed property at the time of such
                 distribution.

                                    ARTICLE 3
                       GUARANTEES OF DEBT AND RESTRICTIONS
                        ON REFINANCING OF GUARANTEED DEBT

         (a) Initial Guaranteed Debt. Either in connection with the Merger or in
connection with prior debt financings undertaken by SCR, the SCR Partner
Guarantors have entered into those certain guarantee agreements whereby the SCR
Partner Guarantors have guaranteed the Guaranteed Debt in an aggregate amount
equal to the Guaranteed Amount. Schedule 8 hereto sets forth, as of the date
hereof, the amount of all Guaranteed Debt and each SCR Partner Guarantor's share
of the Guaranteed Amount with respect to each Guaranteed Debt.

         (b) Requirement to Offer Additional Guaranteed Debt. Not later than
December 31, 2004, Vornado OP shall offer to each SCR Partner Guarantor in
writing the opportunity to guarantee other Vornado OP indebtedness (which other
indebtedness may be, but is not required to be, indebtedness of SCR or one of
its Subsidiaries) in an amount equal to the Initial Guarantee Shortfall for such
SCR Partner Guarantor. In order for the offer of Vornado OP to satisfy the
requirements of this Section 3(b), (i) the indebtedness to be guaranteed, and
the terms of the guaranty must satisfy all of the conditions set forth in
Section 3(e) (indebtedness satisfying all such conditions is referred to as
"Qualified Guarantee Indebtedness"); (ii) the guarantee by the SCR Partner
Guarantors must be pursuant to a Guaranty Agreement substantially in the form
attached hereto as Schedule 7 that satisfies the conditions set forth in
Sections 3(e)(i) and (iii) (a "Qualified Guarantee"); (iii) the amount required
to be guaranteed by each SCR Partner Guarantor cannot exceed such SCR Partner
Guarantor's then existing Initial Guarantee Shortfall; and (iv) the offer of
Vornado OP to such SCR Partner Guarantors pursuant hereto must be in writing and
the SCR Partner Guarantors must have not less than thirty (30) days to elect to
enter into such guarantees. If, and to the extent that, an SCR Partner Guarantor
elects to guarantee Qualified Guarantee Indebtedness pursuant to an offer made
in accordance with this Section 3(b), such indebtedness thereafter shall being
considered a Guaranteed Debt and subject to all of this Article 3, and the
Initial Guarantee Shortfall of such SCR Partner Guarantor shall be reduced by
the amount of such guarantee. If an offer is made by Vornado OP to an SCR
Partner Guarantor pursuant to this Section 3(b) that complies with all of the
requirements of this Section

3(b) and such SCR Partner Guarantor does not join in the guarantee pursuant to
such offer (or joins in the guarantee for less than lesser of the amount offered
or its then remaining Initial Guarantee Shortfall), Vornado OP thereafter shall
have no obligation to such SCR Partner Guarantor with respect to that portion of
such SCR Partner Guarantor's Initial Guarantee Shortfall that corresponds to the
amount of the indebtedness that the SCR Partner Guarantor elected not to
guarantee (and such SCR Partner Guarantor's Initial Guarantee Shortfall shall be
considered to have been reduced accordingly).

         (c) Covenant With Respect to Guaranteed Debt Collateral. Vornado OP
covenants with the SCR Partner Guarantors with respect to the Guaranteed Debt
that (A) it will comply with the requirements set forth in Section 2(b)(5) upon
any disposition of any collateral for a Guaranteed Debt, whether during or
following the applicable Protected Period, and (B) it will not at any time,
whether during or following the applicable Protected Period, pledge the
collateral with respect to a Guaranteed Debt to secure any other indebtedness
(unless such other indebtedness is, by its terms, subordinate in all respects to
the Guaranteed Debt for which such collateral is security) or otherwise
voluntarily dispose of or reduce the amount of such collateral unless either (i)
after giving effect thereto the conditions in Section 3(e)(ii) would continue to
be satisfied with respect to the Guaranteed Debt and the Guaranteed Debt
otherwise would continue to be Qualified Guarantee Indebtedness, or (ii) Vornado
OP (A) obtains from the lender with respect to the original Guaranteed Debt a
full and complete release of any SCR Partner Guarantor unless the SCR Partner
Guarantor expressly requests that it not be released, and (B) if the applicable
Protected Period has not expired as to all SCR Partner Guarantors with respect
to such original Guaranteed Debt, offers to each SCR Partner Guarantor with
respect to such original Guaranteed Debt as to whom the Protected Period has not
expired, not less than 30 days prior to such pledge or disposition, the
opportunity to enter into a Qualified Guarantee of other Vornado OP indebtedness
that constitutes Qualified Guarantee Indebtedness (with such replacement
indebtedness thereafter being considered a Guaranteed Debt and subject to this
Article 3) in an amount equal to the amount of such original Guaranteed Debt
that was guaranteed by such SCR Partner Guarantor.

         (d) Repayment or Refinancing of Guaranteed Debt. Vornado OP shall not,
at any time during the Protected Period applicable to an SCR Partner Guarantor,
repay or refinance all or any portion of any Guaranteed Debt unless (i) after
taking into account such repayment, each SCR Partner Guarantor would be
entitled, pursuant to Treasury Regulation ss. 1.752-2 (and not Treasury
Regulation ss. 1.752-3), to include in its basis for its Protected Units an
amount of Guaranteed Debt equal to its Scheduled Guarantee Amount, or (ii)
alternatively, Vornado OP, not less than 30 days prior to such repayment or
refinancing, offers to the applicable SCR Partner Guarantors the opportunity to
enter into a Qualified Guarantee with respect to other Qualified Guarantee
Indebtedness in an amount sufficient so that, taking into account such
guarantees of such other Qualified Guarantee Indebtedness, each SCR Partner
Guarantor who elects to guarantee such other Qualified Guarantee Indebtedness in
the amount specified by Vornado OP would be entitled, pursuant to Treasury
Regulation ss. 1.752-2 (and not Treasury Regulation ss. 1.752-3), to include in
its adjusted tax basis for its Protected Units debt equal to the Scheduled
Guarantee Amount for such SCR Partner Guarantor.

         (e) Criteria for Indebtedness to be Guaranteed and Guarantees. The
Guaranteed Debt (and any additional or replacement Guaranteed Debt offered
pursuant to Sections 3(b), 3(c), 3(d), and 3(g) hereof) and the guarantees with
respect thereto shall at all times meet the following conditions:

              (i) each such guarantee shall be a "bottom dollar guarantee" in
         that the lender for the Guaranteed Debt is required to pursue all other
         collateral and security for the Guaranteed Debt (other than any "bottom
         dollar guarantees" permitted pursuant to this clause (i) and/or Section
         3(f) below) prior to seeking to collect on such a guarantee, and the
         lender shall have recourse against the guarantee only if, and solely to
         the extent that, the total amount recovered by the lender with respect
         to the Guaranteed Debt after the lender has exhausted its remedies as
         set forth above is less than the aggregate of the Scheduled Guarantee
         Amounts with respect to such Guaranteed Debt (plus the aggregate
         amounts of any other guarantees (x) that are in effect with respect to
         such Guaranteed Debt at the time the guarantees pursuant to this
         Section 3 are entered into, or (y) that are entered into after the date
         the guarantees pursuant to this Section 3 are entered into with respect
         to such Guaranteed Debt and that comply with Section 3(f) below, but
         only to the extent that, in either case, such guarantees are "bottom
         dollar guarantees" with respect to the Guaranteed Debt), and the
         aggregate liability of each SCR Partner Guarantor for all Guaranteed
         Debt shall be limited to the amount actually guaranteed by such SCR
         Partner Guarantor;

              (ii) the fair market value of the collateral against which the
         lender has recourse pursuant to the Guaranteed Debt, determined as of
         the time the guaranty is entered into (an independent appraisal relied
         upon by the lender in making the loan shall be conclusive evidence of
         such fair market value when the guarantee is being entered into in
         connection with the closing of such loan), shall not be less than 3.333
         times the sum of (x) the aggregate of the Scheduled Guarantee Amounts
         with respect to such Guaranteed Debt plus (y) the dollar amount of any
         other indebtedness that is senior to or pari pasu with the Guaranteed
         Debt and as to which the lender thereunder has recourse against
         property that is collateral for the Guaranteed Debt, plus (z) the
         aggregate amounts of any other guarantees (A) that are in effect with
         respect to such Guaranteed Debt at the time the guarantees pursuant to
         this Section 3 are entered into, or (B) that are entered into after the
         date the guarantees pursuant to this Section 3 are entered into with
         respect to such Guaranteed Debt and that comply with Section 3(f)
         below, but only to the extent that in either case, such guarantees are
         "bottom dollar guarantees" with respect to the Guaranteed Debt);

              (iii) (A) the executed guarantee must be delivered to the lender
         and (B) the execution of the guarantee by the SCR Partner Guarantors
         must be acknowledged by the lender as an inducement to it to make a new
         loan, to continue an existing loan (which continuation is not otherwise
         required), or to grant of a material consent under an existing loan

         (which consent is not otherwise required to be granted) or,
         alternatively, the guarantee must be with respect to a loan that, under
         the terms thereof, (I) is governed by New York law and either the loan
         is secured by property located in New York, the lender has a
         significant place of business in New York (with any bona fide branch or
         office of the lender through which the loan is made, negotiated, or
         administered being deemed a "significant place of business" for the
         purposes hereof), or the lender obtained in connection with such loan
         an opinion of counsel to the effect that such provisions regarding New
         York law are enforceable, or (II) is governed by the laws of another
         state that has a statutory provision or applicable controlling judicial
         decisions that are comparable to Section 5-1401 of the New York General
         Obligations Law and the conditions set forth in clause (I) with respect
         to New York would be satisfied with respect to such other state;

              (iv) the aggregate amount of guarantees, indemnities, and other
         similar undertakings with respect to such debt must not exceed the face
         amount of the debt;

              (v) as to each SCR Partner Guarantor that is executing a guarantee
         pursuant hereto, there must be no other Person that would be considered
         to "bear the economic risk of loss," within the meaning of Treasury
         Regulation ss. 1.752-2, or would be considered to be "at risk" for
         purposes of Section 465(b) with respect to that portion of such debt
         for which such SCR Partner Guarantor is being made liable for purposes
         of satisfying Vornado OP's obligations to such SCR Partner Guarantor
         under this Article 3; provided that so long as the initial lender is
         not Vornado REIT or a person considered to be a partner in Vornado OP
         or related to such a partner (determined excluding persons qualifying
         for the de minimis exception set forth in Treasury Regulation ss.
         1.752-2(d)(1)), Vornado OP will not be considered to have violated this
         limitation by reason of actions of persons (other than Vornado REIT and
         its subsidiaries and their officers and directors) that are neither
         consented to in writing nor facilitated by Vornado OP or Vornado REIT
         (except that the foregoing proviso shall not apply to other similar
         "bottom dollar guarantees" existing and permitted pursuant to Section
         3(e)(i) and/or added pursuant to Section 3(f));

              (vi) the obligor with respect to the debt to be guaranteed is
         Vornado OP or a Subsidiary of Vornado OP in which Vornado OP owns,
         directly and indirectly, not less than 51% of the economic interests
         and which is and will continue to be under the legal control of Vornado
         OP (which shall include a partnership or limited liability company in
         which Vornado OP or a wholly owned subsidiary of Vornado OP is the sole
         managing general partner or sole managing member, as applicable).

         (f) Limitation on Additional Guarantees With Respect to Debt Secured by
Collateral for Guaranteed Debt. Vornado OP shall not offer the opportunity or
make available a guaranty of any Guaranteed Debt or other debt that is secured,
directly or indirectly, by any collateral for Guaranteed Debt unless (i) such
debt by its terms is subordinate in all respects to the Guaranteed Debt or, if
such others guarantees are of

the Guaranteed Debt itself, such guarantees by their terms must be paid in full
before the lender can have recourse to the SCR Partner Guarantors (i.e., the
first dollar amount of recovery by the applicable lenders must be applied to the
Guaranteed Amount); provided that the foregoing shall not apply with respect to
additional guarantees of Guaranteed Debt so long as the conditions set forth in
Sections 3(e)(ii) and (v) would be satisfied immediately after the
implementation of such additional guarantee (determined in the case of Section
3(e)(ii), based upon the fair market value of the collateral for such Guaranteed
Debt at the time the additional guarantee is entered into and adding the amount
of such additional guarantee(s) to the sum of the applicable Scheduled Guarantee
Amounts with respect to such Guaranteed Debt plus any other preexisting "bottom
dollar guarantee" previously permitted pursuant to this Section 3(f) or Sections
3(e)(i) and (ii) above, for purposes of making the computation provided for in
Section 3(e)(ii)), and (ii) such other guarantees do not have the effect of
reducing the amount of the Guaranteed Debt that is includible by any SCR Partner
Guarantor in its adjusted tax basis for its SCR Partnership Units pursuant to
Treasury Regulation ss. 1.752-2.

         (g) Amortization of Guaranteed Debt. In the event that the principal
amount of a Guaranteed Debt is decreased as a result of amortization of such
Guaranteed Debt such that the principal amount of the Guaranteed Debt (reduced
by the amount of any other guarantees, indemnities or similar arrangements that
apply with respect to such debt) is less than the Scheduled Guarantee Amount
with respect to such Guaranteed Debt, then Vornado OP shall make available to
the applicable SCR Partner Guarantors the opportunity to guarantee other
Qualified Guarantee Indebtedness in an amount equal to the Scheduled Guarantee
Amounts with respect to such debt (pursuant to a Qualified Guaranty that
satisfies the conditions set forth in Section 3(e) above), with such replacement
indebtedness thereafter being subject to this Article 3. Vornado OP shall have
the right, but not the obligation, to offer to one or more SCR Partner
Guarantors the opportunity to enter into a Qualified Guarantee with respect to
Qualified Guarantee Indebtedness in an amount up to (but not in excess of) the
projected reductions in such SCR Partner Guarantor's "share" of an amortizing
Guaranteed Debt below such SCR Partner Guarantor's Scheduled Guarantee Amount
with respect thereto during the next three years (or if less, the balance of
such SCR Partner Guarantor's Protected Period) (an "Advance Replacement
Guarantee Offer"). If Vornado OP makes an Advance Replacement Guarantee Offer in
writing to an SCR Partner Guarantor and such SCR Partner Guarantor does not
enter into the Qualified Guarantee offered in connection therewith, this Section
3(g) shall not be considered to have been violated with respect to such SCR
Partner Guarantor by reason of amortization of the Guaranteed Debt with respect
to which the Advance Replacement Guarantee Offer was made, up to the amount for
which such Advance Replacement Guarantee Offer was made and not accepted.

         (h) Process. Whenever Vornado OP is required under this Article 3 to
offer to one or more of the SCR Partner Guarantors an opportunity to guarantee
Qualified Guarantee Indebtedness, Vornado OP shall be considered to have
satisfied its obligation if the other conditions in this Article 3 are satisfied
and, not less than thirty (30) days prior to the date that such guarantee would
be required to be executed in order to satisfy this Article 3, Vornado OP sends
by first class mail, return receipt requested, to the last known address of each
such SCR Partner Guarantor (as reflected in the records of Vornado OP) the
Guaranty Agreement to be executed (which shall be substantially in the form of
the Schedule 7 hereto, with such changes thereto as are necessary to reflect the

relevant facts) and a brief letter explaining the relevant circumstances
(including that the offer is being made pursuant to this Article 3, the
circumstances giving rise to the offer, a brief summary of the terms of the
Qualified Guarantee Indebtedness to be guaranteed, a brief description of the
collateral for the Qualified Guarantee Indebtedness, a statement of the amount
to be guaranteed, the address to which the executed Guaranty Agreement must be
sent and the date by which it must be received, and a statement to the effect
that, if the SCR Partner the fails to execute and return the Guaranty Agreement
within the time period specified, the SCR Partner Guarantor thereafter would
lose its rights under this Article 3 with respect to the amount of debt that
Vornado OP is required to offer to be guaranteed and for which the guarantee is
being offered, and depending upon the SCR Partner Guarantor's circumstances and
other circumstances related to Vornado OP, the SCR Partner could be required to
recognize taxable gain as a result thereof, either currently or prior to the
expiration of the applicable Protected Period, that otherwise would have been
deferred). If a notice is properly sent in accordance with this procedure,
Vornado OP shall have not responsibility as a result of the failure of an SCR
Partner Guarantor either to receive such notice or to have responded thereto
within the specified time period. 3/

         (i) Reduction in Obligations of SCR Guarantor Partners. If an offer to
guarantee debt is made by Vornado OP to an SCR Partner Guarantor pursuant to
this Section 3 that complies with all of the applicable requirements of this
Section 3, an SCR Partner Guarantor may elect not to join in a guarantee at all,
or to join in a guarantee for less than the full amount offered, but if such SCR
Partner Guarantor does not join in the guarantee pursuant to such offer (or
joins in the guarantee for less than the amount offered (provided that the
amount offered does not exceed its then remaining Initial Guarantee Shortfall
and the portion of Scheduled Guarantee Amount for which a replacement guarantee
is being offered)), Vornado OP thereafter shall have no obligation to such SCR
Partner Guarantor with respect to that portion of such SCR Partner Guarantor's
Initial Guarantee Shortfall and/or Scheduled Guarantee Amount that corresponds
to the amount of the indebtedness that the SCR Partner Guarantor elected not to
guarantee (and such SCR Partner Guarantor's Initial Guarantee Shortfall or
Scheduled Guarantee Amount, as applicable, shall be considered to have been
reduced accordingly).

         (j) Limitation on Liability. So long as Vornado OP shall have complied
with all of the applicable provisions of this Section 3 and Section 8(a)(i),
neither Vornado OP nor Vornado REIT shall have any liability to an SCR Partner
Guarantor under this Section 3 by reason of a successful assertion by the
Internal Revenue Service that guarantees of Guaranteed Debt, whether entered
into prior to the Merger or subsequent to the Merger and pursuant to this
Section 3, are not effective to cause the affected SCR Partner Guarantors to be
allocated debt pursuant to Treasury Regulation 1.752-2 or considered to be "at
risk" for purposes of Section 465(b).

- --------------------
(3)     Prior to the closing of the Merger, the parties may agree to an approved
form of a notice pursuant hereto, which if agreed upon shall be added as a
Schedule to this Agreement.

         (k) Presumption as to Schedule 7. The form of the Guaranty Agreement
attached hereto as Schedule 7 shall be conclusively presumed to satisfy the
conditions set forth in Section 3(e)(i) and to have caused the Guaranteed Debt
to be considered allocable to the SCR Guarantor Partner who enters into such
Guaranty Agreement pursuant to Treasury Regulation ss. 1.752-2 so long as all of
the following conditions are met with respect such Guaranteed Debt:

         (i)     there are no other guarantees in effect with respect to such
                 Guaranteed Debt (other than the guarantees contemporaneously
                 being entered into by the SCR Partner Guarantors pursuant to
                 this Article 3);

         (ii)    the collateral securing such Guaranteed Debt is not, and shall
                 not thereafter become, collateral for any other indebtedness
                 that is senior to or pari pasu with such Guaranteed Debt;

         (iii)   no additional guarantees with respect to such Guaranteed Debt
                 will be entered into during the applicable Protected Period
                 pursuant to the proviso set forth in Section 3(f);

         (iv)    the lender with respect to such Guaranteed Debt is not Vornado
                 OP, any Subsidiary or other entity in which Vornado OP owns a
                 direct or indirect interest, Vornado REIT, any other partner in
                 Vornado OP, or any person related to any partner in Vornado OP
                 as determined for purposes of Treasury Regulation ss. 1.752-2;
                 and

         (v)     none of Vornado REIT, nor any other partner in Vornado OP, nor
                 any person related to any partner in Vornado OP as determined
                 for purposes of Treasury Regulation ss. 1.752-2 shall have
                 provided, or shall thereafter provide, collateral for, or
                 otherwise shall have entered into, or shall thereafter enter
                 into, a relationship that would cause such person or entity to
                 be considered to bear the risk of loss with respect to such
                 Guaranteed Debt, as determined for purposes of Treasury
                 Regulation ss. 1.752-2.

         (l) Exception for Certain Foreclosures and Involuntary Transfers. If a
Guaranteed Debt is repaid or extinguished in connection with a foreclosure,
bankruptcy, or involuntary transfer that satisfies the conditions set forth in
Section 2(d), Vornado OP shall not be considered to have violated Section 3(d)
so long as Vornado OP undertakes commercially reasonable efforts to make
available to the affected SCR Partner Guarantors as soon as reasonably
practicable under the circumstances other Qualified Guarantee Indebtedness to
guarantee pursuant to Qualifying Guarantees, including any new or additional
indebtedness thereafter incurred by Vornado OP and its Subsidiaries, provided
that Vornado OP shall not be obligated to incur new or additional indebtedness
in order to satisfy such undertaking.

                                    ARTICLE 4
       LIMITATION ON REPAYMENT OR PREPAYMENT OF EXISTING NONRECOURSE DEBT

         (a) Obligation to Retain Existing Nonrecourse Debt. Unless and until
Vornado OP has satisfied its obligations to an SCR Partner Guarantor under
Section 3(b) above (or if sooner, the expiration of the Protected Period
applicable to such SCR Partner Guarantor), Vornado OP shall not, directly or
indirectly, cause or permit Vornado OP or any Subsidiary to repay or prepay any
of the Existing Nonrecourse Debt if, after giving effect to such payment, such
SCR Partner Guarantor would be allocated at any time prior to the expiration of
the Protected Period applicable to such Guarantor Partner pursuant to Treasury
Regulation ss. 1.752-3(a) an amount of Existing Nonrecourse Debt and/or other
indebtedness of Vornado OP that qualifies as a Nonrecourse Liability that is
less than such SCR Partner Guarantor's then remaining Initial Guarantee
Shortfall. If, and to the extent, that Vornado OP relies on other Nonrecourse
Liabilities of Vornado OP for purposes of this Section 4(a), such other
Nonrecourse Liabilities shall be subject to this Article 4. This Section 4(a)
shall have no application with respect to any SCR Unitholder who is not an SCR
Partner Guarantor, or with respect to any SCR Partner Guarantor either who has
no Initial Guarantee Shortfall, or whose Initial Guarantee Shortfall has been
reduced to zero pursuant to Section 3(b) (including, without limitation, by
reason of the last sentence thereof). At such time as Vornado OP has satisfied
all of its obligations to all SCR Partner Guarantors under Seciton 3(b) above,
this Article 4 shall cease to have any application.

         (b) Exceptions for Principal Amortization and Certain Refinancings. The
requirements in Section 4(a) above shall not apply in the case of:

              (i) a payment or repayment that consists solely of a required
principal amortization payment made with respect to an Existing Nonrecourse Debt
or Replacement Debt (as defined in clause (ii) below) in accordance with the
principal amortization schedules in effect at the effective time of the Merger
with respect to such Existing Nonrecourse Debt (or in the case of Replacement
Debt, a principal amortization schedule that meets the conditions set forth in
subclause (z) of clause (ii) below); provided that a required payment of
principal at the scheduled maturity of any indebtedness shall not be considered
within the scope of this clause (i) (and, accordingly, Vornado OP shall be
required to refinance such maturing indebtedness with debt that would be
considered qualifying Replacement Debt under clause (ii) below); or

              (ii) a payment of principal made from proceeds of new indebtedness
incurred to refinance Existing Nonrecourse Debt (such new indebtedness incurred
pursuant to the refinancing that meets the conditions set forth below in this
clause (ii) is referred to in this Agreement as "Replacement Debt"), provided
that (x) such refinancing is made on a basis that the Replacement Debt would be
considered a Nonrecourse Liability that is allocable for purposes of Treasury
Regulations ss. 1.752-3(a) as the Existing Nonrecourse Debt being refinanced;
(y) that the principal amount of the Replacement Debt is at least equal to the
principal amount of the Existing Nonrecourse Debt on the date of such
refinancing; and (z) provides either for "interest-only" payments or for level
payments of principal and interest that would not result in amortization of the
remaining principal balance over a period shorter than the lesser of twenty-five
years or the scheduled amortization of the Existing Nonrecourse Debt.

              (c) Deemed Refinancings. For the purposes of this Article 4, any
transaction or other event, including, without limitation, any modification of
indebtedness, which in each case was either facilitated by, or consented in
writing to, by Vornado OP or Vornado REIT, in which any partner in Vornado OP or
any affiliate of any such partner in Vornado OP would become personally liable
for, or would bear or incur, directly or indirectly, the "risk of loss" with
respect to any Existing Nonrecourse Debt or any Replacement Debt that would
cause such Debt either not to be considered a Nonrecourse Liability or not to
qualify as "qualified nonrecourse financing" for purposes of Section
465(b)(6)(B) of the Code shall be considered a refinancing of such Debt and
shall be subject to the requirements set forth in this Article 4.

              (d) Deemed Repayment. For the purposes of this Article 4, any
sale, exchange or other disposition (including, without limitation, an exchange
to which Section 1031 or 1033 of the Code applies, any transfer that is subject
to either Section 2(b)(5) or Section 2(b)(6), and any disposition, voluntary or
involuntary, pursuant to a foreclosure proceeding, a deed in lieu of foreclosure
or a bankruptcy proceeding) of either a property that is subject to an Existing
Nonrecourse Debt or Replacement Debt or a direct or indirect interest in an
entity that is the obligor with respect to Existing Nonrecourse Debt or
Replacement Debt shall be considered a repayment of such Debt for purposes of
Section 4(a); provided that the foregoing shall not apply with respect to any
foreclosure, bankruptcy or involuntary transfer that satisfies the conditions
set forth in Section 2(d).

                                    ARTICLE 5
                               REMEDIES FOR BREACH

              (a) Monetary Damages. In the event that Vornado OP breaches its
obligations set forth in Article 2, Article 3, Article 4, Article 7, Article 8
or Article 10 with respect to an SCR Unitholder during the Protected Period, the
SCR Unitholder's sole right shall be to receive from Vornado OP, and Vornado OP
shall pay to such SCR Unitholder as damages, an amount equal to the lesser of:

                   (i) the aggregate federal, state and local income taxes
              incurred by the SCR Unitholder as a result of the income or gain
              allocated to, or otherwise recognized by, such SCR Unitholder with
              respect to its Protected Units by reason of such breach, or

                   (ii) in the case of a violation of Article 2, the aggregate
              federal state, and local income taxes that would have been payable
              by such SCR Unitholder (or its predecessor in interest) if the
              relevant Protected Property has been sold on the SCR Merger
              Closing Date for its 704(c) Value (computed based upon tax rates
              in effect for the period during which the event giving rise to the
              computation hereunder has occurred), reduced to reflect:

                        (A) reductions prior to such disposition in the
                   "book-tax disparity" with respect to such Protected Property
                   (but only if and to the extent that such reduction is matched
                   dollar for

                   dollar by a reduction in the gain allocable to the SCR
                   Unitholder by reason of such sale or other disposition
                   pursuant to Section 704(c) of the Code, determined for this
                   purpose taking into account any required "curative
                   allocation" that would result pursuant to the penultimate
                   sentence of Section 7(d)), and

                        (B) with respect to a SCR Unitholder who acquired
                   Protected Units subsequent to the SCR Merger Closing Date,
                   the reduction in gain that results from such holder's having
                   a special inside basis under Section 743 of the Code in the
                   relevant Protected Property (by treating the special inside
                   basis as the basis for determining gain on the deemed sale
                   described in clause (ii)),

         plus in the case of either (i) or (ii), an amount equal to the
aggregate federal, state, and local income taxes payable by the SCR Unitholder
as a result of the receipt of any payment required under this Section 5(a).

         For purposes of computing the amount of federal, state, and local
income taxes required to be paid by an SCR Unitholder, (i) any deduction
actually allowed in computing federal income taxes for state income taxes
payable as a result thereof shall be taken into account, and (ii) an SCR
Unitholder's tax liability shall be computed using the highest federal, state
and local marginal income tax rates that would be applicable to such SCR
Unitholder's taxable income (taking into account the character of such income or
gain) for the year with respect to which the taxes must be paid, without regard
to any deductions, losses or credits that may be available to such SCR
Unitholder that would reduce or offset its actual taxable income or actual tax
liability if such deductions, losses or credits could be utilized by the SCR
Unitholder to offset other income, gain or taxes of the SCR Unitholder, either
in the current year, in earlier years, or in later years). In the event that an
SCR Unitholder shall acquire any additional Vornado OP Units subsequent to the
Merger by reason of a contribution of additional money or property to Vornado
OP, the income and gain that shall be taken into account for purposes of
computing the damages payable under this Section 5(a) would not exceed the gain
that such SCR Unitholder would have recognized by reason of Vornado OP's breach
of its obligation set forth in Article 2, Article 3, Article 4, Article 7,
Article 8 or Article 10, as applicable, had such SCR Unitholder not acquired
such additional Vornado OP Units.

         (b) Limitation on Remedies; Process for Determining Damages.
Notwithstanding any provision of this Agreement, the sole and exclusive rights
and remedies of any SCR Unitholder for a breach or violation of the covenants
set forth in Article 2, Article 3 or Article 4 shall be a claim for damages
against Vornado OP, computed as set forth in Section 5(a) (and to the extent
applicable, Section 5(e)), and no SCR Unitholder shall be entitled to pursue a
claim for specific performance of the covenants set forth in Article 2, Article
3 and Article 4, or bring a claim against any Person that acquires a Protected
Property from Vornado OP in violation of Article 2 (other than a Successor
Partnership that has agreed in writing to be bound by the terms of this
Agreement or that has otherwise succeeded to all of the assets and all of the
liabilities of Vornado OP, but then only for damages computed as set forth in
Section 5(a)). If Vornado OP has breached or violated any of the covenants set
forth in Article 2, Article 3, Article 4, Article 7, Article 8 or Article 10 (or
an SCR Unitholder asserts that

Vornado OP has breached or violated any of the covenants set forth in Article 2,
Article 3, Article 7, Article 8, or Article 10, Vornado OP and the SCR
Unitholder agree to negotiate in good faith to resolve any disagreements
regarding any such breach or violation and the amount of damages, if any,
payable to such SCR Unitholder under Section 5(a) (and to the extent applicable,
Section 5(e)). If any such disagreement cannot be resolved by Vornado OP and
such SCR Unitholder within sixty (60) days after the receipt of notice from
Vornado OP of such breach and the amount of income to be recognized by reason
thereof, Vornado OP and the SCR Unitholder shall jointly retain a nationally
recognized independent public accounting firm ("an Accounting Firm") to act as
an arbitrator to resolve as expeditiously as possible all points of any such
disagreement (including, without limitation, whether a breach of any of the
covenants set forth Article 2, Article 3, Article 4, Article 7, Article 8, or
Article 10 has occurred and, if so, the amount of damages to which the SCR
Unitholder is entitled as a result thereof, determined as set forth in Section
5(a) (and to the extent applicable, Section 5(e))). All determinations made by
the Accounting Firm with respect to the resolution of any breach or violation of
any of the covenants set forth in Article 2, Article 3, Article 4, Article 7,
Article 8, or Article 10 and the amount of damages payable to the SCR Unitholder
under Section 5(a) (and to the extent applicable, Section 5(e)) shall be final,
conclusive and binding on Vornado OP and the SCR Unitholder. The fees and
expenses of any Accounting Firm incurred in connection with any such
determination shall be shared equally by Vornado OP and the SCR Unitholder,
provided that if the amount determined by the Accounting Firm to be owed by
Vornado OP to the SCR Unitholder is more than ten percent (10%) higher than the
amount proposed by Vornado OP to be owed to such SCR Unitholder prior to the
submission of the matter to the Accounting Firm, then all of the fees and
expenses of any Accounting Firm incurred in connection with any such
determination shall be paid by Vornado OP.

         (c) Damages for Flow-Through Entities. For purposes of this Article 5,
if any SCR Unitholder is, for federal income tax purposes, a partnership, an S
corporation, "real estate investment trust" or a trust, then all computations of
amounts of taxes required to be paid by the SCR Unitholder and the payments due
from Vornado OP as a result thereof shall be made by computing the taxes
required to be paid by the partners, shareholders or beneficiaries of such
partnership, S corporation, "real estate investment trust" or trust (or to the
extent that any partner, shareholder or beneficiary of such partnership S
corporation or trust is itself a partnership, S corporation or trust, the same
principles shall apply in determining the taxes required to be paid by such
partner, shareholder or beneficiary).

         (d) Required Notices; Time for Payment. In the event that there has
been a breach of Article 2, Article 3, Article 4, Article 7, or Article 8,
Vornado OP shall provide to the SCR Unitholder notice of the transaction or
event giving rise to such breach not later than at such time as Vornado OP
provides to the SCR Unitholders the Schedule K-1's to Vornado OP's federal
income tax return as required in accordance with Section 10(d) below. All
payments required under this Article 5 to any SCR Unitholder shall be made to
such SCR Unitholder not later than thirty (30) days after receipt by Vornado OP
of a written claim from such SCR Unitholder therefor, unless Vornado OP
disagrees with the computation of the amount required to be paid in respect of
such breach, in which event the procedures in Section 5(b) shall apply and the
payment shall be due within thirty (30) days after the earlier of a
determination by the Accounting Firm

or an agreement between Vornado OP and the SCR Unitholder as to the amount
required to be paid, with interest accruing on the aggregate amount required to
be paid from the date that is thirty (30) days after receipt by Vornado OP of a
claim from such SCR Unitholder to the date of actual payment at a rate equal to
the "prime rate" of interest, as published in the Wall Street Journal (or if no
longer published there, as announced by Citibank) effective as of the date the
payment is required to be made.

         (e) Additional Damages for Breaches of Section 2(b)(5), Section 3(c)
and/or Section 3(e). Notwithstanding any of the foregoing in this Article 5, in
the event that Vornado OP should breach any of its covenants set forth in
Section 2(b)(5), Section 3(c) and/or Sections 3(e)(i), (ii) and/or (iv) and an
SCR Unitholder is required to make a payment in respect of such indebtedness
that it would not have had to make if such breach had not occurred (an "Excess
Payment"), then, in addition to the damages provided for in the other Sections
of this Article 5, Vornado OP shall pay to such SCR Unitholder an amount equal
to the sum of (i) the Excess Payment plus (ii) the aggregate federal, state and
local income taxes, if any, computed or set forth in Section 5(a), required to
be paid by such SCR Unitholder by reason of Section 5(e) becoming operative (for
example, because the breach by Vornado OP and this Section 5(e) caused all or
any portion of the indebtedness in question no longer to be considered debt
includible in basis by the affected SCR Unitholder pursuant to Treasury
Regulations ss. 1.752-2(a)), plus (iii) an amount equal to the aggregate
federal, state and local income taxes required to be paid by the SCR Unitholder
(computed as set forth in Section 5(a)) as a result of any payment required
under this Section 5(e).

                                    ARTICLE 6
              ADDITIONAL OPPORTUNITY FOR SCR PARTNERS TO ENTER INTO
                 DEFICIT RESTORATION OBLIGATIONS AND GUARANTEES

         Without limiting any of the obligations of Vornado OP under this
Agreement, Vornado OP shall consider in good faith a request by an SCR
Unitholder to enter into an agreement with Vornado OP to bear the economic risk
of loss as to a portion of Vornado OP's recourse indebtedness by undertaking an
obligation to restore a portion of its negative capital account balance upon
liquidation of such SCR Unitholder's interest in Vornado OP and/or to bear
financial liability under a Guarantee Agreement substantially in the form of
Schedule 7 hereto for indebtedness that would be considered Qualifying Guarantee
Indebtedness under Section 3(b) hereof, if such SCR Unitholder shall provide
information from its professional tax advisor satisfactory to Vornado OP showing
that, in the absence of such agreement, such SCR Unitholder likely would not be
allocated from Vornado OP sufficient indebtedness under Section 752 of the Code
and the at-risk provisions under Section 465 of the Code to avoid the
recognition of gain (other than gain required to be recognized by reason of
actual cash distributions from Vornado OP). Vornado OP and its professional tax
advisors shall cooperate in good faith with such SCR Unitholder and its
professional tax advisors to provide such information regarding the allocation
of Vornado OP liabilities and the nature of such liabilities as is reasonably
necessary in order to determine the SCR Unitholder's adjusted tax basis in its
Units and at-risk amount. In deciding whether or not to grant such a request,
Vornado OP shall be entitled to take into account all factors related to Vornado
OP, including, without limitation, the existing and anticipated debt structure
of Vornado OP, the tax situations of all other partners in Vornado OP, including
Vornado REIT (individually and as a group), and the effect that granting such a
request might have on their tax situation, the restrictions set forth in Article
3, and the anticipated long-term business needs of Vornado OP. Vornado OP's only
obligation with respect to any such request from an SCR Unitholder pursuant to
this Article 6 shall be to act in good faith, as determined in Vornado's sole
discretion. If Vornado OP permits an SCR Unitholder to enter into an agreement
under this Article 6, Vornado OP shall be under no further obligation with
respect thereto, and Vornado OP shall not be required to indemnify such SCR
Unitholder for any damage incurred, in connection with or as a result of such
agreement or the indebtedness, including without limitation a refinancing or
prepayment thereof.

                                    ARTICLE 7
                      SECTION 704(C) METHOD AND ALLOCATIONS

         (a) Application of "Traditional Method." Notwithstanding any provision
of the Vornado OP Partnership Agreement, Vornado OP shall use the "traditional
method" under Regulations ss. 1.704-3(b) for purposes of making all allocations
under Section 704(c) of the Code (with no "curative allocations" to offset the
effect of a "Ceiling Rule Disparity," as described in Section 7(b) below, except
as set forth in Sections 7(c) and 7(d) below) with respect to (i) each of the
assets acquired by Vornado OP from SCR in the Merger (including, without
limitation, all assets owned by SCR or any direct or indirect Subsidiary of SCR
that is treated either as a partnership or as a disregarded entity for federal
income tax purposes), except to the extent that Vornado OP expressly would be
required to use a different method under an SCR Tax Protection Agreement assumed
by Vornado OP pursuant to the Merger Agreement and the affected SCR Partner has
not executed an agreement to waive its right to such different method following
the Merger. The 704(c) Values of the Protected Properties shall be as determined
by agreement between SCR and Vornado OP prior to the effective time of the
Merger, or in the absence of such agreement, as determined by Vornado REIT, in
its capacity as general partner of Vornado OP, in good faith for purposes of
preparing the financial statements of Vornado and Vornado OP reflecting the
results of the Merger so long as the outside accountants of Vornado and Vornado
OP have approved such financial statements as being in accordance with general
accepted accounting procedures. 4/

         (b) "Ceiling Rule Disparities." For purposes of Section 7(a), Section
7(c) and Section 7(d), the term "Ceiling Rule Disparity" shall mean, with
respect to each Protected Property for each Fiscal Year, the excess, if any, of
(i) the amount of Depreciation with respect to such asset allocated to the
"non-contributing partners" (that is, the holders of Units who are not subject
to Section 704(c) of the Code and Treasury Regulations ss. 1.704-3 with respect
to such asset), over (ii) the actual amount of depreciation deductions with
respect to such asset allocated to the "non-contributing partners" for federal
income tax purposes for such Fiscal Year. It is agreed that Vornado OP and any
partners in Vornado OP other than the SCR Unitholders shall be treated as
"non-contributing partners" for this purpose. The term "Cumulative Net Ceiling
Rule Disparity" with respect to a Protected Property, as that term is used in
Section 7(d), means the sum of the Ceiling Rule Disparities for such Protected
Property for all Fiscal Years through the date of determination, reduced by all
Curative Allocations considered attributable to such Protected Property for
prior Fiscal Years, determined as set forth in Section 7(d) below.

         (c) Annual Curative Allocations. In order to offset the effect of
Ceiling Rule Disparities, Vornado OP shall make the Curative Allocation with
respect to each Non-Rock Spring Protected Unit each Fiscal Year, provided that
no Curative Allocation

- --------------------
(4)     SCR and Vornado OP agree to negotiate in good faith to agree upon these
amounts prior to the closing of the Merger.

shall be made with respect to any Non-Rock Spring Protected Units acquired by
Vornado OP or Vornado REIT from SRC Unitholders as a result of the exercise of
their redemption right under Section 8.6 of the Vornado Partnership Agreement),
with respect to any Fiscal Year (or portion thereof) following such acquisition.

         (d) Additional Curative Allocations Upon Disposition. The Ceiling Rule
Disparity, as described in Section 7(b), with respect to each Protected Property
(other than the Democracy I property) shall be reduced by the amount of the
Curative Allocation that is considered attributable to that Protected Property.
For this purpose, the Curative Allocation for each Fiscal Year shall be
considered allocable among the Protected Properties (other than the Democracy I
property) based upon ratio of the Ceiling Rule Disparity for each Protected
Property (other than the Democracy I property) for the Fiscal Year in question
to the aggregate Ceiling Rule Disparity for all of the Protected Properties
(other than the Democracy I property) for such Fiscal Year, provided that if the
Curative Allocation for a particular Fiscal Year exceeds the aggregate Ceiling
Rule Disparity for all of the Protected Properties (other than the Democracy I
property) for the Fiscal Year in question, the excess amount of the Curative
Allocation shall be allocated to reduce the Cumulative Net Ceiling Rule
Disparities with respect to prior years for each of the Protected Properties
(other than the Democracy I property) (based upon the relative amounts of such
Cumulative Net Ceiling Rule Disparities for all Protected Properties). To the
extent that the cumulative Curative Allocations provided for herein are not
sufficient to eliminate the effect of the Cumulative Net Ceiling Rule Disparity
with respect to a particular Protected Property, Vornado OP shall make an
additional "curative allocation" upon a disposition of that particular Protected
Property (including the Democracy I property) to offset the remaining balance,
if any, of the remaining Cumulative Net Ceiling Rule Disparity with respect to
that particular Protected Property, with such "curative allocation" to be
comprised of income and gain of such character (e.g., ordinary income, long-term
capital gain, and "unrecaptured Section 1250 gain") as the character of the
income and recognized by Vornado OP in connection with such disposition, in the
same proportion as the aggregate amounts thereof recognized by Vornado OP. For
example, if fifty percent of the gain recognized by Vornado OP is "unrecaptured
Section 1250 gain" and fifty percent is long-term capital gain, then 50% of the
curative allocation would be comprised of "unrecaptured Section 1250 gain" and
fifty percent would be comprised of long-term capital gain.

         (e) 1750 Pennsylvania Avenue. In the event that (i) any SCR Unitholder
who holds Protected Units that were issued in the Merger with respect to SCR
Units that previously were issued by SCR in connection with the acquisition by
SCR of Penn Associates L.P. (which Protected Units are referred to as "1750 Penn
Units") should successfully assert that Vornado OP is required to use the
"remedial method" under Treasury Regulation ss. 1.704-3(d) with respect to the
1750 Pennsylvania Avenue property and (ii) the cumulative "remedial allocations"
of income for any Fiscal Year and all prior Fiscal Years subsequent to the SCR
Merger Closing Date with respect to the 1750 Penn Units, on a per unit basis, is
less than the cumulative Curative Allocations for such period with respect to
the 1750 Penn Units, on a per unit basis (a "Curative Allocation Shortfall"),
then an amount of income equal to the aggregate Curative Allocation Shortfall
for all then outstanding 1750 Penn Units shall be specially allocated to the
holders of the then outstanding Non-Rock Spring Protected Units (excluding any
1750 Penn Units), with

an equal amount of the aggregate Curative Allocation Shortfall being allocated
to each such then outstanding Non-Rock Spring Unit that is not a 1750 Penn Unit.
The principles underlying the procedures set forth in Section 10(c) shall apply
in the event that any holder of 1750 Penn Units should make an assertion that,
if successful, would cause this Section 7(e) to apply.

                                    ARTICLE 8
      ALLOCATIONS OF LIABILITIES PURSUANT TO REGULATIONS UNDER SECTION 752

         (a) Allocation Methods to be Followed. All tax returns prepared by
Vornado OP during the Protected Period that allocate liabilities of Vornado OP
for purposes of Section 752 and the Treasury Regulations thereunder shall treat
each SCR Partner Guarantor as being allocated for federal income tax purposes an
amount of recourse debt (in addition to any nonrecourse debt otherwise allocable
to such SCR Partner Guarantor in accordance with the Vornado OP Partnership
Agreement, Treasury Regulations ss. 1.752-3, and this Agreement) pursuant to
Treasury Regulation ss. 1.752-2 equal to such SCR Partner Guarantor's Scheduled
Guarantee Amount, as set forth on Schedule 9 hereto, and Vornado OP and Vornado
REIT shall not, during or with respect to the Protected Period, take any
contrary or inconsistent position in any federal or state income tax returns
(including, without limitation, information returns, such as Forms K-1, provided
to partners in Vornado OP and returns of Subsidiaries of Vornado OP) or any
dealings involving the Internal Revenue Service (including, without limitation,
any audit, administrative appeal or any judicial proceeding involving the income
tax returns of Vornado OP or the tax treatment of any holder of partnership
interests of Vornado OP).

         (b) Exception to Required Allocation Method. Notwithstanding the
provisions of this Tax Reporting and Protection Agreement, Vornado OP shall not
be required to make allocations of Guaranteed Debt to the SCR Unitholders as set
forth in this Agreement if and to the extent that Vornado OP determines in good
faith that there may not be "substantial authority" (within the meaning of
Section 6662(d)(2)(B)(i)) of the Code for such allocation; provided that Vornado
OP shall provide to Mr. Robert H. Smith and Mr. Robert P. Kogod (or in the event
of their death or disability, their executor, guardian or custodian, as
applicable), notice of such determination and if, within forty five (45) days
after the receipt thereof, Vornado OP is provided an opinion of Hogan & Hartson
LLP or Arthur Andersen LLP (or another comparable firm of attorneys or
accountants) to the effect that there is "substantial authority" (within the
meaning of Section 6662(d)(2)(B)(i) of the Code) for such allocations, Vornado
OP shall continue to make allocations of Guaranteed Debt to the SCR Unitholders
as set forth in this Agreement; provided further that if there shall have been a
judicial determination in a proceeding to which Vornado OP is a party and as to
which the SCR GP has been allowed to participate as and to the extent
contemplated in Section 10 to the effect that such allocations are not correct,
Section 8(a) shall not apply unless the matter is being appealed to an
applicable court of appeals, the requirements of Sections 10(c)(i) and
10(c)(iii) shall have been satisfied in connection therewith, and the opinion
described above from counsel or accountants engaged by Messrs. Smith and Kogod
shall have been provided, except that such opinion shall be to the effect that
it is more likely than not that such allocations will be respected. In no event
shall this Section 8(b) be construed to relieve Vornado OP for liability arising
from a failure by Vornado OP to comply with one or more of the provisions of
Article 3 of this Agreement.

         (c) Cooperation in the Event of a Change. If a change in Vornado OP's
allocations of Guaranteed Debt to the SCR Unitholders is required by reason of
circumstances described in the Section 8(b), Vornado OP and its professional tax
advisors shall cooperate in good faith with Messrs. Robert H. Smith and Robert
P. Kogod (or in the event of their death or disability, their executor, guardian
or custodian, as applicable) and their professional tax advisors to develop
alternative allocation arrangements and/or other mechanisms that protect the
federal income tax positions of the SCR Unitholders in the manner contemplated
by the allocations of Guaranteed Debt to the SCR Unitholders as set forth in
this Agreement.

                                    ARTICLE 9
                      OTHER AGREEMENTS WITH SCR UNITHOLDERS

         Pursuant to the Merger Agreement, Vornado, Vornado OP, SCR GP, and SCR
Partnership shall enter into an Assignment and Assumption Agreement, dated as of
[the date of closing], pursuant to which Vornado OP shall assume all obligations
of SCR GP and SCR pursuant to certain tax protection agreements (the "SCR Tax
Protection Agreements"). A list of the SCR Tax Protection Agreements is set
forth on Schedule 5 hereto.

                                   ARTICLE 10
                  TAX TREATMENT AND REPORTING; TAX PROCEEDINGS

         (a) Tax Treatment of Merger. Each of the parties hereto shall treat the
Merger for federal income tax purposes as a contribution by SCR of all of its
assets to Vornado OP in exchange for Vornado OP Units under Section 721 of the
Code, with those Vornado OP Units distributed by SCR to the SCR Unitholders in
accordance with their respective interests in SCR in liquidation of SCR, in a
transaction in which no gain is recognized by any of the SCR Unitholders under
any of Section 721, Section 707, Section 731, Section 737, or any other
provision of the Code. Each of the parties agrees (i) to treat the Merger,
pursuant to Treasury Regulation ss. 1.708-1(c)(3), as an "assets over" form of
merger, with the consequences set forth in Treasury Regulation ss.
1.708-1(c)(3)(i) and (ii) that, in addition, if and to the extent that any
transaction entered into pursuant to the Merger Agreement or otherwise deemed
undertaken in connection with the transactions contemplated by the Merger
Agreement is treated for federal income tax purposes as a direct or indirect
transfer of cash from Vornado OP to a holder of SCR Units that would be
characterized as a sale for federal income tax purposes (including, without
limitation, purchases of SCR Units pursuant to Section 4.7(a) of the Merger
Agreement and payments to holders of SCR options pursuant to Section 1.10 of the
Merger Agreement), pursuant to Treasury Regulation ss. 1.708-1(c)(4) such sale
shall be treated as a sale of such SCR Units by the former holder of SCR Units
receiving (or deemed to receive) such cash directly to Vornado OP and as a
direct purchase by Vornado OP of such SCR Units from such former holder of SCR
Units immediately prior to the Merger (and not as a transfer of cash from
Vornado OP to SCR as part of the Merger). The parties agree and acknowledge (and
will not take any position inconsistent therewith) that no consideration
(whether actual consideration or deemed consideration under Section 707(a) of
the Code or otherwise) other than Vornado OP Units has been or will be given by
Vornado OP or Vornado REIT to the SCR or the SCR Unitholders in

connection with the Merger (other than cash paid by SCR directly to certain
holders of partnership interests in SCR who agreed to sell such partnership
interests back to SCR prior to the closing of the Merger). Without limiting the
foregoing, the parties agree to treat all liabilities of SCR and its
Subsidiaries as "qualified liabilities" within the meaning of Treasury
Regulation ss. 1.707-5a)(6). SCR represents to Vornado OP and Vornado REIT for
this purpose that, to the best of its knowledge, all liabilities of SCR and its
Subsidiaries outstanding at the time of the Merger constitute "qualified
liabilities" within the meaning of Treasury Regulation ss. 1.707-5a)(6). Vornado
OP and Vornado REIT shall not, at any time during or with respect to the
Protected Period, take any contrary or inconsistent position in any federal or
state income tax returns (including, without limitation, information returns,
such as Forms K-1, provided to partners in Vornado OP and returns of
Subsidiaries of Vornado OP) or any dealings involving the Internal Revenue
Service (including, without limitation, any audit, administrative appeal or any
judicial proceeding involving the income tax returns of Vornado OP or the tax
treatment of any holder of partnership interests Vornado OP), except as
permitted pursuant to Section 10(c) below.

         (b) Notice of Tax Audits. If any claim, demand, assessment (including a
notice of proposed assessment) or other assertion is made with respect to Taxes
against SCR or Vornado OP the calculation of which involves a matter covered in
this Agreement ("Tax Claim") or if Vornado REIT, Vornado OP or SCR receives any
notice from any jurisdiction with respect to any current or future audit,
examination, investigation or other proceeding ("Proceeding") involving SCR or
Vornado OP or that otherwise could involve a matter covered in this Agreement
and could directly or indirectly affect the SCR Unitholders (adversely or
otherwise), then Vornado REIT, Vornado OP or SCR, as applicable shall promptly
notify SCR GP, as representative of the SCR Unitholders of such Tax Claim or Tax
Proceeding.

         (c) Control of Tax Proceedings. Vornado REIT, as the general partner of
Vornado OP shall have the right to control the defense, settlement or compromise
of any Proceeding or Tax Claim; provided, however, that Vornado REIT shall not
consent to the entry of any judgment or enter into any settlement with respect
to such Tax Claim or Tax Proceeding without the prior written consent of SCR GP,
as representative of the SCR Unitholders (unless, and only to the extent, that
any Taxes required to be paid by the SCR Unitholders who are Protected
Unitholders as a result thereof would be required to be reimbursed by Vornado OP
and Vornado REIT under Article 5 and Vornado OP and Vornado REIT agree in
connection with such settlement or consent, to make such required payments);
provided further that Vornado OP shall keep SCR GP duly informed of the progress
thereof to the extent that such Proceeding or Tax Claim could directly or
indirectly affect (adversely or otherwise) the SCR Unitholders and that SCR GP
shall have the right to review and comment on any and all submissions made to
the to Internal Revenue Service ("IRS"), a court, or other governmental body
with respect to such Tax Claim or Tax Proceeding and that Vornado OP will
consider such comments in good faith. As a condition to withholding its consent
to a settlement pursuant to the preceding sentence, the SCR GP (i) must have a
reasonable basis to believe that such settlement would have a material adverse
impact on one or more SCR Unitholders with respect to a matter covered by this
Agreement and that such impact would be different from the impact that would
result for other holders of Vornado OP Units who are not SCR Unitholders (which
the SCR GP, upon request from Vornado OP, shall describe in

reasonable detail in writing), (ii) the SCR GP must believe, based upon the
advice of Hogan & Hartson L.L.P. or Arthur Andersen LLP (or another comparable
firm of attorneys or accountants), that it is more likely than not that the
position asserted by the SCR GP would prevail if it were to be asserted in a
judicial proceeding (and upon request of Vornado OP, the SCR GP shall provide to
Vornado OP a letter from such counsel or accountants confirming such advice),
and (iii) the SCR GP shall offer to assume the subsequent costs of defending and
asserting the position asserted by the SCR GP (but not any other costs
associated with such proceeding or any other issues involved therein); provided
that the foregoing shall not apply with respect to, or otherwise restrict or
limit or restrict in any matter, the exercise by the SCR GP or any of the SCR
Unitholders of any rights or privileges provided for in Sections 6221-6234 of
the Code and the Treasury Regulations thereunder or in the Vornado OP
Partnership Agreement in connection with any examination of federal or state
income tax matters related to SCR or Vornado OP.

         (d) Timing of Tax Returns; Periodic Tax Information. Vornado OP shall
cause to be delivered to the SCR Unitholders, no later than July 15 of each year
(beginning in 2003), the Forms K-1 that Vornado OP is required to deliver to
such SCR Unitholders with respect to the prior taxable year. In the case of the
Forms K-1 relating to taxable year 2001 of SCR, Vornado shall engage Arthur
Andersen and cause Arthur Andersen to prepare such Forms K-1 to be delivered to
the SCR Unitholders no later than March 31, 2002. In addition, Vornado OP agrees
to provide to Messrs. Robert Smith and Robert Kogod, upon request, an estimate
of the taxable income expected to be allocable for a specified taxable year from
Vornado OP to the Smith and Kogod families and the entities that they control,
provided that such estimates shall not be required to be provided more
frequently than once each calendar quarter.

                                   ARTICLE 11
                           AMENDMENT OF THIS AGREEMENT

         This Agreement may not be amended, directly or indirectly (including by
reason of a merger between Vornado OP and another entity) except by a written
instrument signed by Vornado, as general partner of Vornado OP, and approved by
(i) the SCR Partners holding seventy-six percent (76%) of the then outstanding
Protected Units and (ii) if any of Robert H. Smith, Robert P. Kogod, Clarice
Smith or Arlene Kogod is then living, the consent of each such person then
living; provided, however, that any amendment that would permit a sale of a
Protected Property or other action in violation of Article 2 or the refinancing
of debt or any other action with respect to debt in violation of Article 3 or
Article 4, shall not be permitted without the written approval of holders of
seventy-six percent (76%) of the then outstanding Protected Units held by SCR
Partners that would be adversely affected by such actions.

                                   ARTICLE 12
                          EARLY TERMINATION OF EXTENDED
                              TAX PROTECTED PERIOD

         The Extended Tax Protected Period shall terminate prior to the
expiration thereof at 12:01 AM on January 1, 2022 (or if earlier, upon the date
of death of the last to survive of Robert H. Smith, Clarice R. Smith, Robert P.
Kogod, or Arlene R. Kogod) as follows:

              (i) the Extended Tax Protected Period as to any SCR Unitholder
         shall terminate only as to that SCR Unitholder upon a Transfer (as
         defined in the Lock-up Agreement) of Vornado Securities (as defined in
         the Lock-up Agreement) originally issued to such SCR Unitholder in the
         Merger in violation of the Lock-up Agreement applicable to such SCR
         Unitholder; and

              (ii) the Extended Tax Protected Period shall terminate as to all
         SCR Unitholders that have entered into Lock-up Agreements in connection
         with the closing of the Merger (to the extent not earlier terminated
         pursuant to clause (i) hereof) upon a Transfer by a member of the Smith
         Family or the Kogod Family or any of their Permitted Transferees (as
         such terms are defined in the Merger Agreement) as a result of which
         the Smith Family, the Kogod Family, and their Permitted Transferees no
         longer Beneficially Own, after giving effect to such Transfer, at least
         (x) 50% of the original aggregate number of VNOP Units (or Vornado
         Common Shares issued in redemption thereof) issued to members of the
         Smith Family and the Kogod Family in the Merger or (ii) 100% of the
         original aggregate value of VNOP Units (or Vornado Common Shares issued
         in redemption thereof) issued to members of the Smith Family and the
         Kogod Family in the Merger (which value of the retained Vornado
         Securities shall be measured only at the time of the applicable
         Transfer based on the closing price of a Vornado Common Share on the
         NYSE after closing of trading on the date immediately preceding the
         date of the applicable Transfer, which value shall be compared to the
         original value of the VNOP Units issued to the undersigned in the
         Merger (based on an assumed price of $41.00 per VNOP Unit)). In
         determining whether a Transfer described in this paragraph (ii) has
         occurred, the two provisos in Section 2(a)(iii) of the Lock-up
         Agreement and the provisions of Sections 2(b), (c), (d), and (e) of the
         Lock-up Agreement shall be applied. Except as otherwise indicated,
         capitalized terms used in this subparagraph (ii) that are not otherwise
         defined in this Agreement shall have the meanings ascribed to them in
         the Lock-Up Agreement.

If Vornado OP believes an SCR Unitholder or, if applicable, a Permitted
Transferee of such SCR Unitholder has made a Transfer (as defined in the Lock-up
Agreement) in violation of the applicable Lock-Up Agreement that has resulted in
a termination of the Extended Tax Protected Period under clause (i) or (ii),
Vornado will notify such SCR Unitholder of such determination and the SCR
Unitholder shall have the opportunity to contest such determination (and no
Extended Tax Protected Period shall terminate as a result thereof unless and
until such contest is resolved and such resolution results in a determination
that a Transfer (as defined in the Lock-up Agreement) in violation of the
applicable Lock-Up Agreement in fact occurred. Vornado shall promptly provide
all SCR Unitholders who have the benefit of an Extended Tax Protected Period
notice in the event of a termination of the Extended Tax Protected Period under
clause (ii).

                                   ARTICLE 13
                                  MISCELLANEOUS

         (a) Additional Actions and Documents. Each of the parties hereto hereby
agrees to take or cause to be taken such further actions, to execute, deliver,
and file or cause to be executed, delivered and filed such further documents,
and will obtain such consents, as may be necessary or as may be reasonably
requested in order to fully effectuate the purposes, terms and conditions of
this Agreement.

         (b) Assignment. No party hereto shall assign its or his rights or
obligations under this Agreement, in whole or in part, except by operation of
law, without the prior written consent of the other parties hereto, and any such
assignment contrary to the terms hereof shall be null and void and of no force
and effect.

         (c) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Protected Unitholders (through SCR GP, as
representative of the SCR Unitholders) and their respective successors and
permitted assigns, whether so expressed or not. This Agreement shall be binding
upon Vornado REIT, Vornado OP, and any entity that is a direct or indirect
successor, whether by merger, transfer, spin-off or otherwise, to all or
substantially all of the assets of either Vornado REIT or Vornado OP (or any
prior successor thereto as set forth in the preceding portion of this sentence),
provided that none of the foregoing shall result in the release of liability of
Vornado REIT and Vornado OP hereunder. Vornado REIT and Vornado OP covenant with
and for the benefit of the SCR Unitholders not to undertake any transfer of all
or substantially all of the assets of either entity (whether by merger,
transfer, spin-off or otherwise) unless the transferee has in writing
acknowledged and agreed to be bound by this Agreement, provided that the
foregoing shall not be deemed to permit any transaction otherwise prohibited by
this Agreement.

         (d) Modification; Waiver. No failure or delay on the part of any party
hereto in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties hereunder are cumulative
and not exclusive of any rights or remedies which they would otherwise have. No
modification or waiver of any provision of this Agreement, nor consent to any
departure by any party therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances.

         (e) Representations and Warranties Regarding Authority;
Noncontravention.

              (i) Representations and Warranties of Vornado REIT and Vornado OP.
         Each of Vornado REIT and Vornado OP has the requisite corporate or
         other (as the case may be) power and authority to enter into

         this Agreement and to perform its respective obligations hereunder. The
         execution and delivery of this Agreement by each of Vornado REIT and
         Vornado OP and the performance of each of its respective obligations
         hereunder have been duly authorized by all necessary trust,
         partnership, or other (as the case may be) action on the part of each
         of Vornado REIT and Vornado OP. This Agreement has been duly executed
         and delivered by each of Vornado REIT and Vornado OP and constitutes a
         valid and binding obligation of each of Vornado REIT and Vornado OP,
         enforceable against each of Vornado REIT and Vornado OP in accordance
         with its terms, notwithstanding Sections 7.1.E, 7.8.B, 10.1, 10.2, and
         10.3 of the Partnership Agreement, except as such enforcement may be
         limited by (i) applicable bankruptcy or insolvency laws (or other laws
         affecting creditors' rights generally) or (ii) general principles of
         equity. The execution and delivery of this Agreement by each of Vornado
         REIT and Vornado OP do not, and the performance by each of its
         respective obligations hereunder will not, conflict with, or result in
         any violation of (i) the Vornado OP Partnership Agreement or (ii) any
         other agreement applicable to Vornado REIT and/or Vornado OP, other
         than, in the case of clause (ii), any such conflicts or violations that
         would not materially adversely affect the performance by Vornado OP and
         Vornado REIT of their obligations hereunder.

              (ii) Representations and Warranties of SCR and SCR GP. Each of SCR
         and SCR GP has the requisite corporate or other (as the case may be)
         power and authority to enter into this Agreement and to perform its
         respective obligations hereunder. The execution and delivery of this
         Agreement by each of SCR and SCR GP and the performance of each of its
         respective obligations hereunder have been duly authorized by all
         necessary trust, partnership, or other (as the case may be) action on
         the part of each of SCR and SCR GP. This Agreement has been duly
         executed and delivered by each of SCR and SCR GP and constitutes a
         valid and binding obligation of each of SCR and SCR GP, enforceable
         against each of SCR and SCR GP in accordance with its terms, except as
         such enforcement may be limited by (i) applicable bankruptcy or
         insolvency laws (or other laws affecting creditors' rights generally)
         or (ii) general principles of equity. The execution and delivery of
         this Agreement by each of SCR and SCR GP do not, and the performance by
         each of its respective obligations hereunder will not, conflict with,
         or result in any violation of (i) the SCR Partnership Agreement or (ii)
         any other agreement applicable to SCR and SCR GP, other than, in the
         case of clause (ii), any such conflicts or violations that would not
         materially adversely affect the performance by SCR and SCR GP of their
         obligations hereunder.

         (f) Captions. The Article and Section headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

         (g) Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:

                (i) if to SCR GP, as representative of the SCR Unitholders, to:

                         Charles E. Smith Commercial Realty, LLC
                         2345 Crystal Drive
                         Crystal City
                         Arlington, Virginia  22202
                         Attention:  Robert H. Smith
                                     Robert P. Kogod
                                     Robert D. Zimet
                         Facsimile:  (703) 769-1305

                  (ii) if to Vornado OP or Vornado REIT, to:

                         Vornado Realty Trust
                         Vornado Realty L.P.
                         888 Seventh Avenue, 44th Floor
                         New York, New York  10019
                         Attention:  Steven Roth
                                     Michael D. Fascitelli
                         Facsimile:  (212) 894-7000

                       and

                         Vornado Realty Trust
                         Vornado Realty L.P.
                         210 Route 4 East
                         Paramus, New Jersey  07652
                         Attention:  Joseph Macnow
                         Facsimile:  (201) 587-1000

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.

         (h) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.

         (i) Governing Law. The interpretation and construction of this
Agreement, and all matters relating thereto, shall be governed by the laws of
the State of Delaware, without regard to the choice of law provisions thereof.

         (j) Consent to Jurisdiction; Enforceability.

              (i) This Agreement and the duties and obligations of the parties
hereunder shall be enforceable against any of the parties in the courts of the
State of Delaware. For such purpose, each party hereto hereby irrevocably
submits to the nonexclusive jurisdiction of such courts and agrees that all
claims in respect of this Agreement may be heard and determined in any of such
courts.

              (ii) Each party hereto hereby irrevocably agrees that a final
judgment of any of the courts specified above in any action or proceeding
relating to this Agreement shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

         (k) Severability. If any part of any provision of this Agreement shall
be invalid or unenforceable in any respect, such part shall be ineffective to
the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Agreement.

         (l) Costs of Disputes. Except as otherwise expressly set forth in this
Agreement, the nonprevailing party in any dispute arising hereunder shall bear
and pay the costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by the prevailing party or parties in
connection with resolving such dispute.

         IN WITNESS WHEREOF, Vornado REIT, Vornado OP, SCR and SCR GP have
caused this Agreement to be signed by their respective officers (or general
partners) thereunto duly authorized all as of the date first written above.

                 VORNADO REALTY TRUST

                 By:     --------------------------------------------
                 Name:   --------------------------------------------
                 Title:  --------------------------------------------

                 VORNADO REALTY L.P.

                 By:  Vornado Realty Trust, its sole general partner

                      By:     --------------------------------------------
                      Name:   --------------------------------------------
                      Title:  --------------------------------------------

                 CHARLES E. SMITH COMMERCIAL REALTY L.P.

                 By:  Charles E. Smith Realty, L.L.C., its sole general partner

                      By:     --------------------------------------------
                      Name:   --------------------------------------------
                      Title:  --------------------------------------------

                 CHARLES E. SMITH REALTY, L.L.C.,
                 for itself and as representative of each holder of
                 partnership interests in Charles E. Smith Commercial Realty
                 L.P. (other than Vornado CESCR LLC and Vornado CESCR II
                 LLC), each of which holder is a third party beneficiary of
                 this Agreement

                      By:     --------------------------------------------
                      Name:   --------------------------------------------
                      Title:  --------------------------------------------

                                                                    Exhibit 10.1

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of January 1, 2002 by and between VORNADO REALTY TRUST, a
Maryland real estate investment trust (the "Company"), and the persons
identified on Schedule A hereto (each a "Holder" and collectively, together with
their respective assigns permitted under Section 6.3 hereof, the "Holders").

         WHEREAS, the Company and Charles E. Smith Commercial Realty L.L.C., a
Delaware limited liability company and the sole general partner of Charles E.
Smith Commercial Realty L.P., a Delaware limited partnership ("SCR"), are
causing an indirect wholly-owned subsidiary of Vornado Realty L.P., a Delaware
limited partnership (the "Partnership") to merge (the "Merger") with and into
SCR and, in connection therewith, the Partnership is issuing 9,518,576 Class A
Units (such units, the "VNOP Units") to the Holders as set forth opposite their
names on Schedule A hereto;

         WHEREAS, pursuant to the terms of Section 8.6 and the other related
provisions of the Second Amended and Restated Agreement of Limited Partnership
of the Partnership (such agreement, as amended from time to time, the
"Partnership Agreement"), commencing on the first anniversary of the date of
issuance, and subject to the various limitations contained in the Partnership
Agreement and other instruments being delivered in connection with the Merger,
the Holders will be entitled to redeem their VNOP Units for cash or, at the
Company's election, common shares of beneficial interest, par value $0.04 per
share, of the Company ("Common Shares");

         WHEREAS, the Company has agreed to grant to the Holders the
Registration Rights (as defined in Section 1 hereof);

         NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
and the mutual covenants and agreements hereinafter set forth, hereby agree as
follows:

SECTION 1. REGISTRATION RIGHTS

         Subject to the various terms and conditions of the Partnership
Agreement and the limitations upon Holders' redemption of VNOP Units set forth
in other instruments being delivered in connection with the Merger, if any
Holder receives Common Shares upon redemption of VNOP Units held by such Holder
("Redemption Shares"), then, unless the Redemption Shares are issued to the
Holder pursuant to an Issuer Registration Statement as provided in Section 2
below, each Holder shall be entitled to offer the Redemption Shares for sale
pursuant to a shelf registration statement,

subject to the terms and conditions set forth in Section 3 hereof (the
"Registration Rights").

SECTION 2. ISSUER REGISTRATION STATEMENT

         Anything contained herein to the contrary notwithstanding, in the event
that the Redemption Shares are issued by the Company to a Holder and included at
the time of issuance in an effective registration statement (an "Issuer
Registration Statement") filed with the Securities and Exchange Commission (the
"Commission"), the Company shall be deemed to have satisfied all of its
registration obligations under this Agreement in respect of such Redemption
Shares.

SECTION 3. DEMAND REGISTRATION RIGHTS

         3.1 (a) Registration Procedure. Unless such Redemption Shares are
included at the time of issuance in an Issuer Registration Statement as provided
in Section 2 above, then subject to Sections 3.1(c) and 3.2 hereof, if any
Holder desires to exercise its Registration Rights with respect to the
Redemption Shares, the Holder shall deliver to the Company a written notice (a
"Registration Notice") informing the Company of such exercise and specifying the
number of shares to be offered by such Holder (such shares to be offered being
referred to herein as the "Registrable Securities"). Such notice may be given at
any time on or after the date a notice of redemption is delivered by the Holder
to the Partnership pursuant to the Partnership Agreement, but must be given at
least sixty (60) days prior to the date on which the Holder desires to
consummate of the sale of Registrable Securities. Upon receipt of the
Registration Notice, the Company, if it has not already caused the Registrable
Securities to be included as part of an existing shelf registration statement
and related prospectus that the Company then has on file with, and has been
declared effective by, the Commission (the "Shelf Registration Statement") (in
which event the Company shall be deemed to have satisfied its registration
obligation under this Section 3), will cause to be filed with the Commission as
soon as reasonably practicable after receiving the Registration Notice a new
registration statement and related prospectus (a "New Registration Statement")
that complies as to form in all material respects with applicable Commission
rules providing for the sale by such Holder of the Registrable Securities, and
agrees (subject to Section 3.2 hereof) to use commercially reasonable efforts to
cause such New Registration Statement to be declared effective by the Commission
as soon as practicable. (As used herein, "Registration Statement" and
"Prospectus" refer to the Shelf Registration Statement and related prospectus
(including any preliminary prospectus) or the New Registration Statement and
related prospectus (including any preliminary prospectus), whichever is utilized
by the Company to satisfy Holder's Registration Rights pursuant to this Section
3, including in each case any documents incorporated therein by reference.)

                                       -2-

         Subject to Section 3.2 hereof, the Company agrees to use commercially
reasonable efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the forty-sixth (46th) day following
commencement of the offering contemplated therein (provided, that the forty-five
(45) day period will be extended one day for each day that the Company suspends
the offering pursuant to its rights in Section 3.2 hereof) or, if sooner, the
date on which Holder consummates the sale of all of the Registrable Securities
registered under the Registration Statement and (ii) the date on which all of
the Registrable Securities are eligible for sale pursuant to Rule 144(k) (or any
successor provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the "Act").
The Company agrees to provide each exercising Holder a reasonable number of
copies of the final Prospectus and any amendments or supplements thereto.
Notwithstanding the foregoing, the Company may at any time, in its sole
discretion and prior to receiving any Registration Notice from any Holder,
include all of any Holder's Redemption Shares or any portion thereof in any
Registration Statement (in which event the Company shall be deemed to have
satisfied its registration obligation under this Section 3.1(a)).

         In connection with any Registration Statement utilized by the Company
to satisfy the Registration Rights pursuant to this Section 3, each Holder
agrees to cooperate with the Company in connection with the preparation of the
Registration Statement, and each Holder agrees that it will (i) respond within
five (5) Business Days to any written request by the Company to provide or
verify information regarding Holder or Holder's Registrable Securities
(including the proposed manner of sale) that may be required to be included in
such Registration Statement pursuant to the rules and regulations of the
Commission, and (ii) provide in a timely manner information regarding the
proposed distribution by such Holder of the Registrable Securities and such
other information as may be requested by the Company from time to time in
connection with the preparation of and for inclusion in the Registration
Statement and related Prospectus. As used in this Agreement, a "Business Day" is
any Monday, Tuesday, Wednesday, Thursday or Friday other than a day on which
banks and other financial institutions are authorized or required to be closed
for business in the State of New York or Maryland.

         (b) Offers and Sales. All offers and sales by a Holder under the
Registration Statement referred to in this Section 3 shall be completed within
the period during which the Registration Statement is required to remain
effective pursuant to Section 3.1(a) above, and upon expiration of such period
no Holder will offer or sell any Registrable Securities under the Registration
Statement. If directed by the Company, each Holder will return all undistributed
copies of the Prospectus in its possession upon the expiration of such period.

                                       -3-

         (c) Limitations on Registration Rights. Each exercise of a Registration
Right shall be with respect to a minimum of the lesser of (i) FIFTY THOUSAND
(50,000) Redemption Shares and (ii) the total number of Redemption Shares held
by the exercising Holder at such time plus the number of Redemption Shares that
may be issued upon redemption of VNOP Units by the exercising Holder. The right
of any Holder to deliver a Registration Notice commences upon the first date the
Holder is permitted to redeem VNOP Units pursuant to the Partnership Agreement
and other instruments being delivered in connection with the Merger. The right
of any Holder to deliver a Registration Notice shall expire on the date on which
all of the Redemption Shares held by the Holder or issuable upon redemption of
Units held by the Holder are eligible for sale pursuant to Rule 144(k) (or any
successor provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Act.

         3.2 Suspension of Offering. Upon any notice by the Company, either
before or after a Holder has delivered a Registration Notice, that a negotiation
or consummation of a transaction by the Company or any of its affiliates is
pending or an event has occurred, which negotiation, consummation or event would
require additional disclosure by the Company in the Registration Statement of
material information which the Company has a bona fide business purpose for
keeping confidential and the non- disclosure of which in the Registration
Statement might cause the Registration Statement to fail to comply with
applicable disclosure requirements (a "Materiality Notice"), each Holder agrees
that it will immediately discontinue offers and sales of the Registrable
Securities under the Registration Statement until the Holder receives copies of
a supplemental or amended Prospectus that corrects the misstatement(s) or
omission(s) referred to above and receives notice that any post-effective
amendment has become effective; provided, that the Company may delay, suspend or
withdraw the Registration Statement for such reason for no more than ninety (90)
days after delivery of the Materiality Notice at any one time. If so directed by
the Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of any
Materiality Notice.

         3.3 Qualification. The Company agrees to use commercially reasonable
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the Commission under
all applicable state securities or "blue sky" laws of such jurisdictions as any
Holder may reasonably request in writing, to keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective pursuant to this Agreement or during the period
offers or sales are being made by Holder after delivery of a Registration Notice
to the Company, whichever is shorter, and to do any and all other similar acts
and things which may be reasonably necessary or advisable to enable Holder to
consummate the disposition of the Registrable Securities owned by Holder in each
such jurisdiction;

                                       -4-

provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction or to register as a broker or
dealer in such jurisdiction where it would not otherwise be required to qualify
but for this Agreement, (ii) take any action that would cause it to become
subject to any taxation in any jurisdiction where it would not otherwise be
subject to such taxation or (iii) take any action that would subject it to the
general service of process in any jurisdiction where it is not now so subject.

         3.4 Obligations of the Company. When the Company is required to effect
the registration of Redemption Shares under the Act pursuant to Section 3.1 of
this Agreement, subject to Section 3.2 hereof, the Company shall:

         (a) prepare and file with the Commission (as soon as reasonably
practicable after receiving the Registration Notice, and in any event within
sixty (60) days after receipt of such Registration Notice) the requisite
Registration Statement to effect such registration, which Registration Statement
shall comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and the Company shall use commercially reasonable efforts
to cause such Registration Statement to become effective; provided, however,
that before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, or comparable statements under securities or "blue sky"
laws of any jurisdiction, the Company shall (i) provide each Holder with an
adequate and appropriate opportunity to participate in the preparation of such
Registration Statement and each Prospectus included therein (and each amendment
or supplement thereto or comparable statement) to be filed with the Commission
and (ii) not file any such Registration Statement or Prospectus (or amendment or
supplement thereto or comparable statement) with the Commission to which any
Holder shall have reasonably objected on the grounds that such filing does not
comply in all material respects with the requirements of the Act or of the rules
or regulations thereunder;

         (b) prepare and file with the Commission such amendments and
supplements as to the Registration Statement and the Prospectus used in
connection therewith as may be necessary (i) to keep such Registration Statement
effective and (ii) to comply with the provisions of the Act with respect to the
disposition of the Redemption Shares covered by such Registration Statement, in
each case for such time as is contemplated in Section 3.1(a) above; provided,
that in any event the period need not extend beyond nine months from the
effective date of the Registration Statement;

         (c) furnish, without charge, to the Holders of the securities covered
by the Registration Statement, such number of copies of the Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits), and the Prospectus included in such Registration Statement (including
each preliminary

                                       -5-

Prospectus) in conformity with the requirements of the Act, and other documents,
as the Holders may reasonably request in order to facilitate the public sale or
other disposition of the Redemption Shares owned by the Holders;

         (d) promptly notify the Holders of securities covered by the
Registration Statement: (i) when the Registration Statement, any pre-effective
amendment, the Prospectus or any prospectus supplement related thereto or
post-effective amendment to the Registration Statement has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any state
securities or blue sky authority for amendments or supplements to the
Registration Statement or the Prospectus related thereto or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation or
threat of any proceedings for that purpose, and (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Redemption Shares for sale under the securities or "blue sky" laws of any
jurisdiction or the initiation of any proceeding for such purpose;

         (e) following receipt of a Registration Notice and thereafter until the
sooner of completion, abandonment or termination of the offering or sale
contemplated thereby and the expiring of the period during which the Company is
required to maintain the effectiveness of the related Registration Statement as
set forth in Section 3.1(a) above, promptly notify the Holders of securities
covered by the Registration Statement: (i) of the existence of any fact of which
the Company is aware or the happening of any event which has resulted in (A) the
Registration Statement, as then in effect, containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make any statements therein not misleading or (B) the Prospectus
included in such Registration Statement containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make any statements therein, in the light of the circumstances
under which they were made, not misleading and (ii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate or that there exist circumstances not yet disclosed to the public
which make further sales under such Registration Statement inadvisable pending
such disclosure and post-effective amendment; and, if the notification relates
to any event described in either of the clauses (i) or (ii) of this Section
3.4(e), subject to Section 3.2 above, at the request of the Holders, the Company
shall prepare and furnish to the Holders of securities covered by the
Registration Statement, a reasonable number of copies of a supplement or
post-effective amendment to such Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that (1) such Registration Statement shall not contain any untrue
statement of a material fact or omit to

                                       -6-

state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (2) as thereafter delivered to the
purchasers of the Redemption Shares being sold thereunder, such Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;

         (f) make available for reasonable inspection by the Holders and any
attorney, accountant or other agent retained by any Holder, material financial
and other relevant information concerning the business and operations of the
Company and the properties of the Company and any subsidiaries thereof as may be
in existence at such time as shall be necessary to enable them to conduct a
reasonable investigation within the meaning of the Act, and cause the Company's
officers, directors and employees to supply such relevant information as may be
reasonably requested by any such parties in connection with such Registration
Statement; provided, however, that, if the Holders or any of their advisors or
agents request any information that the Company determines to be confidential or
non-public, the Company shall be entitled to condition access to that
information upon the Holders and each other recipient of such information having
entered into a confidentiality agreement with the Company in form and substance
satisfactory to the Company acting reasonably, pursuant to which each such
recipient agrees to maintain that information as confidential and use it solely
for the purposes of exercising rights under this Agreement, and provided
further, that the Company shall not be required to disclose any information
subject to the attorney-client or attorney work product privilege if and to the
extent such disclosure would constitute a waiver of such privilege;

         (g) use commercially reasonable efforts to cause all such Redemption
Shares to be listed on the national securities exchange on which the Common
Shares are then listed, if the listing of Redemption Shares is then permitted
under the rules of such national securities exchange; and

         (h) if requested by any Holder participating in the offering of
Registrable Securities, incorporate in a prospectus supplement or post-effective
amendment such information concerning the Holder or the intended method of
distribution as the Holder reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of Redemption Shares being
sold, the purchase price being paid therefor and any other material terms of the
offering of the Redemption Shares to be sold in such offering; provided,
however, that the Company shall not be obligated to include in any such
prospectus supplement or post-effective amendment any requested information that
is unreasonable in scope compared with the Company's most recent prospectus or

                                       -7-

prospectus supplement used in connection with a primary or secondary offering of
equity securities by the Company.

         3.5 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and each person, if any, who controls any Holder
within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any of their
officers, directors, employees or representatives, as follows:

          (i) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, arising out of or based upon any untrue
     statement or alleged untrue statement of a material fact contained in any
     Registration Statement (or any amendment thereto) pursuant to which the
     Registrable Securities were registered under the Act, including all
     documents incorporated therein by reference, or the omission or alleged
     omission therefrom of a material fact required to be stated therein or
     necessary to make the statements therein not misleading or arising out of
     or based upon any untrue statement or alleged untrue statement of a
     material fact contained in any Prospectus (or any amendment or supplement
     thereto), including all documents incorporated therein by reference, or the
     omission or alleged omission therefrom of a material fact necessary in
     order to make the statements therein, in the light of the circumstances
     under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, to the extent of the aggregate amount paid
     in settlement of any litigation, or investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission, if such settlement is effected with
     the written consent of the Company; and

          (iii) against any and all expense whatsoever, as incurred (including
     reasonable fees and disbursements of counsel), reasonably incurred in
     investigating, preparing or defending against any litigation, or
     investigation or proceeding by any governmental agency or body, commenced
     or threatened, in each case whether or not a party, or any claim whatsoever
     based upon any such untrue statement or omission, or any such alleged
     untrue statement or omission, to the extent that any such expense is not
     paid under subparagraph (i) or (ii) above;

                                       -8-

provided, however, that the indemnity provided pursuant to this Section 3.5 does
not apply to any Holder with respect to any loss, liability, claim, damage,
judgment or expense to the extent arising out of (A) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in the Registration Statement (or any amendment thereto) or
the Prospectus (or any amendment or supplement thereto), or (B) any Holder's
failure to deliver an amended or supplemental Prospectus provided to the Holder
by the Company if such loss, liability, claim, damage, judgment or expense would
not have arisen had such delivery occurred.

         3.6 Indemnification by Holder. Each Holder of securities covered by a
Registration Statement (and each permitted assignee of such Holder, on a several
basis) severally and not jointly agrees to indemnify and hold harmless the
Company, and each of its trustees/directors and officers (including each
trustee/director and officer of the Company who signed a Registration
Statement), and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, as follows:

          (i) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, arising out of or based upon any untrue
     statement or alleged untrue statement of a material fact contained in any
     Registration Statement (or any amendment thereto) pursuant to which
     Registrable Securities of such Holder were registered under the Act,
     including all documents incorporated therein by reference, or the omission
     or alleged omission therefrom of a material fact required to be stated
     therein or necessary to make the statements therein not misleading or
     arising out of or based upon any untrue statement or alleged untrue
     statement of a material fact contained in any Prospectus (or any amendment
     or supplement thereto), including all documents incorporated therein by
     reference, or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, to the extent of the aggregate amount paid
     in settlement of any litigation, or investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission, if such settlement is effected with
     the written consent of the Holder; and

                                       -9-

          (iii) against any and all expense whatsoever, as incurred (including
     reasonable fees and disbursements of counsel), reasonably incurred in
     investigating, preparing or defending against any litigation, or
     investigation or proceeding by any governmental agency or body, commenced
     or threatened, in each case whether or not a party, or any claim whatsoever
     based upon any such untrue statement or omission, or any such alleged
     untrue statement or omission, to the extent that any such expense is not
     paid under subparagraph (i) or (ii) above;

provided, however, that the indemnity provided pursuant to this Section 3.6
shall only apply with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of (A) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder expressly for
use in the Registration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) or (B) any Holder's failure to deliver
an amended or supplemental Prospectus provided to the Holder by the Company if
such loss, liability, claim, damage or expense would not have arisen had such
delivery occurred. Notwithstanding the provisions of this Section 3.6, a Holder
and any permitted assignee shall not be required to indemnify the Company, its
officers, trustees/directors or control persons with respect to any amount in
excess of the amount of the total proceeds to the Holder or such permitted
assignee, as the case may be, from sales of the Registrable Securities of the
Holder under the Registration Statement.

         3.7 Conduct of Indemnification Proceedings. An indemnified party
hereunder shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 3.5 or 3.6 above, unless and only to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses, and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided under Section 3.5 or 3.6 above. If the indemnifying party so
elects within a reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at such indemnifying
party's own expense with counsel chosen by the indemnifying party and approved
by the indemnified party, which approval shall not be unreasonably withheld;
provided, however, that the indemnifying party will not settle any such action
or proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that, if the indemnified
party reasonably determines that a conflict of interest exists where it is

                                      -10-

advisable for the indemnified party to be represented by separate counsel or
that, upon advice of counsel, there may be legal defenses available to it which
are different from or in addition to those available to the indemnifying party,
then the indemnifying party shall not be entitled to assume such defense and the
indemnified party shall be entitled to separate counsel at the indemnifying
party's expense. If the indemnifying party is not entitled to assume the defense
of such action or proceeding as a result of the second proviso to the preceding
sentence, the indemnifying party's counsel shall be entitled to conduct the
indemnifying party's defense and counsel for the indemnified party shall be
entitled to conduct the defense of the indemnified party, it being understood
that both such counsel will cooperate with each other to conduct the defense of
such action or proceeding as efficiently as possible. If the indemnifying party
is not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this paragraph, the indemnifying party will pay the reasonable fees and expenses
of counsel for the indemnified party. In such event, however, the indemnifying
party will not be liable for any settlement effected without the written consent
of the indemnifying party. If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with this
paragraph, the indemnifying party shall not be liable for any fees and expenses
of counsel for the indemnified party incurred thereafter in connection with such
action or proceeding.

         3.8 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Sections 3.5 and 3.6 above is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms, the Company
and the relevant Holder shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the Holder, (i) in such proportion as is
appropriate to reflect the relative fault of and benefits to the Company on the
one hand and the Holder on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities, or
expenses or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative fault of, but also the relative benefits to, the Company on the one
hand and the Holder on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits to the indemnifying party and indemnified party shall be determined by
reference to, among other things, the total proceeds received by the
indemnifying party and indemnified party in connection with the offering to
which such losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has

                                      -11-

been made by, or relates to information supplied by, the indemnifying party or
the indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.

         The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 3.8 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 3.8, a Holder shall not be
required to contribute any amount in excess of the amount of the total proceeds
to the Holder from sales of the Registrable Securities of such Holder under the
Registration Statement.

         Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 3.8, each person, if any, who
controls a Holder within the meaning of Section 15 of the Act shall have the
same rights to contribution as the Holder, and each trustee/director of the
Company, each officer of the Company who signed a Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Act shall have the same rights to contribution as the Company.

SECTION 4. EXPENSES

         The Company shall pay all expenses incident to the performance by the
Company of its registration obligations under Sections 2 and 3 above, including
(i) all stock exchange, Commission and state securities registration, listing
and filing fees, (ii) all expenses incurred in connection with the preparation,
printing and distribution of any Issuer Registration Statement or Registration
Statement and Prospectus, and (iii) fees and disbursements of counsel for the
Company and of the independent public accountants of the Company. Each Holder
shall be responsible for the payment of any brokerage and sales commissions,
fees and disbursements of the Holder's counsel, accountants and other advisors,
and any transfer taxes relating to the sale or disposition of the Registrable
Securities by such Holder pursuant to this Agreement.

                                      -12-

SECTION 5. RULE 144 COMPLIANCE

         The Company covenants that it will use its best efforts to timely file
the reports required to be filed by the Company under the Act and the Exchange
Act so as to enable each Holder to sell Registrable Securities pursuant to Rule
144 under the Act. In connection with any sale, transfer or other disposition by
a Holder of any Registrable Securities pursuant to Rule 144 under the Act, the
Company shall cooperate with the Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend, and enable certificates for such Registrable
Securities to be for such number of shares and registered in such names as
Holder may reasonably request at least ten (10) Business Days prior to any sale
of Registrable Securities hereunder.

SECTION 6. MISCELLANEOUS

         6.1 Integration; Amendment. This Agreement constitutes the entire
agreement among the parties hereto with respect to the matters set forth herein
and supersedes and renders of no force and effect all prior oral or written
agreements, commitments and understandings among the parties with respect to the
matters set forth herein. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the Company
and each Holder against whom such amendment, modification or discharge is sought
to be enforced.

         6.2 Waivers. No waiver by a party hereto shall be effective unless made
in a written instrument duly executed by the party against whom such waiver is
sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.

         6.3 Assignment; Successors and Assigns. This Agreement and the rights
granted hereunder may not be assigned by any Holder without the written consent
of the Company; provided, however, that a Holder may assign its rights and
obligations hereunder, to a transferee in connection with a transfer of some or
all of such Holder's VNOP Units in accordance with the terms of the Partnership
Agreement, if such transferee agrees in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be binding
upon all of the parties hereto and their respective successors and permitted
assigns.

                                      -13-

         6.4 Notices. All notices called for under this Agreement shall be in
writing and shall be deemed given upon receipt if delivered personally or by
facsimile transmission and followed promptly by mail, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the addresses set forth in Schedule A hereto, or to any other address or
addressee as any party entitled to receive notice under this Agreement shall
designate, from time to time, to others in the manner provided in this Section
6.4 for the service of notices; provided, however, that notices of a change of
address shall be effective only upon receipt thereof. Any notice delivered to
the party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is not
a Business Day, then the notice shall be deemed to have been given and received
on the Business Day next following such day and if any party rejects delivery of
any notice attempted to be given hereunder, delivery shall be deemed given on
the date of such rejection. Any notice sent by facsimile transmission shall be
deemed to have been given and received on the Business Day next following the
transmission.

         6.5 Specific Performance. The parties hereto acknowledge that the
obligations undertaken by them hereunder are unique and that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.

         6.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York, but not
including the choice of law rules thereof.

         6.7 Headings. Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

         6.8 Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.

                                      -14-

         6.9 Execution in Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or on behalf of
each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties.

         6.10 Severability. If fulfillment of any provision of this Agreement,
at the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.

                          SIGNATURES ON FOLLOWING PAGE

                                      -15-

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first herein above
set forth.

                                          VORNADO REALTY TRUST

                                          By: /s/ JOSEPH MACNOW
                                             ---------------------------------
                                              Name:  Joseph Macnow
                                              Title: Executive Vice President -
                                                     Finance and Administration
                                                     and Chief Financial Officer

                                          CHARLES E. SMITH
                                          COMMERCIAL REALTY L.L.C.,
                                          as Representative of the Holders

                                          By: /s/ PAUL F. LARNER
                                             ---------------------------------
                                              Name:  Paul F. Larner
                                              Title: Chief Financial Officer

                                                                    Exhibit 10.2

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of January 1, 2002 by and among (i) VORNADO REALTY TRUST, a
Maryland real estate investment trust (the "Company"), and (ii) each of the
persons identified on Schedule A hereto (each a "Holder" and collectively,
together with their assigns permitted under Section 5.3 hereof, the "Holders").

         WHEREAS, the Company and Charles E. Smith Commercial Realty L.L.C., a
Delaware limited liability company and the sole general partner of Charles E.
Smith Commercial Realty L.P., a Delaware limited partnership ("SCR"), are
causing an indirect wholly-owned subsidiary of Vornado Realty L.P., a Delaware
limited partnership (the "Partnership") to merge (the "Merger") with and into
SCR and, in connection therewith, the Partnership is issuing 6,094,255 Class A
Units (such units, the "VNOP Units") to the Holders as set forth opposite their
names on Schedule A hereto;

         WHEREAS, pursuant to Section 8.6 and the other related provisions of
the Second Amended and Restated Agreement of Limited Partnership of the
Partnership (such agreement, as amended from time to time, the "Partnership
Agreement"), commencing on the first anniversary of the date of issuance, and
subject to the various limitations contained in the Partnership Agreement and
other instruments being delivered in connection with the Merger, the Holders
will be entitled to redeem their VNOP Units for cash or, at the Company's
election, common shares of beneficial interest, par value $0.04 per share, of
the Company ("Common Shares" and such redemption right, the "Redemption Right");

         WHEREAS, the Company has agreed to grant to the Holders the
registration rights described herein with respect to certain of the Common
Shares, if any, issuable in respect of the VNOP Units;

         NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, hereby agree as
follows:

SECTION 1. REGISTRATION RIGHTS

         1.1 Shelf Registration Right. (a) Subject to the various terms,
conditions and other limitations set forth in this Agreement, the Company hereby
grants the Holders the right (the "Registration Right") to require the Company
to register for resale by the Holders all Registrable Shares (as defined below)
then held by them, together with all Registrable Shares that would then be
issuable in respect of VNOP Units (assuming, for this purpose, that all Holders
exercised their Redemption Rights in respect of those VNOP Units and that the
Company elected to satisfy the rights by issuing and

delivering Common Shares to the Holders) as more fully set forth in the
remainder of this Agreement. The Registration Right shall only be exercisable by
the Holder Representative (as defined below) delivering a written request (the
"Registration Request") identifying in reasonable detail the maximum aggregate
number of Registrable Shares then issued and issuable to all Holders (assuming
each were to exercise its Redemption Right in respect of all VNOP Units then
owned by it, and the Company were to elect to satisfy all such redemption
requests with Common Shares) as well as the proposed method(s) and timing of
resale and the number of Registrable Shares anticipated to be sold by the
Holders in the next succeeding twelve (12) months. The Holder Representative may
only deliver the Registration Request on or after the later of (x) the Business
Day (as defined below) following the third anniversary of the date of this
Agreement and (y) the date on which a Holder first delivers a notice of
redemption substantially in the form of Exhibit D attached to the Partnership
Agreement to the Partnership in respect of any of the VNOP Units held by it. In
addition, the Holder Representative must deliver the Registration Request to the
Company at least sixty (60) days prior to the date on which the related Holder
desires to consummate the first sale of any Registrable Shares to be registered
therein. A Resale Shelf Registration Statement (as defined below) may also
include securities to be sold for the account of the Company or for other
persons holding securities of the Company. Notwithstanding the foregoing, the
Company may at any time, in its sole discretion and prior to receiving any
Registration Request from the Holder Representative, include all of such
Holder's Registrable Shares or any portion thereof in any shelf registration
statement then being filed by the Company for any other purpose, and if the
Registrable Shares are so registered and the registration statement complies in
all material respects with the requirements of this Agreement applicable to a
Resale Shelf Registration Statement, the same shall be deemed to satisfy the
requirements of this Section 1.1(a) and to be the Resale Shelf Registration
Statement contemplated herein.

         (b) As used in this Agreement:

          "Business Day" means any Monday, Tuesday, Wednesday, Thursday or
          Friday other than a day on which banks and other financial
          institutions are authorized or required to be closed for business in
          the State of New York or Maryland.

          "Holder Representative" means Charles E. Smith Management, Inc.,
          acting as the appointed representative of the Holders in respect of
          the rights contained herein, or such other representative as is
          appointed from time to time and identified to the Company in a writing
          signed by Holders of a majority of the Registrable Shares at any such
          time.

                                       -2-

          "Registrable Shares" means all Common Shares issued or issuable upon
          redemption of VNOP Units held by the Holders (assuming the Company
          will elect to deliver Common Shares in satisfaction of the Redemption
          Right), but excluding any such Common Shares that (i) may be sold by
          the relevant Holder without volume restrictions pursuant to Rule
          144(k) under the Securities Act of 1933, as amended (the "Act") or any
          successor provision then in force or, if the Holder owns less than 1%
          of the outstanding Common Shares of the Company (determined assuming
          redemption of all VNOP Units held by such Holder), pursuant to Rule
          144(e) under the Act or any successor provision then in force, (ii)
          are held by, or upon redemption would be issuable to, a Holder that is
          not an "affiliate" (as defined in Rule 144(a) under the Act) of the
          Company, (iii) have been disposed of pursuant to any offering or sale
          in accordance with the Resale Shelf Registration Statement, or have
          been sold pursuant to Rule 144 or Rule 145 (or any successor
          provisions) under the Act or in any other transaction in which the
          purchaser does not receive "restricted securities" (as that term is
          defined for purposes of Rule 144 under the Act), (iv) have been
          transferred to a transferee that has not agreed in writing and for the
          benefit of the Company to be bound by the terms and conditions of this
          Agreement, or (v) have ceased to be of a class of securities of the
          Company that is listed and traded on a national securities exchange or
          the National Market of the National Association of Securities Dealers,
          Inc. Automated Quotation System (or any successor or other national
          trading system).

          "Resale Shelf Registration Statement" means the shelf registration
          statement of the Company as required herein, which covers the resale
          by the Holders of the Registrable Shares, including the prospectus
          contained therein, all exhibits thereto and all documents incorporated
          therein by reference.

         1.2 Underwritten Offerings. (a) If any Holder proposes to offer or sell
any Registrable Shares pursuant to an underwritten offering, it shall cause the
Holder Representative to notify the Company of such intention at least
forty-five (45) days prior to the proposed commencement of that offering and the
Company shall have the right to select the lead managing underwriter and any
other underwriters that will participate in such public offering (each
underwriter so selected by the Company, an "Underwriter"). The Company agrees
that it will notify the Holder Representative of its selection of the
Underwriter(s) promptly and in any case within ten (10) Business Days after
receipt of a written request from the Holder Representative that it do so.

                                       -3-

         (b) If any Holder proposes to offer or sell Registrable Shares pursuant
to an underwritten offering, the offering size shall be such that the aggregate
total gross proceeds to all Holders from that offering or sale shall be (x)
equal to or greater than Twenty-Five Million Dollars ($25,000,000.00) and (y)
equal to or less than Two Hundred Million Dollars ($200,000,000.00), and the
Holders shall not be permitted to conduct, individually or collectively, more
than one underwritten offering or sale in any one hundred and eighty (180) day
period; provided, however, that any underwritten offering that is suspended by
the Company pursuant to Section 1.6 hereof shall not be counted as an
underwritten offering for purposes of the preceding clause unless the offering
is concluded following the termination of such suspension.

         1.3 Obligations of the Company. When the Company receives the
Registration Request in accordance with Section 1.1 above, then, subject to
Section 1.6 hereof, the Company shall:

         (a) prepare and file with the Securities and Exchange Commission (the
"Commission") the Resale Shelf Registration Statement (as soon as reasonably
practicable after receiving the Registration Request, and in any event within
sixty (60) days after receipt of the Registration Request) in accordance with
Rule 415 under the Act (or any successor or other rule of the Commission
applicable to the proposed sale) to register Registrable Shares pursuant to the
Act, which shall comply as to form in all material respects with the
requirements of the applicable form and shall include all financial statements
required by the Commission to be filed therewith, and the Company shall use its
commercially reasonable efforts to cause the Resale Shelf Registration Statement
to become effective as soon as practicable; provided that all of the Company's
obligations with respect to the Resale Shelf Registration Statement pursuant to
this Agreement will automatically terminate if none of the Common Shares covered
by that Resale Shelf Registration Statement are Registrable Shares; provided,
however, that, before filing the Resale Shelf Registration Statement or any
amendments or supplements thereto, or comparable statements under applicable
securities or "blue sky" laws of any jurisdiction, the Company shall (i) provide
each Holder with an adequate and appropriate opportunity to participate in the
preparation of the Resale Shelf Registration Statement and each prospectus
included therein (and each amendment or supplement thereto or comparable
statement) to be filed with the Commission and (ii) not file the Resale Shelf
Registration Statement or the related prospectus (or amendment or supplement
thereto or comparable statement) with the Commission to which the Holder
Representative shall have reasonably objected on the grounds that such filing
does not comply in all material respects with the requirements of the Act or of
the rules or regulations thereunder;

         (b) use its commercially reasonable efforts to keep the Resale Shelf
Registration Statement effective, including preparing and filing with the
Commission

                                       -4-

such amendments and supplements to the Resale Shelf Registration Statement and
the prospectus to be used in connection therewith as may be necessary to keep
the Resale Shelf Registration Statement effective and to comply with the
provisions of the Act with respect to the disposition of the Registrable Shares
covered by the Resale Shelf Registration Statement, until the earlier of (i) the
date on which the Holders have disposed of all of the Registrable Shares
registered under the Resale Shelf Registration Statement and (ii) the date on
which there are no longer any Registrable Shares outstanding or issuable in
respect of any VNOP Units;

         (c) furnish, without charge, to the Holders and each Underwriter, if
any, of the securities covered by the Resale Shelf Registration Statement, such
number of copies of the Resale Shelf Registration Statement, each amendment and
supplement thereto (in each case including all exhibits), and the prospectus
included in the Resale Shelf Registration Statement (including each preliminary
prospectus and any summary prospectus) in conformity with the requirements of
the Act, as the Holder Representative may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the Holders;

         (d) promptly notify the Holder Representative and the sole or lead
managing Underwriter, if any: (i) when the Resale Shelf Registration Statement,
any pre-effective amendment, the prospectus or any prospectus supplement
related thereto or post-effective amendment to the Resale Shelf Registration
Statement has been filed, and, with respect to the Resale Shelf Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the Commission or any state securities or "blue sky"
authority for amendments or supplements to the Resale Shelf Registration
Statement or the prospectus related thereto or for additional information, (iii)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Resale Shelf Registration Statement or the initiation or threat of any
proceedings for that purpose, and (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Shares for sale under the securities or "blue sky" laws of any
jurisdiction or the initiation of any proceeding for such purpose;

         (e) upon receipt of a Proposed Sale Notice (as defined in Section
1.4(a) hereof) and thereafter until the completion, abandonment or termination
of the offering or sale contemplated thereby, promptly notify the Holder
Representative and the sole or lead managing Underwriter, if any: (i) of the
existence of any fact of which the Company is aware or the happening of any
event that has resulted in (A) the Resale Shelf Registration Statement, as then
in effect, containing an untrue statement of a material fact or omitting to
state a material fact required to be stated therein or necessary to make any
statements therein not misleading or (B) the prospectus included in the Resale
Shelf Registration Statement containing an untrue statement of a material fact
or omitting to state a material fact required to be stated therein or necessary
to make any statements therein, in the light

                                       -5-

of the circumstances under which they were made, not misleading and (ii) of the
Company's reasonable determination that a post-effective amendment to the Resale
Shelf Registration Statement would be appropriate or that there exist
circumstances not yet disclosed to the public which make further sales under the
Resale Shelf Registration Statement inadvisable pending such disclosure and
post-effective amendment; and, if the notification relates to an event described
in either of the clauses (i) or (ii) of this Section 1.3(e), subject to Section
1.6, at the request of the Holder Representative, the Company shall prepare and
furnish to the Holder Representative and each Underwriter, if any, a reasonable
number of copies of a supplement or post-effective amendment to the Resale Shelf
Registration Statement or related prospectus or any document incorporated
therein by reference or file any other required document so that (1) the Resale
Shelf Registration Statement shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (2) as thereafter
delivered to the purchasers of the Registrable Shares being sold thereunder, the
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

         (f) make available for reasonable inspection by the Holders, any
Underwriter, and any attorney, accountant or other agent retained by any Holder
or Underwriter, material financial and other relevant information concerning the
business and operations of the Company and the properties of the Company and any
subsidiaries thereof as may be in existence at such time as shall be necessary,
and cause the Company's officers, directors and employees to supply such
relevant information as may be reasonably requested by any such parties in
connection with the Resale Shelf Registration Statement; provided, however,
that, if the Holders or any Underwriter or any of their advisors or agents
request any information that the Company determines to be confidential or
non-public, the Company shall be entitled to condition access to that
information upon the Holders and each other recipient of such information having
entered into a confidentiality agreement with the Company in form and substance
satisfactory to the Company acting reasonably, pursuant to which each such
recipient agrees to maintain that information as confidential and use it solely
for the purpose of exercising its rights under this Agreement, and provided
further, that the Company shall not be required to disclose any information
subject to any attorney-client or attorney work product privilege if and to the
extent such disclosure would constitute a waiver of such privilege;

         (g) in the case of an underwritten public offering of Registrable
Shares covered by the Resale Shelf Registration Statement, obtain an opinion
from the Company's counsel and a "cold comfort" letter from the Company's
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such Resale Shelf
Registration Statement in customary form

                                       -6-

and covering such matters as are customarily covered by such opinions and "cold
comfort" letters delivered to underwriters in underwritten public offerings,
dated the date of the closing under the underwriting agreement, which opinion
and letter shall be reasonably satisfactory to the sole or lead managing
Underwriter, if any, and to the Holders participating in the offering, and
furnish to the Holders and to each Underwriter, if any, a copy of such opinion
and letter addressed to the Holders (in the case of the opinion) and the
underwriter(s) (in the case of the opinion and the "cold comfort" letter);

         (h) in the case of an underwritten public offering, make generally
available to its security holders as soon as practicable, but in any event not
later than eighteen (18) months after the effective date of the Resale Shelf
Registration Statement (as defined in Rule 158(c) under the Act), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158 under
the Act);

         (i) use commercially reasonable efforts to cause all Registrable Shares
to be listed on the national securities exchange or over-the-counter exchange on
which the Common Shares are then listed, if the listing of Registrable Shares is
then permitted under the rules of such exchange;

         (j) if requested by the Holder Representative or the sole or lead
managing Underwriter, incorporate in a prospectus supplement or post-effective
amendment such information concerning any Holder, any Underwriter or the
intended method of distribution as the sole or lead managing Underwriter or the
Holder Representative reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of Registrable Shares being
sold to the Underwriters, the purchase price being paid therefor by such
Underwriters and any other material terms of the underwritten offering of the
Registrable Shares to be sold in such offering; provided, however, that the
Company shall not be obligated to include in any such prospectus supplement or
post-effective amendment any requested information that is unreasonable in scope
when compared with the Company's most recent prospectus or prospectus supplement
used in connection with a primary or secondary offering of equity securities by
the Company; and

         (k) subject to Section 1.6 hereof, use commercially reasonable efforts
to take such other steps as may reasonably be requested of it to facilitate the
registration and disposition of the Registrable Shares contemplated hereby,
including obtaining necessary governmental approvals and effecting required
filings; entering into customary agreements (including customary underwriting
agreements, if the public offering is underwritten); cooperating with the
Holders and any Underwriter in connection with any

                                       -7-

filings required by the National Association of Securities Dealers, Inc.
("NASD"); providing appropriate certificates not bearing restrictive legends
(other than legends relating to restrictions imposed in the Company's charter or
by applicable law) representing the Registrable Shares; and providing a CUSIP
number and maintaining a transfer agent and registrar for the Registrable
Shares; provided, however, that nothing in this Agreement shall be interpreted
as requiring the Company's management to attend or participate in any road show,
any meetings with prospective investors or any other similar marketing or
selling activities, or to take any of the actions described in the proviso to
Section 1.7 below.

         1.4 Holder Obligations.

         (a) No Holder, underwriter, if any, or other person or entity acting
for any of them shall commence any offering or consummate any sale of any
Registrable Shares included in the Resale Shelf Registration Statement requiring
delivery of a prospectus unless the Holder Representative has given the Company
at least five (5) and not more than sixty (60) days' prior written notice (a
"Proposed Sale Notice") of the intention to do so specifying (i) the Holders
proposing to participate in the offering and the number of Registrable Shares to
be offered and sold by each Holder and (ii) the intended method or methods of
distribution of such Registrable Shares, and the Holders shall terminate any
such offering that is not consummated within forty-five (45) days of its
commencement (it being understood that any offering terminated pursuant to this
clause shall be deemed to have been consummated for purposes of Section 1.2(b)
above, and it being further understood that the forty-five (45) day period shall
be deemed extended one day for each day that the Company suspends the offering
pursuant to its rights in Section 1.6 hereof). The Holder Representative shall
give the Company prompt written notice of the completion, termination or
abandonment of any sale or offering of Registrable Shares.

         (b) Each Holder agrees to cooperate with the Company in connection with
the preparation of the Resale Shelf Registration Statement, and for so long as
the Company is obligated to keep the Resale Shelf Registration Statement
effective, each Holder agrees that it will (i) respond within five (5) Business
Days to any request by the Company to provide or verify information regarding a
Holder or a Holder's Registrable Shares (including the proposed manner of sale)
that may be required to be included in such Resale Shelf Registration Statement
pursuant to the rules and regulations of the Commission, and (ii) provide in a
timely manner information regarding the proposed distribution by such Holder of
the Registrable Shares and such other information as may reasonably be requested
by the Company from time to time in connection with the preparation of and for
inclusion in the Resale Shelf Registration Statement and any related prospectus.

                                       -8-

         (c) If requested by the Company, each Holder agrees that before using
the Resale Shelf Registration Statement or any prospectus contained therein or
any amendment or supplement thereto, it will deliver to the Company a
certification that it has reviewed the information contained therein and
representing and warranting to the Company that the information relating to such
Holder and its plan of distribution is as set forth in the related prospectus,
that the prospectus does not, as of the time of such sale, contain any untrue
statement of a material fact relating to or provided by such Holder or its plan
of distribution and that the prospectus does not, as of the time of such sale,
omit to state any material fact relating to such Holder or its plan of
distribution necessary to make the statements in such prospectus, in the light
of the circumstances under which they were made, misleading.

         1.5 Timing of Offers and Sales. All offers and sales by any Holder
under the Resale Shelf Registration Statement shall be completed within the
period during which the Resale Shelf Registration Statement is required to
remain effective pursuant to Section 1.3(b) above. If directed by the Company,
the Holders will return all undistributed copies of any prospectus included in
the Resale Shelf Registration Statement that is in its possession upon the
expiration of such period.

         1.6 Suspension of Offering. At any time either before or after the
Holder Representative has delivered a Proposed Sale Notice, the Company may
suspend offers and sales by the Holders under the Resale Shelf Registration
Statement if the Company, in its judgment exercised in good faith, determines
that (i) a negotiation or consummation of a transaction by the Company or any of
its affiliates is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in the
Resale Shelf Registration Statement of material information which the Company
has a bona fide business purpose for keeping confidential and the nondisclosure
of which in the Resale Shelf Registration Statement might be expected to cause
the Resale Shelf Registration Statement to fail to comply with applicable
disclosure requirements or (ii) in the case of a proposed underwritten public
offering of Registrable Shares of any Holder, the offering of such Registrable
Shares could reasonably be expected to adversely affect another pending or
proposed public offering of Common Shares by and for the account of the Company
or any of its affiliates. After receiving a Proposed Sale Notice from the Holder
Representative and before the consummation of the proposed sale identified in
such Proposed Sale Notice, the Company shall give written notice thereof to the
Holder Representative (a "Materiality Notice") promptly upon making any such
determination, with a copy to each of the Holders, and upon receipt of a
Materiality Notice, each Holder agrees that it will immediately discontinue
offers and sales of the Registrable Shares under the Resale Shelf Registration
Statement until (x) in the case of a Materiality Notice delivered pursuant to
clause (i) above, such Holder receives copies of a supplemented or amended
prospectus that corrects the misstatement(s) or omission(s) referred to above
and receives notice that any post-

                                      -9-

effective amendment has become effective or (y) in the case of a Materiality
Notice delivered pursuant to clause (ii) above, such Holder receives a
subsequent written notice from the Company that revokes or otherwise withdraws
such Materiality Notice; provided that the Company agrees that it will use
commercially reasonable efforts to not to delay or suspend offers and sales
pursuant to the Resale Shelf Registration Statement for such reason for more
than ninety (90) days after delivery of the Materiality Notice at any one time.
If so directed by the Company, each Holder agrees that it will deliver to the
Company all copies of the prospectus covering the Registrable Shares current at
the time of receipt of any Materiality Notice. If the Company delivers a
Materiality Notice pursuant to clause (ii) above, the Company agrees that it
will permit the Holders to complete an underwritten public offering
substantially similar to the type that was suspended by virtue of the foregoing
provisions commencing no later than one hundred and eighty-one (181) days after
the closing of the public offering contemplated by such Materiality Notice or
its decision not to undertake such public offering, as the case may be.

         1.7 Qualification. The Company agrees to use its commercially
reasonable efforts to register or qualify the Registrable Shares by the time the
Resale Shelf Registration Statement is declared effective by the Commission
under all applicable state securities or "blue sky" laws of such jurisdictions
as any Holder or Underwriter, if any, may reasonably request in writing, to keep
each such registration or qualification effective during the period such Resale
Shelf Registration Statement is required to be kept effective pursuant to this
Agreement or during the period offers or sales are being made by such Holder
after delivery of a Registration Request to the Company, whichever is shorter,
and to do any and all other similar acts and things which may be reasonably
necessary or advisable under applicable laws and/or regulations to enable such
Holder to consummate the disposition in each such jurisdiction of the
Registrable Shares owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such jurisdiction where it
would not otherwise be required to qualify but for this Agreement, (ii) take any
action that would cause it to become subject to any taxation in any jurisdiction
where it would not otherwise be subject to such taxation or (iii) take any
action that would subject it to the general service of process in any
jurisdiction where it is not now so subject.

SECTION 2. INDEMNIFICATION

         2.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and each Underwriter who participates in any public
offering and sale of Registrable Shares pursuant to the Resale Shelf
Registration Statement, if any, and each person who controls any Holder or any
such Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Securities Exchange Act

                                      -10-

of 1934, as amended  (the "Exchange Act"), and any of their officers, directors,
employees or representatives, as follows:

          (i) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, arising out of or based upon any untrue
     statement or alleged untrue statement of a material fact contained in the
     Resale Shelf Registration Statement (or any amendment thereto) pursuant to
     which the Registrable Shares were registered under the Act, including all
     documents incorporated therein by reference, or the omission or alleged
     omission therefrom of a material fact required to be stated therein or
     necessary to make the statements therein not misleading or arising out of
     or based upon any untrue statement or alleged untrue statement of a
     material fact contained in any related prospectus (or any amendment or
     supplement thereto), including all documents incorporated therein by
     reference, or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, to the extent of the aggregate amount paid
     in settlement of any litigation, or investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission, if such settlement is effected with
     the written consent of the Company; and

          (iii) against any and all expense whatsoever, as incurred (including
     reasonable fees and disbursements of counsel), reasonably incurred in
     investigating, preparing or defending against any litigation, or
     investigation or proceeding by any governmental agency or body, commenced
     or threatened, in each case whether or not a party, or any claim whatsoever
     based upon any such untrue statement or omission, or any such alleged
     untrue statement or omission, to the extent that any such expense is not
     paid under subparagraph (i) or (ii) above;

provided, however, that the indemnity provided pursuant to this Section 2.1 does
not apply with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of (A) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such indemnified party
expressly for use in the Resale Shelf Registration Statement (or any amendment
thereto) or the related prospectus (or any amendment or supplement thereto) or
(B) such indemnified party's failure to deliver an amended or supplemental
prospectus provided to the indemnified party by the Company if such loss,
liability, claim, damage or expense would not have arisen had such delivery
occurred.

                                      -11-

         2.2 Indemnification by the Holders. Each Holder (and each permitted
assignee of such Holder, on a several basis), severally and not jointly, agrees
to indemnify and hold harmless the Company, and each of the Company's
trustees/directors and officers (including each trustee/director and officer of
the Company who signed the Resale Shelf Registration Statement), and each
Underwriter who participates in any public offering and sale of Registrable
Shares pursuant to the Resale Shelf Registration Statement, if any, and each
person, if any, who controls the Company or any such Underwriters within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, as follows:

          (i) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, arising out of or based upon any untrue
     statement or alleged untrue statement of a material fact contained in the
     Resale Shelf Registration Statement (or any amendment thereto) pursuant to
     which the Registrable Shares were registered under the Act, including all
     documents incorporated therein by reference, or the omission or alleged
     omission therefrom of a material fact required to be stated therein or
     necessary to make the statements therein not misleading or arising out of
     or based upon any untrue statement or alleged untrue statement of a
     material fact contained in any related prospectus (or any amendment or
     supplement thereto), including all documents incorporated therein by
     reference, or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage, judgment and
     expense whatsoever, as incurred, to the extent of the aggregate amount paid
     in settlement of any litigation, or investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission, if such settlement is effected with
     the written consent of the Holder Representative; and

          (iii) against any and all expense whatsoever, as incurred (including
     reasonable fees and disbursements of counsel), reasonably incurred in
     investigating, preparing or defending against any litigation, or
     investigation or proceeding by any governmental agency or body, commenced
     or threatened, in each case whether or not a party, or any claim whatsoever
     based upon any such untrue statement or omission, or any such alleged
     untrue statement or omission, to the extent that any such expense is not
     paid under subparagraph (i) or (ii) above;

provided, however, that the indemnity provided pursuant to this Section 2.2
shall only apply with respect to any loss, liability, claim, damage, judgment or
expense to the extent

                                      -12-

arising out of (A) any untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with written information
furnished to the Company by such Holder expressly for use in the Resale Shelf
Registration Statement (or any amendment thereto) or the related prospectus (or
any amendment or supplement thereto) or (B) such indemnified party's failure to
deliver an amended or supplemental prospectus provided to the indemnified party
by the Company if such loss, liability, claim, damage or expense would not have
arisen had such delivery occurred. Notwithstanding the provisions of this
Section 2.2, no Holder or any permitted assignee shall be required to indemnify
the Company, its officers, trustees/directors, officers or control persons with
respect to any amount in excess of the amount of the total proceeds to such
Holder or such permitted assignee, as the case may be, from sales of the
Registrable Shares of such Holder under the Resale Statement Registration
Statement.

         2.3 Conduct of Indemnification Proceedings. An indemnified party
hereunder shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 2.1 or 2.2 above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses, and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under Section 2.1 or 2.2 above. If the indemnifying party so
elects within a reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at such indemnifying
party's own expense with counsel chosen by the indemnifying party and approved
by the indemnified party, which approval shall not be unreasonably withheld;
provided, however, that the indemnifying party will not settle any such action
or proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that, if the indemnified
party reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel or
that, upon advice of counsel, there may be legal defenses available to it which
are different from or in addition to those available to the indemnifying party,
then the indemnifying party shall not be entitled to assume such defense and the
indemnified party shall be entitled to separate counsel at the indemnifying
party's expense. If the indemnifying party is not entitled to assume the defense
of such action or proceeding as a result of the second proviso to the preceding
sentence, the indemnifying party's counsel shall be entitled to conduct the
indemnifying party's defense and counsel for the indemnified party shall be
entitled to conduct the defense of the indemnified party, it being understood
that both such counsel will cooperate with each other to conduct the defense of
such action or proceeding as efficiently as possible. If the indemnifying party
is not so entitled to

                                      -13-

assume the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party will pay the reasonable fees and expenses of counsel for the
indemnified party. In such event, however, the indemnifying party will not be
liable for any settlement effected without the written consent of the
indemnifying party. If an indemnifying party is entitled to assume, and assumes,
the defense of such action or proceeding in accordance with this paragraph, the
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified party incurred thereafter in connection with such action or
proceeding.

         2.4 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Sections 2.1 and 2.2 above is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms, each
indemnifying party shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the indemnified party, (i) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
each Holder on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative fault
of, but also the relative benefits to, the Company on the one hand and each
Holder on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference to,
among other things, the total proceeds received by the indemnifying party and
indemnified party in connection with the offering to which such losses, claims,
damages, liabilities or expenses relate. The relative fault of the indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, the indemnifying
party or the indemnified party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action.

         The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.4, a Holder shall not be
required to contribute any amount in excess of the amount of the total proceeds
to such Holder from sales of the Registrable Shares of such Holder under the
Resale Shelf Registration Statement.

                                      -14-

         Notwithstanding the foregoing, no person guilty of fraudulent misrepre-
sentation (within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 2.4, each person, if any, who
controls any Holder within the meaning of Section 15 of the Act shall have the
same rights to contribution as such Holder, and each trustee/director of the
Company, each officer of the Company who signed the Resale Shelf Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act shall have the same rights to contribution as the
Company.

SECTION 3. EXPENSES

         3.1 Registration Expenses. Other than those expenses referred in
Section 3.2 hereto, the Company shall pay all expenses incurred in connection
with the registration of the Registrable Shares pursuant to Section 1 above and
the performance by the Company of its registration obligations under the terms
of this Agreement (such expenses, the "Registration Expenses"), including (i)
all stock exchange, Commission registration, listing and filing fees, (ii) all
expenses incurred in connection with the preparation, printing and distribution
of the Resale Shelf Registration Statement and the related prospectus and any
amendments or supplements thereto, (iii) fees and disbursements of counsel for
the Company and of independent certified public accountants and other advisors
retained by the Company and (iv) NASD fees and fees and expenses of registration
or qualification of Registrable Shares under state securities laws.

         3.2 Holder Expenses. Each Holder shall pay all of its expenses incurred
in connection with the exercise of its Registration Right, including, without
limitation, any underwriting or brokerage discounts and sales commissions, all
fees and disbursements of the Holder's counsel, accountants and other advisors
and any transfer fees or expenses (including the cost of all transfer tax
stamps) relating to the sale or disposition of the Registrable Shares by such
Holder pursuant to this Agreement.

         3.3 Payment/Reimbursement of Expenses Relating to Underwriting
Offerings. In the case of any underwritten offering of Registrable Shares
(including any block sale to or arranged through any underwriter), the Holders
participating in that offering shall pay (and reimburse the Company, to the
extent incurred by it, for) all of the following expenses incurred in connection
therewith that would not have arisen if the offer was not being conducted as an
underwritten offering, pro rata based on the aggregate number of Registrable
Shares of each such Holder proposed for inclusion in that offering: (i) any
printing or other duplicating expenses, delivery charges and escrow fees, (ii)
fees and disbursements of counsel to the Company (including, without limitation,
the fees and expenses relating to the preparation and delivery of legal opinions
to the underwriters), (iii) fees and expenses for independent certified public
accountants

                                      -15-

retained by the Company (including, without limitation, the fees and expenses
relating to the preparation or delivery by them of any special procedures
letters, any comfort letters or other similar undertakings), (iv) fees and
expenses of any special advisors or experts retained by the Company or the
underwriters in connection with such offering, and (v) any fees and
disbursements of underwriters and broker-dealers customarily paid by issuers or
sellers of securities.

SECTION 4. RULE 144 COMPLIANCE

         The Company covenants that it will use its best efforts to timely file
the reports required to be filed by the Company under the Act and the Exchange
Act so as to enable each Holder to sell Registrable Shares pursuant to Rule 144
under the Act. In connection with any sale, transfer or other disposition by a
Holder of any Registrable Shares pursuant to Rule 144 under the Act, the Company
shall cooperate with such Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Shares to be sold and not
bearing any Act legend, and enable certificates for such Registrable Shares to
be for such number of shares and registered in such names as the Holder
Representative may reasonably request in writing at least ten (10) Business Days
prior to any sale of Registrable Shares hereunder.

SECTION 5. MISCELLANEOUS

         5.1 Integration; Amendment. This Agreement constitutes the entire
agreement among the parties hereto with respect to the matters set forth herein
and supersedes and renders of no force and effect all prior oral or written
agreements, commitments and understandings among the parties with respect to the
matters set forth herein. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the Company
and the Holders.

         5.2 Waivers. No waiver by a party hereto shall be effective unless made
in a written instrument duly executed by the party against whom such waiver is
sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.

         5.3 Assignment; Successors and Assigns. Except as set forth in the next
sentence, this Agreement and the rights granted hereunder may not be assigned by
any Holder without the prior written consent of the Company, which may be
granted or

                                      -16-

withheld by the Company in its discretion. Each Holder will be permitted to
assign its rights under this Agreement to one or more entities controlled by it
in connection with a concurrent transfer of VNOP Units or Registrable Shares
that is permitted by the terms of the Partnership Agreement, so long as the
Holder provides to the Company at least five (5) Business Days' advance written
notice of the transfer, and the transferee executes and delivers to the Company
an instrument, in form and substance acceptable to the Company, agreeing to be
bound by the terms of this Agreement as if it were an original party hereto.
This Agreement shall inure to the benefit of and be binding upon all of the
parties hereto and their respective successors and permitted assigns.

         5.4 Notices. All notices called for under this Agreement shall be in
writing and shall be deemed given upon receipt if delivered personally or by
facsimile transmission and followed promptly by mail, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the addresses set forth below in this Section 5.4, or to any other address or
addressee as any party entitled to receive notice under this Agreement shall
designate, from time to time, to the others in the manner provided in this
Section 5.4 for the service of notices; provided, however, that notices of a
change of address shall be effective only upon receipt thereof. Any notice
delivered to the party hereto to whom it is addressed shall be deemed to have
been given and received on the day it was received; provided, however, that, if
such day is not a Business Day, then the notice shall be deemed to have been
given and received on the Business Day next following such day and if any party
rejects delivery of any notice attempted to be given hereunder, delivery shall
be deemed given on the date of such rejection. Any notice sent by facsimile
transmission shall be deemed to have been given and received on the Business Day
next following the transmission.

         if to the Company:

         Vornado Realty Trust
         888 Seventh Avenue, 46th Floor
         New York, New York 10019
         Attention:  Executive Vice President, Finance and Administration
         Facsimile:  (212) 894-7979

         and

         Vornado Realty Trust
         210 Route 4 East
         Paramus, New Jersey  07652
         Attention:  Executive Vice President, Finance and Administration
         Facsimile:  (201) 587-1000

                                      -17-

         with a copy (which shall not constitute notice) to:

         Sullivan & Cromwell
         125 Broad Street
         New York, New York  10004
         Attention:  William G. Farrar
         Facsimile:  (212) 558-3588

         if to any Holder or the Holder Representative:

         c/o Charles E. Smith Commercial Realty L.L.C.
         2345 Crystal Drive
         Crystal Park #4
         Arlington, Virginia  22202
         Attention:  Robert D. Zimet
         Facsimile:  (703) 769-1305

         with a copy (which shall not constitute notice) to:

         Hogan & Hartson L.L.P.
         Columbia Square
         555 13th Street, N.W.
         Washington, D.C.  20004-1109
         Attention:  Bruce W. Gilchrist
         Facsimile:  (202) 637-5910

         5.5 Specific Performance. The parties hereto acknowledge that the
obligations undertaken by them hereunder are unique and that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.

         5.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York, but not
including the choice of law rules thereof.

                                      -18-

         5.7 Headings. Section and subsection headings contained in this Agree-
ment are inserted for convenience of reference only, shall not be deemed to be a
part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

         5.8 Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.

         5.9 Execution in Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature of or on behalf of each party appear on each
counterpart, but it shall be sufficient that the signature of or on behalf of
each party appear on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties.

         5.10 Severability. If fulfillment of any provision of this Agreement,
at the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.

                          SIGNATURES ON FOLLOWING PAGE

                                      -19-

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first hereinabove set
forth.

                                        VORNADO REALTY TRUST

                                        By: /s/ JOSEPH MACNOW
                                           ------------------------------------
                                            Name:  Joseph Macnow
                                            Title: Executive Vice President -
                                                   Finance and Administration
                                                   and Chief Executive Officer

                                        /s/ ROBERT H. SMITH
                                        ---------------------------------------
                                        Robert H. Smith

                                        /s/ CLARICE R. SMITH
                                        ---------------------------------------
                                        Clarice R. Smith

                                        /s/ ROBERT P. KOGOD
                                        ---------------------------------------
                                        Robert P. Kogod

                                        /s/ ARLENE R. KOGOD
                                        ---------------------------------------
                                        Arlene R. Kogod

                                        CHARLES E. SMITH MANAGEMENT, INC.
                                        On its own behalf and as Holder
                                        Representative,

                                        By: /s/ ROBERT P. KOGOD
                                           ------------------------------------
                                            Name:  Robert P. Kogod
                                            Title: President

                                      -20-

                                TABLE OF CONTENTS
                                                                            Page

SECTION 1.       REGISTRATION RIGHTS...........................................1
        1.1      Shelf Registration Right......................................1
        1.2      Underwritten Offerings........................................3
        1.3      Obligations of the Company....................................4
        1.4      Holder Obligations............................................8
        1.5      Timing of Offers and Sales....................................9
        1.6      Suspension of Offering........................................9
        1.7      Qualification................................................10

SECTION 2.        INDEMNIFICATION.............................................11
        2.1       Indemnification by the Company..............................11
        2.2       Indemnification by the Holders..............................12
        2.3       Conduct of Indemnification Proceedings......................13
        2.4       Contribution................................................14

SECTION 3.        EXPENSES....................................................15
        3.1       Registration Expenses.......................................15
        3.2       Holder Expenses.............................................15
        3.3       Payment/Reimbursement of Expenses
                  Relating to Underwriting Offerings..........................15

SECTION 4.        RULE 144 COMPLIANCE.........................................16

SECTION 5.        MISCELLANEOUS...............................................16
        5.1       Integration; Amendment......................................16
        5.2       Waivers.....................................................16
        5.3       Assignment; Successors and Assigns..........................17
        5.4       Notices.....................................................17
        5.5       Specific Performance........................................18
        5.6       Governing Law...............................................18
        5.7       Headings....................................................19
        5.8       Pronouns....................................................19
        5.9       Execution in Counterparts...................................19
        5.10      Severability................................................19

                                                                    Exhibit 10.3

                     TAX REPORTING AND PROTECTION AGREEMENT

                                  BY AND AMONG

                              VORNADO REALTY TRUST,

                              VORNADO REALTY L.P.,

                    CHARLES E. SMITH COMMERCIAL REALTY L.P.,

                                       AND

                   CHARLES E. SMITH COMMERCIAL REALTY, L.L.C.,
                  as Representative of, and for the Benefit of,
                 the Holders of Units of Partnership Interest in
                     Charles E. Smith Commercial Realty L.P.

                                   Dated as of
                                December 31, 2001

                     TAX REPORTING AND PROTECTION AGREEMENT

         THIS TAX REPORTING  AND  PROTECTION  AGREEMENT  (this  "Agreement")  is
entered  into as of  December  31,  2001,  by and  among  VORNADO  REALTY  TRUST
("Vornado  REIT"), a Maryland real estate  investment trust and the sole general
partner of  Vornado  Realty  L.P.;  VORNADO  REALTY  L.P.,  a  Delaware  limited
partnership  ("Vornado OP"); CHARLES E. SMITH COMMERCIAL REALTY L.P., a Delaware
limited partnership ("SCR");  and CHARLES E. SMITH COMMERCIAL REALTY,  L.L.C., a
Delaware  limited  liability  company and the sole general  partner of SCR ("SCR
GP"), as representative  of the current holders of partnership  interests in SCR
(other than Vornado CESCR LLC and Vornado CESCR II LLC) (the "SCR Unitholders").
SCR GP is entering into this  Agreement in its capacity as a general  partner of
SCR,  in the  capacity  as  representative  of, and for the benefit of, each SCR
Unitholder,  and for its own  account.  Vornado REIT and Vornado OP hereby agree
that each of the SCR Unitholders is a third party  beneficiary of this agreement
with all of the rights and privileges set forth herein.

         WHEREAS,  Vornado REIT,  Vornado OP, Vornado Merger Sub L.P.  ("Vornado
Merger Sub"),  SCR, Robert H. Smith,  and Robert P. Kogod have entered into that
certain  Agreement  and Plan of Merger  dated as of October  18,  2001 (the "SCR
Merger Agreement")  whereby Vornado REIT and Vornado OP will acquire SCR through
a merger of Vornado  Merger Sub with and into SCR,  with the  existing  units of
limited partnership  interest in SCR (other than those held by Vornado CESCR LLC
and Vornado  CESCR II LLC) (the "Old SCR Units") being  converted  into units of
limited  partnership  interest  in Vornado OP (the  "Vornado  OP Units") and the
partners of Vornado  Merger Sub becoming the sole  interest  holders in SCR (the
"Merger");

         WHEREAS,  (i) Vornado Merger Sub, which is owned entirely by Vornado OP
and an entity that is owned entirely by Vornado OP and  disregarded  for federal
income tax purposes, is disregarded as an entity for federal income tax purposes
under Treasury  Regulation ss.  301.7701-3,  and (ii) following the merger,  SCR
will be owned  entirely by Vornado OP and another  entity that is owned entirely
by Vornado OP and that is  disregarded  for federal  income tax  purposes  under
Treasury Regulation ss. 301.7701-3, with the result that SCR will be disregarded
as an entity for federal income tax purposes  following the Merger,  and Vornado
OP will be treated as owning  directly  all of the assets of SCR, it is intended
for federal income tax purposes that the Merger,  regardless of form, be treated
as a  contribution  by  SCR  of  all  of  its  assets,  subject  to  all  of its
liabilities,  to Vornado OP in exchange for partnership  interests in Vornado OP
under Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"),
followed by a distribution by SCR of those  partnership  interests in Vornado OP
to the current holders of partnership units in SCR (other than Vornado CESCR LLC
and Vornado CESCR II LLC) in accordance with their  respective  interests in SCR
in liquidation of SCR; and

         WHEREAS, in accordance with Section 4.2 of the SCR Merger Agreement and
in consideration for the agreement of SCR to consummate the Merger,  the parties
desire to enter into this  Agreement  regarding  certain tax matters  associated
with the Merger.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
representations,  warranties,  covenants and agreements  contained herein and in
the SCR Merger Agreement, the parties hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         To the extent not otherwise  defined herein,  capitalized terms used in
this  Agreement  have the  meanings  ascribed to them in the Second  Amended and
Restated  Agreement of Limited  Partnership of Vornado Realty L.P. dated October
20, 1997, as amended to the date hereof,  a copy of which is attached  hereto as
Exhibit A (the "Vornado OP Partnership Agreement").

         704(c)  Value:  Means the fair  market  value of each of the  Protected
Properties  as agreed to by  Vornado  OP and SCR and as set forth in  Schedule 3
hereto.

         Ceiling Rule Disparity: As defined in Section 7(a).

         Cumulative Net Ceiling Rule Disparity: As defined in Section 7(a).

         Curative Allocation: Means, (i) for the Fiscal Year ending December 31,
2002, an amount of income per Non-Rock  Spring  Protected  Unit equal to $1.2613
(which  amount shall be prorated for 2002 if the Merger  occurs after January 1,
2002,  based upon the  number of days in 2002  following  the Merger  divided by
365), (ii) for the Fiscal Year ending December 31, 2003, an amount of income per
Non-Rock  Spring  Protected Unit equal to $1.4781 and (iii) for each Fiscal Year
following  2003  through and  including  2041,  an amount of income per Non-Rock
Spring  Protected  Unit  equal to $1.6423  (which  amount  per  Non-Rock  Spring
Protected Unit shall be pro rated between the  transferor  and  transferee  with
respect to a  Non-Rock  Spring  Protected  Unit that is  transferred  during any
Fiscal Year,  based upon the number of days in such Fiscal Year prior to the day
on which such Non-Rock  Spring  Protected Unit was transferred and the number of
days  remaining in such Fiscal Year).  If any taxable year of Vornado OP is less
than 365 days,  then the Curative  Allocation  shall be pro rated based upon the
ratio of the number of days in such "short taxable year" to 365.

         Existing Nonrecourse Debt: Means all of the outstanding indebtedness of
SCR and its  Subsidiaries  at the  time of the  closing  of the  Merger  that is
treated as a  Nonrecourse  Liability and that is secured by any of the Protected
Properties (or is treated for purposes of Treasury Regulation ss.  1.752-3(a)(2)
as secured by any of the Protected  Properties).  The Existing  Nonrecourse Debt
and the  Protected  Properties  secured  thereby  are set  forth on  Schedule  4
hereto).

         Existing SCR Indebtedness: As defined in Section 2(d)(1).

         Extended  Tax  Protected  Period:  As  defined  in  the  definition  of
Protected Period.

         Guaranteed  Amount:  Means the aggregate amount of each Guaranteed Debt
that is guaranteed at any time by SCR Partner Guarantors.  The Guaranteed Amount

                                       2

with  respect  to each  Guaranteed  Debt as of the date  hereof  is set forth on
Schedule 8 hereto.

         Guaranteed  Debt:  Means each of the loans  listed on Schedule 8 hereto
that is guaranteed by SCR Partner  Guarantors on the date hereof,  and any other
loans  incurred (or assumed) by Vornado OP or any of its  Subsidiaries  that are
guaranteed by SCR Partner Guarantors at any time hereafter pursuant to Article 3
hereof.

         Initial Guarantee  Shortfall:  Means, as to each SCR Partner Guarantor,
the excess of the amount of  indebtedness  that such SCR Partner  Guarantor  has
committed to  guarantee  at the time of the Merger,  which amount as to each SCR
Partner  Guarantor  is set  forth on  Schedule  9  hereto,  over  the  Scheduled
Guarantee Amount for such SCR Partner Guarantor. The Initial Guarantee Shortfall
for each SCR partner  Guarantor as of the date hereof is set forth on Schedule 9
hereto. The Initial Guarantee Shortfall with respect to an SCR Partner Guarantor
shall be reduced as set forth in Section 3(b).

         Lock-up Agreement:  Means as to each SCR Unitholder who enters into the
a Lock-Up  Agreement in the form of Schedule 6 hereto,  such  Lock-up  Agreement
that such SCR Unitholder has entered into.

         Nonrecourse  Liability:  Means a "nonrecourse  liability" as defined in
Treasury Regulations ss. 1.752-1(a)(2).

         Non-Rock Spring Protected  Units:  Means all Protected Units other than
the  Protected  Units  issued in the  Merger  with  respect  to SCR  Units  that
previously  were  issued to the former  partners  of First Rock  Spring  Limited
Partnership in connection with the contribution of their interests in First Rock
Spring Limited Partnership to SCR on or about January 31, 2000.

         Other Qualified Indebtedness: As defined in Section 2(d)(1).

         Protected  Units:  Means  those  Vornado  OP  Units  issued  to the SCR
Unitholders  in  connection  with the Merger,  or any  partnership  interests in
Vornado OP (or any other  entity  that is treated as a  partnership  for federal
income tax purposes)  thereafter  issued by Vornado OP to the SCR Unitholders in
exchange for such Protected Units or with respect to such Protected  Units.  The
term  Protected  Units shall not include  any other  Vornado OP Units  hereafter
acquired by an SCR  Unitholder,  whether from Vornado OP (except as described in
the immediately preceding sentence) or otherwise.

         Protected Properties:  Means, except as otherwise specifically provided
herein,  those  properties  and assets set forth on Schedule 2 hereto 1/ and any
other

- ----------
1/ The  Protected  Properties  will include all  buildings and land in which SCR
owns a direct or indirect interest at the time of the Merger, all partnership or
LLC interests owned directly or indirectly by SCR at the time of the Merger, the
management  business  conducted  by SCR  and  all  stock  or  securities  of any
corporate  entity to which all or any

                                                            [Footnote continued]

                                       3

properties or assets hereafter  acquired by Vornado OP or any direct or indirect
Subsidiary  of Vornado OP that are treated as  "substituted  basis  property" as
defined  in  Section  7701(a)(42)  of the Code with  respect  to such  Protected
Properties.

         Protected Period: Means with respect to each SCR Unitholder, the period
ending  at 12:01  A.M.  on  January  1, 2012 (the  "Initial  Ten-Year  Period"),
provided, however, that the Protected Period with respect to each SCR Unitholder
who enters into a Lock-Up  Agreement  in the form of Schedule 6 hereto  shall be
extended  for an  additional  10-year  period,  which shall end at 12:01 A.M. on
January 1, 2022 (the  additional  10-year period is referred to as the "Extended
Tax Protected  Period"),  provided further that in the event of the death of all
of Robert H. Smith,  Robert P.  Kogod,  Clarice R. Smith and Arlene R. Kogod (a)
during the Initial Ten-Year Period, no SCR Unitholder shall have an Extended Tax
Protected  Period  beyond the Initial  Ten-Year  Period or (b) after the Initial
Ten-Year Period,  the Extended Tax Protected Period shall terminate with respect
to each SCR  Unitholder on the date of death of the last to survive of Robert H.
Smith,  Clarice R. Smith, Robert P. Kogod, or Arlene R. Kogod. In addition,  the
Extended Tax Protected Period shall be subject to early termination as set forth
in Article 12 below.

         Qualified Guarantee: As defined in Section 3(b).

         Qualified Guarantee Indebtedness: As defined in Section 3(b).

         Qualified Replacement Indebtedness:As defined in Section 2(d)(1).

         SCR Merger Closing Date: Means December 31, 2001.

         SCR Partner Guarantors: Means those SCR Unitholders who, as of the time
of the determination, have guaranteed any portion of any of the Guaranteed Debt.
The SCR Partner  Guarantors as of the date hereof,  the aggregate  amount of all
Guaranteed Debt that each such SCR Partner has guaranteed as of the date hereof,
and each SCR Partner  Guarantor's  dollar amount share of the Guaranteed  Amount
with  respect  to each  Guaranteed  Debt as of the date  hereof are set forth on
Schedules 8 and 9 hereto.

         SCR  Unitholders:  Means the SCR  Unitholders  set forth on  Schedule 1
hereto,2/ and any Person who holds  Protected  Units who acquires such Protected
Units  from an SCR  Unitholder  in a  transaction  in which  gain or loss is not
recognized in whole or in part for federal income tax purposes and in which such
transferee's  adjusted basis, as

- ----------
[Footnote continued]

portion  of such  management  business  is  transferred  in  connection  with or
following the Merger and in which Vornado OP owns a direct or indirect interest.

2/ The term SCR  Unitholders  shall  include each SCR  Unitholder  that receives
Vornado  OP Units in the  Merger.

                                       4

determined for federal income tax purposes, is determined in whole or in part by
reference to the adjusted basis of the SCR Unitholder in such Protected Units.

         Scheduled  Guarantee Amount:  Means, as to each SCR Partner  Guarantor,
the aggregate  amount of all Guaranteed  Debt that, as of the SCR Merger Closing
Date, such SCR Partner Guarantor shall have guaranteed.  The Scheduled Guarantee
Amount for each such SCR  Partner  Guarantor  is set forth on Schedule 9 to this
Agreement.  The Scheduled Guarantee Amount for an SCR Partner Guarantor shall be
increased by the amount of any Qualified  Guarantee  Indebtedness  guaranteed by
such SCR Partner  Guarantor  pursuant to Section 3(b).  The Scheduled  Guarantee
Amount  for an SCR  Partner  Guarantor  shall  be  reduced  only if (i) such SCR
Partner  Guarantor  notifies Vornado OP in writing that the Scheduled  Guarantee
Amount is thereafter to be reduced (which notice shall not affect any guarantees
then existing by the SCR Partner  Guarantor  but, as to the dollar amount of the
reduction  specified in such notice,  shall relieve Vornado OP of its obligation
under this  Agreement to maintain the  Guaranteed  Debt with respect to such SCR
Partner  Guarantor  or to offer  replacement  debt to be  guaranteed  by the SCR
Partner  Guarantor),  or (ii) in the  event  that any  Guaranteed  Debt is to be
repaid  or  refinanced  and  Vornado  OP offers in  writing  to the SCR  Partner
Guarantor the  opportunity  to enter into a Qualified  Guarantee with respect to
other  Qualified  Guarantee  Indebtedness  that meets all of the  conditions set
forth in Section 3(e) and the other applicable  provisions of Article 3, the SCR
Partner Guarantor fails, within 30 days after receipt of such offer from Vornado
OP, to execute a guarantee  with  respect to such  replacement  Guaranteed  Debt
(provided  that the amount of the  reduction in the Scheduled  Guarantee  Amount
with  respect to such SCR Partner  Guarantor  shall not exceed the lesser of the
dollar  amount of the  guarantee  offered by Vornado and not accepted by the SCR
Partner Guarantor or such SCR Partner Guarantor's share of the Guaranteed Amount
with respect to the Guaranteed Debt being repaid or refinanced).

         Subsidiary: Means any partnership,  limited liability company, trust or
other entity either (a) whose disposition of a Protected  Property or any direct
or  indirect  interest  in a  Protected  Property  or (b) a direct  or  indirect
disposition of an interest in which by Vornado OP would result in the allocation
of taxable gain to one or more SCR Unitholders pursuant to Section 704(c) of the
Code and the Treasury Regulations thereunder.

         Successor Partnership: As defined in Section 2(b).

         Taxes:  Means all federal,  state,  local and foreign taxes (including,
without  limitation,  income,  profit,  franchise,  sales,  use, real  property,
personal  property,  ad valorem,  excise,  employment,  social security and wage
withholding   taxes)  and  installments   and  estimated   taxes,   assessments,
deficiencies, levies, imposts, duties, withholdings, or other similar charges of
every kind,  character or description  imposed by any governmental  authorities,
and any interest, penalties or additions to tax imposed thereon or in connection
therewith.

                                       5

                                    ARTICLE 2
              RESTRICTIONS ON DISPOSITIONS OF PROTECTED PROPERTIES

         (a)  General  Prohibition  on  Disposition.  Vornado  OP agrees for the
benefit of each SCR Unitholder,  for the term of the Protected Period applicable
to such SCR Unitholder, not to directly or indirectly sell, exchange,  transfer,
or otherwise dispose of any Protected  Property or any interest therein (without
regard to  whether  such  disposition  is  voluntary  or  involuntary).  Without
limiting the foregoing,  the term "sale,  exchange,  transfer or disposition" by
Vornado OP shall be deemed to include, and the prohibition shall extend to:

         (i)      any direct or indirect  disposition  by any direct or indirect
                  Subsidiary  (including  SCR) of any Protected  Property or any
                  interest therein;

         (ii)     any direct or indirect disposition by Vornado OP of all or any
                  portion of its interest in SCR;

         (iii)    any  direct  or  indirect  disposition  by  Vornado  OP or any
                  Subsidiary of Vornado OP of all or any portion of its interest
                  in any  entity  that (A) was a  Subsidiary  of SCR or (B) is a
                  Subsidiary  of Vornado and owns a direct or indirect  interest
                  in a Protected  Property  (which  prohibition  shall  include,
                  without limitation,  any transaction  involving a distribution
                  or deemed  distribution  by a  Subsidiary  to Vornado OP under
                  Section 731 of the Code);

         (iv)     any  direct or  indirect  distribution  by  Vornado  OP of any
                  Protected   Property  (or  any  direct  or  indirect  interest
                  therein) that is subject to Section  704(c)(1)(B)  of the Code
                  and the Treasury Regulations thereunder; and

         (v)      any  distribution  by Vornado OP to an SCR Unitholder  that is
                  subject  to  Section   737  of  the  Code  and  the   Treasury
                  Regulations   thereunder   (except  as,  and  to  the  extent,
                  permitted under Section 2(f) below);

Without  limiting the  foregoing,  a  disposition  shall  include any  transfer,
voluntary or  involuntary,  in a foreclosure  proceeding,  pursuant to a deed in
lieu of  foreclosure,  or in a  bankruptcy  proceeding,  except  as set forth in
Section  2(d)  below.  This  Section  2(a) shall not be violated by an actual or
deemed  distribution of money (within the meaning of Section 731 of the Code) by
Vornado OP that results in the  recognition  of gain solely by reason of Section
731 of the Code.

         (b)  Exceptions   Where  No  Gain   Recognized.   Notwithstanding   the
restriction set forth in Section 2(a),  Vornado OP or any Subsidiary  (including
SCR) may  dispose of a  Protected  Property  (or an  interest  therein)  if such
disposition qualifies as a like-kind exchange under Section 1031 of the Code, or
an involuntary  conversion under Section 1033 of the Code, or other  transaction
(including,  but not limited to, a  contribution  of property to any entity that
qualifies for the nonrecognition of gain under Section 721 or Section 351 of the
Code, or a merger or consolidation of Vornado OP (or SCR, as applicable) with or
into another entity that qualifies for taxation as a  "partnership"  for federal
income  tax  purposes  (a  "Successor  Partnership"))  that,  as to  each of the
foregoing,  does not result in the  recognition of any taxable income or gain to
any  SCR  Unitholder  with  respect  to any of

                                       6

the Protected Units; provided, however, that:

          (1)  in the event of a disposition  under Section 1031 or Section 1033
               of the Code,  any property that is acquired in exchange for or as
               a  replacement  for a  Protected  Property  shall  thereafter  be
               considered a Protected Property;

          (2)  in the  case  of a  Section  1031  like-kind  exchange,  if  such
               exchange is with a "related  party" within the meaning of Section
               1031(f)(3)  of the Code,  any direct or indirect  disposition  by
               such  related  party  of the  Protected  Property  or  any  other
               transaction  prior to the  expiration  of the two (2) year period
               following  such exchange  that would cause Section  1031(f)(1) to
               apply with respect to the Protected Property (including by reason
               of the application of Section  1031(f)(4))  shall be considered a
               violation of Section 2(a) by Vornado OP;

          (3)  if the Protected  Property is  transferred to another entity in a
               transaction in which gain or loss is not  recognized,  the direct
               and  indirect  interest  of  Vornado  OP  in  such  entity  shall
               thereafter  be  considered  a  Protected  Property,  and  if  the
               acquiring  entity's  disposition of the Protected  Property would
               cause an SCR  Unitholder  to  recognize  gain or loss as a result
               thereof,  the  transferred  Protected  Property  still  shall  be
               considered a Protected Property;

          (4)  if Vornado OP directly or  indirectly  receives any property that
               is in whole or in part a "substituted  basis property" as defined
               in Section  7701(a)(42)  of the Code with  respect to a Protected
               Property (including,  without limitation, a Protected Property by
               reason of clause (3)  above),  such  substituted  basis  property
               shall thereafter be considered a Protected Property;

          (5)  in  the  event  that  at  the  time  of  the  exchange  or  other
               disposition  the  Protected  Property  is  secured,  directly  or
               indirectly,   by  indebtedness  that  is  guaranteed  by  an  SCR
               Unitholder (or for which an SCR Unitholder otherwise has personal
               liability)  and that is not then in default and the transferee is
               not a Subsidiary  of Vornado OP that both is more than 50% owned,
               directly or  indirectly by Vornado OP and is and will continue to
               be under the legal  control of Vornado OP (which shall  include a
               partnership or limited liability company in which Vornado OP or a
               wholly  owned  subsidiary  of  Vornado  OP is the  sole  managing
               general  partner or sole managing  member,  as  applicable),  (a)
               either  (I) such  indebtedness  shall be  repaid  in full or (II)
               Vornado  shall  obtain  from the  lenders  with  respect  to such
               indebtedness a full and complete release of liability for each of
               the  SCR  Unitholders  that  has  guaranteed,  or  otherwise  has
               liability for, such indebtedness, and (b) if such indebtedness is
               a  Guaranteed  Debt and the  Protected  Period of the SCR Partner
               Guarantors  with respect to such  Guaranteed  Debt shall not have
               expired,  Vornado OP shall comply with its covenants set forth in
               Article 3 below with respect to such  Guaranteed Debt and the SCR
               Partner Guarantors that are considered to have

                                       7

               liability  for such  Guaranteed  Debt  (determined  under Section
               3(d),  treating  such  events as a  repayment  of the  Guaranteed
               Debt); and

          (6)  in the event of a merger or  consolidation  involving  Vornado OP
               (or any  Subsidiary) and a Successor  Partnership,  the Successor
               Partnership  shall have  agreed in writing for the benefit of the
               SCR  Unitholders  that all of the  restrictions of this Article 2
               shall continue to apply with respect to the Protected Properties.

         (c) Mergers.  Any merger or consolidation  involving  Vornado OP or any
Subsidiary of Vornado OP,  whether or not Vornado OP is the surviving  entity in
such merger or  consolidation,  that results in an SCR Unitholder being required
to recognize part or all of the gain that would have been recognized for federal
income tax purposes upon a fully taxable  disposition  of one or more  Protected
Properties at the time of the Merger shall be deemed to be a disposition  of the
Protected Properties for purposes of Section 2(a).

         (d) Exceptions for Certain  Foreclosures,  Bankruptcies and Involuntary
Transfers.  Notwithstanding  the  restriction  set forth in Section 2(a), and in
addition  to the  exceptions  set  forth  in  Section  2(b),  Vornado  OP or any
Subsidiary  (including SCR) may dispose of a Protected  Property (or an interest
therein), without such disposition being considered to be a violation of Article
2 or Vornado OP  incurring  any  liability  under  Article 5 as a result of this
Article 2, as follows:

          (1)  pursuant  to the  foreclosure  of a  loan  secured,  directly  or
               indirectly,  by a Protected  Property,  or in connection with the
               bankruptcy of an entity  owning a direct or indirect  interest in
               the  Protected  Property if all of the following  conditions  are
               satisfied  (A)  if a  foreclosure,  the  foreclosure  (I)  is  of
               indebtedness  that was  incurred  by SCR prior to the time of the
               Merger and was in place at the time of the Merger  ("Existing SCR
               Indebtedness"),  (II) is of  indebtedness  incurred to  refinance
               Existing  SCR  Indebtedness  and the  amount of such  replacement
               indebtedness  at the time it was  incurred did not exceed the sum
               of  the  then  outstanding   Existing  SCR   Indebtedness   being
               refinanced, plus all costs (including prepayment fees, "breakage"
               payments  and similar  costs)  incurred in  connection  with such
               refinancing and such replacement  indebtedness was provided by an
               institutional  lender in connection  with its business of lending
               money  ("Qualified  Replacement  Indebtedness"),  or  (III) is of
               indebtedness  that, at the time incurred,  did not exceed (taking
               into account all other  indebtedness  then outstanding and either
               secured by the Protected Property or owed by the entity incurring
               such  indebtedness  and  its  direct  or  indirect  subsidiaries)
               seventy  percent  (70%) of the fair market value of the Protected
               Property at such time (as determined in good faith by Vornado OP)
               ("Other Qualified Indebtedness");  (B) if a bankruptcy,  the only
               indebtedness  of the  entity in  bankruptcy  for  borrowed  money
               (other  than  obligations  to  trade  creditors  incurred  in the
               ordinary  course  of  business)  is  Existing  SCR  Indebtedness,
               Qualified   Replacement   Indebtedness   and/or  Other  Qualified
               Indebtedness; (C) at all times from the time of the Merger to the
               time of the foreclosure or bankruptcy, as applicable,  the direct
               or indirect  percentage  ownership  interest of

                                       8

               Vornado OP in the Protected Property was not less than the lesser
               of fifty-one  percent (51%) or the percentage  interest of SCR in
               such Protected Property at the time of the Merger; (D) Vornado OP
               at all  times  since the  Merger  shall  have had and shall  have
               exercised  the  legal  right to  control  the  operations  of the
               Protected  Property  (and any entities  through  which Vornado OP
               owns a direct or indirect interest therein); (E) if such Existing
               SCR Indebtedness,  Qualified Replacement  Indebtedness,  or Other
               Qualified Indebtedness shall have matured,  Vornado OP shall have
               used commercially  reasonable  efforts  commencing a commercially
               reasonable   period   prior  to  the  stated   maturity  of  such
               indebtedness  to  cause  such   indebtedness  to  be  refinanced,
               provided that such  refinancing  can be obtained on  commercially
               reasonable terms; and (F) Vornado OP shall have used commercially
               reasonable  efforts  (considering  its  own  best  interests)  to
               prevent  such  foreclosure  or  bankruptcy  (provided  that  such
               required  efforts  shall  not  include  contributing  capital  or
               otherwise providing funds to repay such indebtedness);

          (2)  an event (other than a  foreclosure  or  bankruptcy,  unless such
               foreclosure satisfies clause (1) above) described in Section 1033
               of the Code,  other than a disposition  resulting from or made in
               connection  with the mere threat or imminence of a requisition or
               condemnation;  provided  that Vornado OP agrees to cause any real
               property purchases that it and/or its Subsidiaries  undertake and
               complete  after the  occurrence  of the event  described  in this
               Section  2(d)(2) and prior to the  expiration  of the  applicable
               replacement  period under  Section 1033  (determined  taking into
               account  Section  1033(g) of the Code) and that  otherwise  would
               qualify as  replacement  property for purposes of Section 1033 of
               the Code with respect to the Protected  Property to be treated as
               replacement acquisitions for the purposes of this Section 2(d)(2)
               (other than acquisitions made with Vornado OP Units, acquisitions
               made as part of a Section 1031 exchange and acquisitions  made as
               part of another Section 1033 transaction.

         (e) Issuances of Additional Equity Interests.  Notwithstanding  Section
2(a), the issuance of additional partnership interests in Vornado OP pursuant to
the Vornado  Partnership  Agreement  shall not be considered to be prohibited by
this Section 2 unless such partnership interests are in a form that either their
issuance,  or any  exercise  by a holders  of any  rights  thereunder,  would be
considered to result in a direct or indirect  taxable  disposition by Vornado OP
or any  Subsidiary  of one or more of the  Protected  Properties or any interest
therein   (determined  taking  into  account,   without   limitation,   Sections
704(c)(1)(B),  707(a),  and  737  of  the  Code  and  the  Treasury  Regulations
thereunder).

         (f) Limited Exception for Certain  Distributions by Vornado OP. Section
2(a)(v) shall not be construed to prohibit any  distribution  of property  (such
as, but not limited to, debt securities and equity  securities in a corporation,
a limited  liability  company,  or another  partnership) made by Vornado OP with
respect  to  Vornado  OP Units so long as all of the  following  conditions  are
satisfied:

          (i)  the  distributed  property  received by each holder of  Protected
               Units is registered under the Securities Exchange Act of 1934, is
               listed for  trading

                                       9

               on the New  York  Stock  Exchange,  the  NASDAQ  National  Market
               System, or another comparable national exchange or market system,
               and is freely  transferable  by the  recipient  thereof under the
               applicable federal and state securities laws; and

          (ii) any gain required to be recognized by a holder of Protected Units
               by reason of such  distribution  does not exceed the fair  market
               value  of  the   distributed   property   at  the  time  of  such
               distribution.

                                    ARTICLE 3
                       GUARANTEES OF DEBT AND RESTRICTIONS
                        ON REFINANCING OF GUARANTEED DEBT

         (a) Initial Guaranteed Debt. Either in connection with the Merger or in
connection  with  prior  debt  financings  undertaken  by SCR,  the SCR  Partner
Guarantors have entered into those certain guarantee  agreements whereby the SCR
Partner  Guarantors have  guaranteed the Guaranteed Debt in an aggregate  amount
equal to the  Guaranteed  Amount.  Schedule 8 hereto sets forth,  as of the date
hereof, the amount of all Guaranteed Debt and each SCR Partner Guarantor's share
of the Guaranteed Amount with respect to each Guaranteed Debt.

         (b)  Requirement to Offer  Additional  Guaranteed  Debt. Not later than
December  31,  2004,  Vornado OP shall  offer to each SCR Partner  Guarantor  in
writing the opportunity to guarantee other Vornado OP indebtedness  (which other
indebtedness  may be, but is not required to be,  indebtedness  of SCR or one of
its Subsidiaries) in an amount equal to the Initial Guarantee Shortfall for such
SCR  Partner  Guarantor.  In order for the offer of Vornado  OP to  satisfy  the
requirements of this Section 3(b), (i) the  indebtedness  to be guaranteed,  and
the  terms of the  guaranty  must  satisfy  all of the  conditions  set forth in
Section 3(e)  (indebtedness  satisfying  all such  conditions  is referred to as
"Qualified  Guarantee  Indebtedness");  (ii) the  guarantee  by the SCR  Partner
Guarantors must be pursuant to a Guaranty  Agreement  substantially  in the form
attached  hereto  as  Schedule  7 that  satisfies  the  conditions  set forth in
Sections 3(e)(i) and (iii) (a "Qualified Guarantee");  (iii) the amount required
to be  guaranteed by each SCR Partner  Guarantor  cannot exceed such SCR Partner
Guarantor's then existing  Initial  Guarantee  Shortfall;  and (iv) the offer of
Vornado OP to such SCR Partner Guarantors pursuant hereto must be in writing and
the SCR Partner  Guarantors must have not less than thirty (30) days to elect to
enter into such guarantees. If, and to the extent that, an SCR Partner Guarantor
elects to guarantee Qualified Guarantee  Indebtedness  pursuant to an offer made
in accordance with this Section 3(b), such  indebtedness  thereafter shall being
considered  a  Guaranteed  Debt and  subject  to all of this  Article 3, and the
Initial  Guarantee  Shortfall of such SCR Partner  Guarantor shall be reduced by
the  amount  of such  guarantee.  If an  offer is made by  Vornado  OP to an SCR
Partner  Guarantor  pursuant to this Section 3(b) that  complies with all of the
requirements  of this Section 3(b) and such SCR Partner  Guarantor does not join
in the guarantee pursuant to such offer (or joins in the guarantee for less than
lesser of the amount offered or its then remaining Initial Guarantee Shortfall),
Vornado OP thereafter  shall have no  obligation  to such SCR Partner  Guarantor
with respect to that portion of such SCR Partner  Guarantor's  Initial Guarantee
Shortfall  that  corresponds  to the  amount  of the  indebtedness  that the SCR
Partner  Guarantor  elected not to guarantee  (and such SCR

                                       10

Partner Guarantor's Initial Guarantee Shortfall shall be considered to have been
reduced accordingly).

         (c) Covenant With Respect to  Guaranteed  Debt  Collateral.  Vornado OP
covenants with the SCR Partner  Guarantors  with respect to the Guaranteed  Debt
that (A) it will comply with the  requirements set forth in Section 2(b)(5) upon
any  disposition  of any  collateral  for a Guaranteed  Debt,  whether during or
following  the  applicable  Protected  Period,  and (B) it will not at any time,
whether  during  or  following  the  applicable  Protected  Period,  pledge  the
collateral  with respect to a Guaranteed  Debt to secure any other  indebtedness
(unless such other indebtedness is, by its terms, subordinate in all respects to
the  Guaranteed  Debt for  which  such  collateral  is  security)  or  otherwise
voluntarily dispose of or reduce the amount of such collateral unless either (i)
after giving effect thereto the conditions in Section 3(e)(ii) would continue to
be  satisfied  with  respect  to the  Guaranteed  Debt and the  Guaranteed  Debt
otherwise would continue to be Qualified Guarantee Indebtedness, or (ii) Vornado
OP (A) obtains from the lender with respect to the  original  Guaranteed  Debt a
full and complete  release of any SCR Partner  Guarantor  unless the SCR Partner
Guarantor expressly requests that it not be released,  and (B) if the applicable
Protected  Period has not expired as to all SCR Partner  Guarantors with respect
to such original  Guaranteed  Debt,  offers to each SCR Partner  Guarantor  with
respect to such original Guaranteed Debt as to whom the Protected Period has not
expired,  not  less  than 30 days  prior  to such  pledge  or  disposition,  the
opportunity to enter into a Qualified Guarantee of other Vornado OP indebtedness
that  constitutes  Qualified  Guarantee   Indebtedness  (with  such  replacement
indebtedness  thereafter  being considered a Guaranteed Debt and subject to this
Article 3) in an amount  equal to the amount of such  original  Guaranteed  Debt
that was guaranteed by such SCR Partner Guarantor.

         (d) Repayment or Refinancing of Guaranteed Debt.  Vornado OP shall not,
at any time during the Protected Period applicable to an SCR Partner  Guarantor,
repay or refinance  all or any portion of any  Guaranteed  Debt unless (i) after
taking  into  account  such  repayment,  each  SCR  Partner  Guarantor  would be
entitled,  pursuant  to  Treasury  Regulation  ss.  1.752-2  (and  not  Treasury
Regulation  ss.  1.752-3),  to include in its basis for its  Protected  Units an
amount of  Guaranteed  Debt equal to its  Scheduled  Guarantee  Amount,  or (ii)
alternatively,  Vornado  OP,  not less than 30 days prior to such  repayment  or
refinancing,  offers to the applicable SCR Partner Guarantors the opportunity to
enter into a  Qualified  Guarantee  with  respect to other  Qualified  Guarantee
Indebtedness  in  an  amount  sufficient  so  that,  taking  into  account  such
guarantees  of such other  Qualified  Guarantee  Indebtedness,  each SCR Partner
Guarantor who elects to guarantee such other Qualified Guarantee Indebtedness in
the amount  specified  by Vornado OP would be  entitled,  pursuant  to  Treasury
Regulation ss. 1.752-2 (and not Treasury Regulation ss. 1.752-3),  to include in
its  adjusted  tax basis for its  Protected  Units debt  equal to the  Scheduled
Guarantee Amount for such SCR Partner Guarantor.

         (e) Criteria for  Indebtedness  to be Guaranteed  and  Guarantees.  The
Guaranteed  Debt (and any  additional  or  replacement  Guaranteed  Debt offered
pursuant to Sections 3(b),  3(c), 3(d), and 3(g) hereof) and the guarantees with
respect thereto shall at all times meet the following conditions:

          (i) each such guarantee  shall be a "bottom dollar  guarantee" in that
     the  lender  for the  Guaranteed  Debt is  required  to  pursue

                                       11

     all other  collateral and security for the Guaranteed  Debt (other than any
     "bottom  dollar  guarantees"  permitted  pursuant to this clause (i) and/or
     Section 3(f) below)  prior to seeking to collect on such a  guarantee,  and
     the lender shall have recourse against the guarantee only if, and solely to
     the extent that,  the total amount  recovered by the lender with respect to
     the  Guaranteed  Debt after the lender has  exhausted  its  remedies as set
     forth above is less than the aggregate of the Scheduled  Guarantee  Amounts
     with respect to such  Guaranteed  Debt (plus the  aggregate  amounts of any
     other  guarantees  (x) that are in effect with  respect to such  Guaranteed
     Debt at the time the  guarantees  pursuant  to this  Section 3 are  entered
     into, or (y) that are entered into after the date the  guarantees  pursuant
     to this Section 3 are entered into with respect to such Guaranteed Debt and
     that comply with Section 3(f) below, but only to the extent that, in either
     case,  such guarantees are "bottom dollar  guarantees"  with respect to the
     Guaranteed Debt), and the aggregate liability of each SCR Partner Guarantor
     for all Guaranteed Debt shall be limited to the amount actually  guaranteed
     by such SCR Partner Guarantor;

          (ii) the fair market value of the collateral  against which the lender
     has recourse pursuant to the Guaranteed Debt, determined as of the time the
     guaranty  is entered  into (an  independent  appraisal  relied  upon by the
     lender in making the loan shall be conclusive  evidence of such fair market
     value when the  guarantee  is being  entered  into in  connection  with the
     closing of such  loan),  shall not be less than 3.333  times the sum of (x)
     the  aggregate  of the  Scheduled  Guarantee  Amounts  with respect to such
     Guaranteed Debt plus (y) the dollar amount of any other  indebtedness  that
     is  senior to or pari  pasu  with the  Guaranteed  Debt and as to which the
     lender  thereunder has recourse against property that is collateral for the
     Guaranteed Debt, plus (z) the aggregate amounts of any other guarantees (A)
     that are in effect  with  respect to such  Guaranteed  Debt at the time the
     guarantees  pursuant to this  Section 3 are entered  into,  or (B) that are
     entered into after the date the  guarantees  pursuant to this Section 3 are
     entered  into with  respect to such  Guaranteed  Debt and that  comply with
     Section  3(f)  below,  but only to the  extent  that in either  case,  such
     guarantees  are "bottom dollar  guarantees"  with respect to the Guaranteed
     Debt);

          (iii) (A) the executed  guarantee  must be delivered to the lender and
     (B) the  execution of the guarantee by the SCR Partner  Guarantors  must be
     acknowledged  by the lender as an  inducement  to it to make a new loan, to
     continue an existing loan (which  continuation is not otherwise  required),
     or to grant of a material  consent under an existing loan (which consent is
     not otherwise required to be granted) or, alternatively, the guarantee must
     be with respect to a loan that, under the terms thereof, (I) is governed by
     New York law and  either the loan is  secured  by  property  located in New
     York, the lender has a significant  place of business in New York (with any
     bona fide  branch or office of the lender  through  which the loan is made,
     negotiated,  or administered being deemed a "significant place of business"
     for the purposes  hereof),  or the lender  obtained in connection with such
     loan an opinion of counsel to the effect that such provisions regarding New
     York law

                                       12

     are enforceable,  or (II) is governed by the laws of another state that has
     a statutory provision or applicable controlling judicial decisions that are
     comparable to Section  5-1401 of the New York General  Obligations  Law and
     the  conditions  set forth in clause (I) with  respect to New York would be
     satisfied with respect to such other state;

          (iv) the  aggregate  amount  of  guarantees,  indemnities,  and  other
     similar  undertakings  with  respect  to such debt must not exceed the face
     amount of the debt;

          (v) as to each SCR  Partner  Guarantor  that is  executing a guarantee
     pursuant hereto,  there must be no other Person that would be considered to
     "bear the economic risk of loss," within the meaning of Treasury Regulation
     ss. 1.752-2, or would be considered to be "at risk" for purposes of Section
     465(b) with respect to that portion of such debt for which such SCR Partner
     Guarantor  is being made liable for  purposes of  satisfying  Vornado  OP's
     obligations  to such SCR Partner  Guarantor  under this Article 3; provided
     that  so  long as the  initial  lender  is not  Vornado  REIT  or a  person
     considered  to be a partner  in  Vornado  OP or  related  to such a partner
     (determined  excluding persons  qualifying for the de minimis exception set
     forth in Treasury  Regulation  ss.  1.752-2(d)(1)),  Vornado OP will not be
     considered to have violated this limitation by reason of actions of persons
     (other  than  Vornado  REIT and its  subsidiaries  and their  officers  and
     directors)  that are neither  consented  to in writing nor  facilitated  by
     Vornado OP or Vornado  REIT (except that the  foregoing  proviso  shall not
     apply to other similar  "bottom dollar  guarantees"  existing and permitted
     pursuant to Section 3(e)(i) and/or added pursuant to Section 3(f));

          (vi) the obligor with respect to the debt to be  guaranteed is Vornado
     OP or a  Subsidiary  of Vornado OP in which  Vornado OP owns,  directly and
     indirectly,  not less than 51% of the economic  interests  and which is and
     will  continue  to be under the legal  control of  Vornado OP (which  shall
     include a partnership or limited liability company in which Vornado OP or a
     wholly owned  subsidiary of Vornado OP is the sole managing general partner
     or sole managing member, as applicable).

         (f) Limitation on Additional Guarantees With Respect to Debt Secured by
Collateral for Guaranteed  Debt.  Vornado OP shall not offer the  opportunity or
make available a guaranty of any Guaranteed  Debt or other debt that is secured,
directly or indirectly,  by any  collateral for Guaranteed  Debt unless (i) such
debt by its terms is subordinate  in all respects to the Guaranteed  Debt or, if
such others  guarantees are of the Guaranteed  Debt itself,  such  guarantees by
their terms must be paid in full before the lender can have  recourse to the SCR
Partner  Guarantors (i.e., the first dollar amount of recovery by the applicable
lenders must be applied to the Guaranteed  Amount);  provided that the foregoing
shall not apply with respect to additional guarantees of Guaranteed Debt so long
as the  conditions  set forth in Sections  3(e)(ii)  and (v) would be  satisfied
immediately after the implementation of such additional guarantee (determined in
the case of Section 3(e)(ii), based upon the fair market value of the collateral
for such  Guaranteed  Debt at the time the additional  guarantee is entered into
and  adding  the  amount  of  such  additional

                                       13

guarantee(s)  to the sum of the  applicable  Scheduled  Guarantee  Amounts  with
respect  to such  Guaranteed  Debt plus any  other  preexisting  "bottom  dollar
guarantee"  previously  permitted  pursuant  to this  Section  3(f) or  Sections
3(e)(i) and (ii) above,  for purposes of making the computation  provided for in
Section  3(e)(ii)),  and (ii) such  other  guarantees  do not have the effect of
reducing the amount of the Guaranteed Debt that is includible by any SCR Partner
Guarantor in its adjusted tax basis for its SCR  Partnership  Units  pursuant to
Treasury Regulation ss. 1.752-2.

         (g)  Amortization  of Guaranteed  Debt. In the event that the principal
amount of a Guaranteed  Debt is decreased  as a result of  amortization  of such
Guaranteed  Debt such that the principal  amount of the Guaranteed Debt (reduced
by the amount of any other guarantees,  indemnities or similar arrangements that
apply with  respect to such debt) is less than the  Scheduled  Guarantee  Amount
with respect to such  Guaranteed  Debt,  then Vornado OP shall make available to
the  applicable  SCR Partner  Guarantors  the  opportunity  to  guarantee  other
Qualified  Guarantee  Indebtedness in an amount equal to the Scheduled Guarantee
Amounts  with  respect  to such debt  (pursuant  to a  Qualified  Guaranty  that
satisfies the conditions set forth in Section 3(e) above), with such replacement
indebtedness  thereafter  being subject to this Article 3. Vornado OP shall have
the  right,  but  not the  obligation,  to  offer  to one or  more  SCR  Partner
Guarantors the  opportunity to enter into a Qualified  Guarantee with respect to
Qualified  Guarantee  Indebtedness in an amount up to (but not in excess of) the
projected  reductions in such SCR Partner  Guarantor's  "share" of an amortizing
Guaranteed Debt below such SCR Partner  Guarantor's  Scheduled  Guarantee Amount
with  respect  thereto  during the next three years (or if less,  the balance of
such  SCR  Partner  Guarantor's   Protected  Period)  (an  "Advance  Replacement
Guarantee Offer"). If Vornado OP makes an Advance Replacement Guarantee Offer in
writing to an SCR  Partner  Guarantor  and such SCR Partner  Guarantor  does not
enter into the Qualified Guarantee offered in connection therewith, this Section
3(g) shall not be  considered  to have been  violated  with  respect to such SCR
Partner  Guarantor by reason of amortization of the Guaranteed Debt with respect
to which the Advance Replacement  Guarantee Offer was made, up to the amount for
which such Advance Replacement Guarantee Offer was made and not accepted.

         (h) Process.  Whenever  Vornado OP is required  under this Article 3 to
offer to one or more of the SCR Partner  Guarantors an  opportunity to guarantee
Qualified  Guarantee  Indebtedness,  Vornado  OP  shall  be  considered  to have
satisfied its obligation if the other conditions in this Article 3 are satisfied
and, not less than thirty (30) days prior to the date that such guarantee  would
be required to be executed in order to satisfy  this Article 3, Vornado OP sends
by first class mail, return receipt requested, to the last known address of each
such SCR  Partner  Guarantor  (as  reflected  in the  records of Vornado OP) the
Guaranty  Agreement to be executed (which shall be  substantially in the form of
the Schedule 7 hereto, with such changes thereto as are necessary to reflect the
relevant  facts)  and a  brief  letter  explaining  the  relevant  circumstances
(including  that  the  offer is  being  made  pursuant  to this  Article  3, the
circumstances  giving  rise to the  offer,  a brief  summary of the terms of the
Qualified  Guarantee  Indebtedness to be guaranteed,  a brief description of the
collateral for the Qualified Guarantee  Indebtedness,  a statement of the amount
to be guaranteed,  the address to which the executed Guaranty  Agreement must be
sent and the date by which it must be  received,  and a statement  to the effect
that, if the SCR Partner the fails to execute and return the Guaranty  Agreement
within the time period  specified,  the SCR Partner  Guarantor  thereafter would
lose its  rights  under this  Article 3 with  respect to

                                       14

the amount of debt that Vornado OP is required to offer to be guaranteed and for
which  the  guarantee  is being  offered,  and  depending  upon the SCR  Partner
Guarantor's circumstances and other circumstances related to Vornado OP, the SCR
Partner could be required to recognize taxable gain as a result thereof,  either
currently or prior to the expiration of the applicable  Protected  Period,  that
otherwise would have been deferred).  If a notice is properly sent in accordance
with this procedure, Vornado OP shall have not responsibility as a result of the
failure of an SCR  Partner  Guarantor  either to receive  such notice or to have
responded thereto within the specified time period. 3/

         (i) Reduction in Obligations of SCR Guarantor Partners.  If an offer to
guarantee  debt is made by Vornado OP to an SCR  Partner  Guarantor  pursuant to
this Section 3 that complies  with all of the  applicable  requirements  of this
Section 3, an SCR Partner Guarantor may elect not to join in a guarantee at all,
or to join in a guarantee for less than the full amount offered, but if such SCR
Partner  Guarantor  does not join in the  guarantee  pursuant  to such offer (or
joins in the  guarantee  for less than the  amount  offered  (provided  that the
amount offered does not exceed its then remaining  Initial  Guarantee  Shortfall
and the portion of Scheduled Guarantee Amount for which a replacement  guarantee
is being  offered)),  Vornado OP thereafter shall have no obligation to such SCR
Partner  Guarantor with respect to that portion of such SCR Partner  Guarantor's
Initial Guarantee  Shortfall and/or Scheduled  Guarantee Amount that corresponds
to the amount of the indebtedness  that the SCR Partner Guarantor elected not to
guarantee  (and such SCR Partner  Guarantor's  Initial  Guarantee  Shortfall  or
Scheduled  Guarantee  Amount,  as  applicable,  shall be considered to have been
reduced accordingly).

         (j) Limitation on Liability.  So long as Vornado OP shall have complied
with all of the  applicable  provisions  of this Section 3 and Section  8(a)(i),
neither  Vornado OP nor Vornado REIT shall have any  liability to an SCR Partner
Guarantor  under  this  Section  3 by reason of a  successful  assertion  by the
Internal  Revenue  Service that guarantees of Guaranteed  Debt,  whether entered
into  prior to the Merger or  subsequent  to the  Merger  and  pursuant  to this
Section 3, are not effective to cause the affected SCR Partner  Guarantors to be
allocated debt pursuant to Treasury  Regulation  1.752-2 or considered to be "at
risk" for purposes of Section 465(b).

         (k)  Presumption  as to Schedule 7. The form of the Guaranty  Agreement
attached  hereto as  Schedule 7 shall be  conclusively  presumed  to satisfy the
conditions set forth in Section  3(e)(i) and to have caused the Guaranteed  Debt
to be  considered  allocable to the SCR  Guarantor  Partner who enters into such
Guaranty Agreement pursuant to Treasury Regulation ss. 1.752-2 so long as all of
the following conditions are met with respect such Guaranteed Debt:

          (i)    there are no other  guarantees  in effect with  respect to such
                 Guaranteed Debt (other than the guarantees contemporaneously

- ----------
3/ Prior to the closing of the Merger, the parties may agree to an approved form
of a notice pursuant  hereto,  which if agreed upon shall be added as a Schedule
to this Agreement.

                                       15

                 being  entered into by the SCR Partner  Guarantors  pursuant to
                 this Article 3);

          (ii)   the collateral  securing such Guaranteed Debt is not, and shall
                 not thereafter  become,  collateral for any other  indebtedness
                 that is senior to or pari pasu with such Guaranteed Debt;

          (iii)  no additional  guarantees  with respect to such Guaranteed Debt
                 will be entered  into during the  applicable  Protected  Period
                 pursuant to the proviso set forth in Section 3(f);

          (iv)   the lender with respect to such  Guaranteed Debt is not Vornado
                 OP, any  Subsidiary  or other entity in which Vornado OP owns a
                 direct or indirect interest, Vornado REIT, any other partner in
                 Vornado OP, or any person  related to any partner in Vornado OP
                 as determined for purposes of Treasury  Regulation ss. 1.752-2;
                 and

          (v)    none of Vornado REIT,  nor any other partner in Vornado OP, nor
                 any person  related to any partner in Vornado OP as  determined
                 for  purposes of Treasury  Regulation  ss.  1.752-2  shall have
                 provided,  or shall  thereafter  provide,  collateral  for,  or
                 otherwise  shall have entered into, or shall  thereafter  enter
                 into, a relationship  that would cause such person or entity to
                 be  considered  to bear the risk of loss with  respect  to such
                 Guaranteed   Debt,  as  determined  for  purposes  of  Treasury
                 Regulationss. 1.752-2.

         (l) Exception for Certain Foreclosures and Involuntary Transfers.  If a
Guaranteed  Debt is repaid or  extinguished  in connection  with a  foreclosure,
bankruptcy,  or involuntary  transfer that satisfies the conditions set forth in
Section 2(d),  Vornado OP shall not be considered to have violated  Section 3(d)
so long  as  Vornado  OP  undertakes  commercially  reasonable  efforts  to make
available  to  the  affected  SCR  Partner  Guarantors  as  soon  as  reasonably
practicable under the circumstances  other Qualified  Guarantee  Indebtedness to
guarantee  pursuant to  Qualifying  Guarantees,  including any new or additional
indebtedness  thereafter  incurred by Vornado OP and its Subsidiaries,  provided
that Vornado OP shall not be obligated to incur new or  additional  indebtedness
in order to satisfy such undertaking.

                                       16

                                    ARTICLE 4
       LIMITATION ON REPAYMENT OR PREPAYMENT OF EXISTING NONRECOURSE DEBT

         (a) Obligation to Retain Existing  Nonrecourse  Debt.  Unless and until
Vornado OP has  satisfied  its  obligations  to an SCR Partner  Guarantor  under
Section  3(b)  above (or if  sooner,  the  expiration  of the  Protected  Period
applicable  to such SCR Partner  Guarantor),  Vornado OP shall not,  directly or
indirectly,  cause or permit Vornado OP or any Subsidiary to repay or prepay any
of the Existing  Nonrecourse Debt if, after giving effect to such payment,  such
SCR Partner  Guarantor would be allocated at any time prior to the expiration of
the Protected Period  applicable to such Guarantor  Partner pursuant to Treasury
Regulation ss.  1.752-3(a) an amount of Existing  Nonrecourse  Debt and/or other
indebtedness  of Vornado OP that  qualifies as a Nonrecourse  Liability  that is
less  than  such  SCR  Partner  Guarantor's  then  remaining  Initial  Guarantee
Shortfall.  If, and to the extent,  that Vornado OP relies on other  Nonrecourse
Liabilities  of  Vornado  OP for  purposes  of this  Section  4(a),  such  other
Nonrecourse  Liabilities  shall be subject to this  Article 4. This Section 4(a)
shall have no  application  with respect to any SCR Unitholder who is not an SCR
Partner  Guarantor,  or with respect to any SCR Partner Guarantor either who has
no Initial Guarantee  Shortfall,  or whose Initial Guarantee  Shortfall has been
reduced to zero  pursuant to Section 3(b)  (including,  without  limitation,  by
reason of the last sentence  thereof).  AT SUCH TIME AS VORNADO OP HAS SATISFIED
ALL OF ITS OBLIGATIONS TO ALL SCR PARTNER  GUARANTORS  UNDER SECTION 3(B) ABOVE,
THIS ARTICLE 4 SHALL CEASE TO HAVE ANY APPLICATION.

         (b) Exceptions for Principal Amortization and Certain Refinancings. The
requirements in Section 4(a) above shall not apply in the case of:

              (i) a payment  or  repayment  that  consists  solely of a required
principal amortization payment made with respect to an Existing Nonrecourse Debt
or  Replacement  Debt (as defined in clause (ii) below) in  accordance  with the
principal  amortization  schedules in effect at the effective time of the Merger
with respect to such Existing  Nonrecourse  Debt (or in the case of  Replacement
Debt, a principal  amortization  schedule that meets the conditions set forth in
subclause  (z) of clause  (ii)  below);  provided  that a  required  payment  of
principal at the scheduled  maturity of any indebtedness shall not be considered
within  the scope of this  clause  (i) (and,  accordingly,  Vornado  OP shall be
required  to  refinance  such  maturing  indebtedness  with debt  that  would be
considered qualifying Replacement Debt under clause (ii) below); or

              (ii) a payment of principal made from proceeds of new indebtedness
incurred to refinance Existing Nonrecourse Debt (such new indebtedness  incurred
pursuant to the  refinancing  that meets the  conditions set forth below in this
clause (ii) is referred to in this Agreement as  "Replacement  Debt"),  provided
that (x) such  refinancing is made on a basis that the Replacement Debt would be
considered a  Nonrecourse  Liability  that is allocable for purposes of Treasury
Regulations ss.  1.752-3(a) as the Existing  Nonrecourse Debt being  refinanced;
(y) that the principal  amount of the Replacement  Debt is at least equal to the
principal  amount  of  the  Existing  Nonrecourse  Debt  on  the  date  of  such
refinancing;  and (z) provides either for "interest-only"  payments or for level
payments of principal and interest that would not result in  amortization of the
remaining principal balance over a period shorter than the lesser of twenty-five
years or the scheduled amortization of the Existing Nonrecourse Debt.

                                       17

         (c)  Deemed  Refinancings.  For the  purposes  of this  Article  4, any
transaction or other event, including,  without limitation,  any modification of
indebtedness,  which in each case was either  facilitated  by, or  consented  in
writing to, by Vornado OP or Vornado REIT, in which any partner in Vornado OP or
any affiliate of any such partner in Vornado OP would become  personally  liable
for,  or would bear or incur,  directly or  indirectly,  the "risk of loss" with
respect to any  Existing  Nonrecourse  Debt or any  Replacement  Debt that would
cause such Debt either not to be  considered a  Nonrecourse  Liability or not to
qualify  as   "qualified   nonrecourse   financing"   for  purposes  of  Section
465(b)(6)(B)  of the Code shall be  considered  a  refinancing  of such Debt and
shall be subject to the requirements set forth in this Article 4.

         (d) Deemed  Repayment.  For the  purposes of this  Article 4, any sale,
exchange or other disposition  (including,  without  limitation,  an exchange to
which Section 1031 or 1033 of the Code applies,  any transfer that is subject to
either Section 2(b)(5) or Section  2(b)(6),  and any  disposition,  voluntary or
involuntary, pursuant to a foreclosure proceeding, a deed in lieu of foreclosure
or a bankruptcy  proceeding) of either a property that is subject to an Existing
Nonrecourse  Debt or  Replacement  Debt or a direct or  indirect  interest in an
entity  that  is the  obligor  with  respect  to  Existing  Nonrecourse  Debt or
Replacement  Debt shall be  considered  a repayment of such Debt for purposes of
Section 4(a);  provided  that the foregoing  shall not apply with respect to any
foreclosure,  bankruptcy or  involuntary  transfer that satisfies the conditions
set forth in Section 2(d).

                                    ARTICLE 5
                               REMEDIES FOR BREACH

         (a)  Monetary  Damages.  In the event  that  Vornado  OP  breaches  its
obligations  set forth in Article 2,  Article 3, Article 4, Article 7, Article 8
or Article 10 with respect to an SCR Unitholder during the Protected Period, the
SCR Unitholder's  sole right shall be to receive from Vornado OP, and Vornado OP
shall pay to such SCR Unitholder as damages, an amount equal to the lesser of:

               (i) the aggregate federal,  state and local income taxes incurred
          by the SCR  Unitholder as a result of the income or gain allocated to,
          or otherwise  recognized by, such SCR  Unitholder  with respect to its
          Protected Units by reason of such breach, or

               (ii) in the case of a  violation  of  Article  2,  the  aggregate
          federal state,  and local income taxes that would have been payable by
          such SCR Unitholder  (or its  predecessor in interest) if the relevant
          Protected  Property  has been sold on the SCR Merger  Closing Date for
          its  704(c)  Value  (computed  based  upon tax rates in effect for the
          period during which the event giving rise to the computation hereunder
          has occurred), reduced to reflect:

                    (A)  reductions  prior to such  disposition in the "book-tax
               disparity"  with respect to such Protected  Property (but only if
               and to the  extent  that such  reduction  is  matched  dollar for
               dollar by a reduction in the gain allocable to the SCR Unitholder
               by reason of such sale or other  disposition  pursuant to Section
               704(c) of the  Code,

                                       18

               determined  for this  purpose  taking into  account any  required
               "curative   allocation"   that  would  result   pursuant  to  the
               penultimate sentence of Section 7(d)), and

                    (B) with respect to a SCR Unitholder who acquired  Protected
               Units subsequent to the SCR Merger Closing Date, the reduction in
               gain that  results  from such  holder's  having a special  inside
               basis  under  Section 743 of the Code in the  relevant  Protected
               Property (by  treating the special  inside basis as the basis for
               determining gain on the deemed sale described in clause (ii)),

         plus in the  case  of  either  (i) or  (ii),  an  amount  equal  to the
aggregate  federal,  state, and local income taxes payable by the SCR Unitholder
as a result of the receipt of any payment required under this Section 5(a).

         For  purposes  of  computing  the amount of federal,  state,  and local
income  taxes  required  to be paid  by an SCR  Unitholder,  (i)  any  deduction
actually  allowed in  computing  federal  income  taxes for state  income  taxes
payable  as a  result  thereof  shall  be taken  into  account,  and (ii) an SCR
Unitholder's  tax liability shall be computed using the highest  federal,  state
and  local  marginal  income  tax rates  that  would be  applicable  to such SCR
Unitholder's taxable income (taking into account the character of such income or
gain) for the year with respect to which the taxes must be paid,  without regard
to any  deductions,  losses  or  credits  that  may be  available  to  such  SCR
Unitholder  that would reduce or offset its actual  taxable income or actual tax
liability  if such  deductions,  losses or credits  could be utilized by the SCR
Unitholder to offset other income,  gain or taxes of the SCR Unitholder,  either
in the current year, in earlier years, or in later years).  In the event that an
SCR Unitholder  shall acquire any additional  Vornado OP Units subsequent to the
Merger by reason of a  contribution  of additional  money or property to Vornado
OP,  the  income  and gain that shall be taken  into  account  for  purposes  of
computing the damages  payable under this Section 5(a) would not exceed the gain
that such SCR Unitholder  would have recognized by reason of Vornado OP's breach
of its  obligation  set forth in Article 2,  Article  3,  Article 4,  Article 7,
Article 8 or Article 10, as  applicable,  had such SCR  Unitholder  not acquired
such additional Vornado OP Units.

         (b)   Limitation  on  Remedies;   Process  for   Determining   Damages.
Notwithstanding  any provision of this Agreement,  the sole and exclusive rights
and remedies of any SCR  Unitholder  for a breach or violation of the  covenants
set forth in  Article  2,  Article 3 or  Article 4 shall be a claim for  damages
against  Vornado OP,  computed  as set forth in Section  5(a) (and to the extent
applicable,  Section 5(e)),  and no SCR Unitholder shall be entitled to pursue a
claim for specific  performance of the covenants set forth in Article 2, Article
3 and Article 4, or bring a claim  against any Person that  acquires a Protected
Property  from  Vornado OP in  violation  of Article 2 (other  than a  Successor
Partnership  that  has  agreed  in  writing  to be  bound  by the  terms of this
Agreement  or that has  otherwise  succeeded to all of the assets and all of the
liabilities  of Vornado OP, but then only for  damages  computed as set forth in
Section  5(a)).  If Vornado OP has breached or violated any of the covenants set
forth in Article 2, Article 3, Article 4, Article 7, Article 8 or Article 10 (or
an SCR  Unitholder  asserts  that Vornado OP has breached or violated any of the
covenants  set forth in Article 2,  Article 3,  Article 7, Article 8, or Article
10,  Vornado  OP and the SCR  Unitholder  agree to  negotiate  in good  faith to
resolve any disagreements

                                       19

regarding  any such  breach or  violation  and the  amount of  damages,  if any,
payable to such SCR Unitholder under Section 5(a) (and to the extent applicable,
Section  5(e)).  If any such  disagreement  cannot be resolved by Vornado OP and
such SCR  Unitholder  within  sixty (60) days after the  receipt of notice  from
Vornado OP of such  breach and the amount of income to be  recognized  by reason
thereof,  Vornado OP and the SCR  Unitholder  shall jointly  retain a nationally
recognized  independent  public accounting firm ("an Accounting Firm") to act as
an  arbitrator  to resolve as  expeditiously  as possible all points of any such
disagreement  (including,  without  limitation,  whether  a breach of any of the
covenants  set forth  Article 2,  Article 3, Article 4, Article 7, Article 8, or
Article  10 has  occurred  and,  if so,  the  amount of damages to which the SCR
Unitholder is entitled as a result  thereof,  determined as set forth in Section
5(a) (and to the extent applicable,  Section 5(e))). All determinations  made by
the Accounting Firm with respect to the resolution of any breach or violation of
any of the  covenants  set forth in Article 2,  Article 3, Article 4, Article 7,
Article 8, or Article 10 and the amount of damages payable to the SCR Unitholder
under Section 5(a) (and to the extent applicable,  Section 5(e)) shall be final,
conclusive  and  binding  on  Vornado  OP and the SCR  Unitholder.  The fees and
expenses  of  any  Accounting   Firm  incurred  in  connection   with  any  such
determination  shall be shared  equally by  Vornado  OP and the SCR  Unitholder,
provided  that if the amount  determined  by the  Accounting  Firm to be owed by
Vornado OP to the SCR  Unitholder is more than ten percent (10%) higher than the
amount  proposed  by Vornado OP to be owed to such SCR  Unitholder  prior to the
submission  of the  matter  to the  Accounting  Firm,  then  all of the fees and
expenses  of  any  Accounting   Firm  incurred  in  connection   with  any  such
determination shall be paid by Vornado OP.

         (c) Damages for Flow-Through  Entities. For purposes of this Article 5,
if any SCR Unitholder is, for federal income tax purposes,  a partnership,  an S
corporation, "real estate investment trust" or a trust, then all computations of
amounts of taxes  required to be paid by the SCR Unitholder and the payments due
from  Vornado  OP as a result  thereof  shall  be made by  computing  the  taxes
required  to be paid by the  partners,  shareholders  or  beneficiaries  of such
partnership,  S corporation,  "real estate investment trust" or trust (or to the
extent that any  partner,  shareholder  or  beneficiary  of such  partnership  S
corporation or trust is itself a partnership,  S corporation or trust,  the same
principles  shall  apply in  determining  the taxes  required to be paid by such
partner, shareholder or beneficiary).

         (d) Required  Notices;  Time for  Payment.  In the event that there has
been a breach of Article  2,  Article  3,  Article  4,  Article 7, or Article 8,
Vornado OP shall  provide to the SCR  Unitholder  notice of the  transaction  or
event  giving  rise to such  breach  not later  than at such time as  Vornado OP
provides to the SCR  Unitholders  the  Schedule  K-1's to Vornado  OP's  federal
income tax return as  required in  accordance  with  Section  10(d)  below.  All
payments  required under this Article 5 to any SCR  Unitholder  shall be made to
such SCR  Unitholder not later than thirty (30) days after receipt by Vornado OP
of a  written  claim  from  such SCR  Unitholder  therefor,  unless  Vornado  OP
disagrees with the  computation of the amount  required to be paid in respect of
such breach,  in which event the  procedures in Section 5(b) shall apply and the
payment   shall  be  due  within  thirty  (30)  days  after  the  earlier  of  a
determination by the Accounting Firm or an agreement  between Vornado OP and the
SCR Unitholder as to the amount required to be paid,  with interest  accruing on
the aggregate  amount required to be paid from the date that is thirty (30) days
after  receipt by Vornado OP of a claim from such SCR  Unitholder to the date of
actual payment at a rate equal to the "prime rate" of interest,  as published in
the Wall Street

                                       20

Journal (or if no longer published there, as announced by Citibank) effective as
of the date the payment is required to be made.

         (e) Additional  Damages for Breaches of Section  2(b)(5),  Section 3(c)
and/or Section 3(e).  Notwithstanding any of the foregoing in this Article 5, in
the event  that  Vornado  OP should  breach  any of its  covenants  set forth in
Section 2(b)(5),  Section 3(c) and/or Sections 3(e)(i),  (ii) and/or (iv) and an
SCR  Unitholder  is required  to make a payment in respect of such  indebtedness
that it would not have had to make if such breach had not  occurred  (an "Excess
Payment"),  then, in addition to the damages  provided for in the other Sections
of this Article 5, Vornado OP shall pay to such SCR  Unitholder  an amount equal
to the sum of (i) the Excess Payment plus (ii) the aggregate federal,  state and
local income taxes, if any,  computed or set forth in Section 5(a),  required to
be paid by such SCR Unitholder by reason of Section 5(e) becoming operative (for
example,  because the breach by Vornado OP and this  Section  5(e) caused all or
any portion of the  indebtedness  in question  no longer to be  considered  debt
includible  in  basis  by the  affected  SCR  Unitholder  pursuant  to  Treasury
Regulations  ss.  1.752-2(a)),  plus  (iii) an  amount  equal  to the  aggregate
federal,  state and local income taxes required to be paid by the SCR Unitholder
(computed  as set forth in  Section  5(a)) as a result of any  payment  required
under this Section 5(e).

                                       21

                                    ARTICLE 6
              ADDITIONAL OPPORTUNITY FOR SCR PARTNERS TO ENTER INTO
                 DEFICIT RESTORATION OBLIGATIONS AND GUARANTEES

         Without  limiting  any of the  obligations  of  Vornado  OP under  this
Agreement,  Vornado  OP  shall  consider  in  good  faith  a  request  by an SCR
Unitholder to enter into an agreement  with Vornado OP to bear the economic risk
of loss as to a portion of Vornado OP's recourse  indebtedness by undertaking an
obligation  to restore a portion of its negative  capital  account  balance upon
liquidation  of such SCR  Unitholder's  interest  in  Vornado  OP and/or to bear
financial  liability under a Guarantee  Agreement  substantially  in the form of
Schedule 7 hereto for indebtedness that would be considered Qualifying Guarantee
Indebtedness  under Section 3(b) hereof,  if such SCR  Unitholder  shall provide
information from its professional tax advisor satisfactory to Vornado OP showing
that, in the absence of such agreement,  such SCR Unitholder likely would not be
allocated from Vornado OP sufficient  indebtedness under Section 752 of the Code
and  the  at-risk  provisions  under  Section  465  of the  Code  to  avoid  the
recognition  of gain (other than gain  required  to be  recognized  by reason of
actual cash  distributions from Vornado OP). Vornado OP and its professional tax
advisors  shall  cooperate  in good  faith  with  such  SCR  Unitholder  and its
professional tax advisors to provide such  information  regarding the allocation
of Vornado OP  liabilities  and the nature of such  liabilities as is reasonably
necessary in order to determine the SCR  Unitholder's  adjusted tax basis in its
Units and at-risk  amount.  In deciding  whether or not to grant such a request,
Vornado OP shall be entitled to take into account all factors related to Vornado
OP, including,  without limitation,  the existing and anticipated debt structure
of Vornado OP, the tax situations of all other partners in Vornado OP, including
Vornado REIT  (individually and as a group), and the effect that granting such a
request might have on their tax situation, the restrictions set forth in Article
3, and the anticipated long-term business needs of Vornado OP. Vornado OP's only
obligation  with respect to any such request from an SCR Unitholder  pursuant to
this Article 6 shall be to act in good faith,  as determined  in Vornado's  sole
discretion.  If Vornado OP permits an SCR  Unitholder to enter into an agreement
under this  Article 6,  Vornado  OP shall be under no  further  obligation  with
respect  thereto,  and Vornado OP shall not be required  to  indemnify  such SCR
Unitholder for any damage  incurred,  in connection  with or as a result of such
agreement or the  indebtedness,  including  without  limitation a refinancing or
prepayment thereof.

                                       22

                                    ARTICLE 7
                      SECTION 704(C) METHOD AND ALLOCATIONS

         (a) Application of "Traditional Method."  Notwithstanding any provision
of the Vornado OP Partnership  Agreement,  Vornado OP shall use the "traditional
method" under  Regulations ss. 1.704-3(b) for purposes of making all allocations
under Section 704(c) of the Code (with no "curative  allocations"  to offset the
effect of a "Ceiling Rule Disparity," as described in Section 7(b) below, except
as set forth in Sections  7(c) and 7(d)  below) with  respect to (i) each of the
assets  acquired  by  Vornado  OP from  SCR in the  Merger  (including,  without
limitation,  all assets owned by SCR or any direct or indirect Subsidiary of SCR
that is treated either as a partnership  or as a disregarded  entity for federal
income tax  purposes),  except to the extent that Vornado OP expressly  would be
required to use a different method under an SCR Tax Protection Agreement assumed
by Vornado OP pursuant to the Merger  Agreement and the affected SCR Partner has
not executed an agreement to waive its right to such different  method following
the Merger. The 704(c) Values of the Protected Properties shall be as determined
by  agreement  between  SCR and  Vornado OP prior to the  effective  time of the
Merger,  or in the absence of such agreement,  as determined by Vornado REIT, in
its  capacity as general  partner of Vornado  OP, in good faith for  purposes of
preparing  the financial  statements  of Vornado and Vornado OP  reflecting  the
results of the Merger so long as the outside  accountants of Vornado and Vornado
OP have approved such financial  statements as being in accordance  with general
accepted accounting procedures. 4/

         (b) "Ceiling Rule  Disparities." For purposes of Section 7(a),  Section
7(c) and Section  7(d),  the term  "Ceiling  Rule  Disparity"  shall mean,  with
respect to each Protected  Property for each Fiscal Year, the excess, if any, of
(i) the amount of  Depreciation  with  respect to such  asset  allocated  to the
"non-contributing  partners"  (that is, the holders of Units who are not subject
to Section 704(c) of the Code and Treasury  Regulations ss. 1.704-3 with respect
to such asset),  over (ii) the actual  amount of  depreciation  deductions  with
respect to such asset allocated to the  "non-contributing  partners" for federal
income tax purposes  for such Fiscal Year.  It is agreed that Vornado OP and any
partners  in  Vornado  OP other  than the SCR  Unitholders  shall be  treated as
"non-contributing  partners" for this purpose.  The term "Cumulative Net Ceiling
Rule  Disparity" with respect to a Protected  Property,  as that term is used in
Section 7(d),  means the sum of the Ceiling Rule  Disparities for such Protected
Property for all Fiscal Years through the date of determination,  reduced by all
Curative  Allocations  considered  attributable  to such Protected  Property for
prior Fiscal Years, determined as set forth in Section 7(d) below.

         (c)  Annual  Curative  Allocations.  In order to offset  the  effect of
Ceiling Rule  Disparities,  Vornado OP shall make the Curative  Allocation  with
respect to each Non-Rock Spring  Protected Unit each Fiscal Year,  provided that
no  Curative  Allocation  shall be made  with  respect  to any  Non-Rock  Spring
Protected Units acquired by Vornado OP or

- ----------
4/ SCR and  Vornado  OP agree to  negotiate  in good  faith to agree  upon these
amounts prior to the closing of the Merger.

                                       23

Vornado  REIT  from  SRC  Unitholders  as a  result  of the  exercise  of  their
redemption right under Section 8.6 of the Vornado Partnership  Agreement),  with
respect to any Fiscal Year (or portion thereof) following such acquisition.

         (d) Additional Curative Allocations Upon Disposition.  The Ceiling Rule
Disparity, as described in Section 7(b), with respect to each Protected Property
(other  than the  Democracy  I  property)  shall be reduced by the amount of the
Curative Allocation that is considered  attributable to that Protected Property.
For this  purpose,  the  Curative  Allocation  for  each  Fiscal  Year  shall be
considered  allocable among the Protected Properties (other than the Democracy I
property)  based upon ratio of the Ceiling  Rule  Disparity  for each  Protected
Property  (other than the  Democracy I property) for the Fiscal Year in question
to the aggregate  Ceiling Rule  Disparity  for all of the  Protected  Properties
(other than the Democracy I property) for such Fiscal Year, provided that if the
Curative  Allocation for a particular  Fiscal Year exceeds the aggregate Ceiling
Rule Disparity for all of the Protected  Properties  (other than the Democracy I
property)  for the Fiscal Year in  question,  the excess  amount of the Curative
Allocation  shall be  allocated  to  reduce  the  Cumulative  Net  Ceiling  Rule
Disparities  with  respect to prior years for each of the  Protected  Properties
(other than the Democracy I property)  (based upon the relative  amounts of such
Cumulative Net Ceiling Rule  Disparities for all Protected  Properties).  To the
extent that the  cumulative  Curative  Allocations  provided  for herein are not
sufficient to eliminate the effect of the  Cumulative Net Ceiling Rule Disparity
with  respect  to a  particular  Protected  Property,  Vornado  OP shall make an
additional "curative allocation" upon a disposition of that particular Protected
Property  (including the Democracy I property) to offset the remaining  balance,
if any, of the remaining  Cumulative  Net Ceiling Rule Disparity with respect to
that  particular  Protected  Property,  with such  "curative  allocation"  to be
comprised of income and gain of such character (e.g., ordinary income, long-term
capital  gain,  and  "unrecaptured  Section 1250 gain") as the  character of the
income and recognized by Vornado OP in connection with such disposition,  in the
same proportion as the aggregate  amounts thereof  recognized by Vornado OP. For
example,  if fifty percent of the gain recognized by Vornado OP is "unrecaptured
Section 1250 gain" and fifty percent is long-term  capital gain, then 50% of the
curative  allocation would be comprised of "unrecaptured  Section 1250 gain" and
fifty percent would be comprised of long-term capital gain.

         (e) 1750 Pennsylvania  Avenue. In the event that (i) any SCR Unitholder
who holds  Protected  Units that were issued in the Merger  with  respect to SCR
Units that  previously  were issued by SCR in connection with the acquisition by
SCR of Penn Associates L.P. (which Protected Units are referred to as "1750 Penn
Units")  should  successfully  assert  that  Vornado OP is  required  to use the
"remedial  method" under Treasury  Regulation ss. 1.704-3(d) with respect to the
1750 Pennsylvania Avenue property and (ii) the cumulative "remedial allocations"
of income for any Fiscal Year and all prior Fiscal Years  subsequent  to the SCR
Merger Closing Date with respect to the 1750 Penn Units, on a per unit basis, is
less than the cumulative  Curative  Allocations  for such period with respect to
the 1750 Penn Units,  on a per unit basis (a "Curative  Allocation  Shortfall"),
then an amount of income equal to the aggregate  Curative  Allocation  Shortfall
for all then  outstanding  1750 Penn Units shall be  specially  allocated to the
holders of the then  outstanding  Non-Rock Spring Protected Units (excluding any
1750 Penn Units),  with an equal  amount of the  aggregate  Curative  Allocation
Shortfall  being  allocated to each such

                                       24

then  outstanding  Non-Rock  Spring  Unit  that  is not a 1750  Penn  Unit.  The
principles  underlying  the procedures set forth in Section 10(c) shall apply in
the event that any holder of 1750 Penn Units should make an assertion  that,  if
successful, would cause this Section 7(e) to apply.

                                    ARTICLE 8
      ALLOCATIONS OF LIABILITIES PURSUANT TO REGULATIONS UNDER SECTION 752

         (a)  Allocation  Methods to be  Followed.  All tax returns  prepared by
Vornado OP during the Protected  Period that allocate  liabilities of Vornado OP
for purposes of Section 752 and the Treasury Regulations  thereunder shall treat
each SCR Partner Guarantor as being allocated for federal income tax purposes an
amount of recourse debt (in addition to any nonrecourse debt otherwise allocable
to such SCR Partner  Guarantor  in  accordance  with the Vornado OP  Partnership
Agreement,  Treasury  Regulations ss. 1.752-3,  and this Agreement)  pursuant to
Treasury Regulation ss. 1.752-2 equal to such SCR Partner Guarantor's  Scheduled
Guarantee Amount, as set forth on Schedule 9 hereto,  and Vornado OP and Vornado
REIT  shall  not,  during or with  respect  to the  Protected  Period,  take any
contrary or  inconsistent  position  in any federal or state  income tax returns
(including, without limitation, information returns, such as Forms K-1, provided
to  partners  in Vornado OP and  returns of  Subsidiaries  of Vornado OP) or any
dealings involving the Internal Revenue Service (including,  without limitation,
any audit, administrative appeal or any judicial proceeding involving the income
tax  returns  of Vornado OP or the tax  treatment  of any holder of  partnership
interests Vornado OP).

         (b)  Exception  to  Required  Allocation  Method.  Notwithstanding  the
provisions of this Tax Reporting and Protection Agreement,  Vornado OP shall not
be required to make allocations of Guaranteed Debt to the SCR Unitholders as set
forth in this  Agreement if and to the extent that Vornado OP determines in good
faith that  there may not be  "substantial  authority"  (within  the  meaning of
Section 6662(d)(2)(B)(i)) of the Code for such allocation; provided that Vornado
OP shall provide to Mr. Robert H. Smith and Mr. Robert P. Kogod (or in the event
of their  death  or  disability,  their  executor,  guardian  or  custodian,  as
applicable),  notice of such  determination  and if, within forty five (45) days
after the receipt thereof,  Vornado OP is provided an opinion of Hogan & Hartson
LLP or  Arthur  Andersen  LLP  (or  another  comparable  firm  of  attorneys  or
accountants)  to the effect that there is  "substantial  authority"  (within the
meaning of Section  6662(d)(2)(B)(i) of the Code) for such allocations,  Vornado
OP shall continue to make  allocations of Guaranteed Debt to the SCR Unitholders
as set forth in this Agreement; provided further that if there shall have been a
judicial  determination in a proceeding to which Vornado OP is a party and as to
which  the  SCR  GP has  been  allowed  to  participate  as  and  to the  extent
contemplated in Section 10 to the effect that such  allocations are not correct,
Section  8(a)  shall  not  apply  unless  the  matter  is being  appealed  to an
applicable  court  of  appeals,   the  requirements  of  Sections  10(c)(i)  and
10(c)(iii)  shall have been satisfied in connection  therewith,  and the opinion
described above from counsel or accountants  engaged by Messrs.  Smith and Kogod
shall have been  provided,  except that such opinion shall be to the effect that
it is more likely than not that such allocations will be respected.  In no event
shall this Section 8(b) be construed to relieve Vornado OP for liability arising
from a failure  by Vornado OP to comply  with one or more of the  provisions  of
Article 3 of this Agreement.

                                       25

         (c)  Cooperation in the Event of a Change.  If a change in Vornado OP's
allocations of Guaranteed  Debt to the SCR  Unitholders is required by reason of
circumstances described in the Section 8(b), Vornado OP and its professional tax
advisors shall  cooperate in good faith with Messrs.  Robert H. Smith and Robert
P. Kogod (or in the event of their death or disability, their executor, guardian
or custodian,  as  applicable)  and their  professional  tax advisors to develop
alternative  allocation  arrangements  and/or other  mechanisms that protect the
federal income tax positions of the SCR  Unitholders in the manner  contemplated
by the  allocations  of Guaranteed  Debt to the SCR  Unitholders as set forth in
this Agreement.

                                    ARTICLE 9
                      OTHER AGREEMENTS WITH SCR UNITHOLDERS

         Pursuant to the Merger Agreement,  Vornado, Vornado OP, SCR GP, and SCR
Partnership shall enter into an Assignment and Assumption Agreement, dated as of
[the date of closing], pursuant to which Vornado OP shall assume all obligations
of SCR GP and SCR pursuant to certain tax  protection  agreements  (the "SCR Tax
Protection  Agreements").  A list of the SCR Tax  Protection  Agreements  is set
forth on Schedule 5 hereto.

                                   ARTICLE 10
                  TAX TREATMENT AND REPORTING; TAX PROCEEDINGS

         (a) Tax Treatment of Merger. Each of the parties hereto shall treat the
Merger for federal  income tax purposes as a  contribution  by SCR of all of its
assets to Vornado OP in exchange  for Vornado OP Units under  Section 721 of the
Code,  with those Vornado OP Units  distributed by SCR to the SCR Unitholders in
accordance  with their  respective  interests in SCR in liquidation of SCR, in a
transaction in which no gain is recognized by any of the SCR  Unitholders  under
any of  Section  721,  Section  707,  Section  731,  Section  737,  or any other
provision  of the Code.  Each of the  parties  agrees  (i) to treat the  Merger,
pursuant to Treasury Regulation ss.  1.708-1(c)(3),  as an "assets over" form of
merger,   with  the   consequences   set  forth  in  Treasury   Regulation   ss.
1.708-1(c)(3)(i)  and (ii) that,  in  addition,  if and to the  extent  that any
transaction  entered into pursuant to the Merger  Agreement or otherwise  deemed
undertaken  in  connection  with the  transactions  contemplated  by the  Merger
Agreement  is treated  for federal  income tax  purposes as a direct or indirect
transfer  of cash  from  Vornado  OP to a  holder  of SCR  Units  that  would be
characterized  as a sale for federal  income tax  purposes  (including,  without
limitation,  purchases  of SCR Units  pursuant  to Section  4.7(a) of the Merger
Agreement and payments to holders of SCR options pursuant to Section 1.10 of the
Merger Agreement),  pursuant to Treasury Regulation ss.  1.708-1(c)(4) such sale
shall be treated  as a sale of such SCR Units by the former  holder of SCR Units
receiving  (or  deemed to  receive)  such cash  directly  to Vornado OP and as a
direct  purchase by Vornado OP of such SCR Units from such former  holder of SCR
Units  immediately  prior to the  Merger  (and not as a  transfer  of cash  from
Vornado OP to SCR as part of the Merger). The parties agree and acknowledge (and
will  not  take  any  position  inconsistent  therewith)  that no  consideration
(whether actual  consideration or deemed  consideration  under Section 707(a) of
the Code or otherwise)  other than Vornado OP Units has been or will be given by
Vornado OP or Vornado REIT to the SCR or the SCR  Unitholders in connection with
the  Merger  (other  than  cash  paid by SCR  directly  to  certain  holders  of
partnership  interests in SCR who agreed to sell such partnership interests back
to SCR prior to the closing of the Merger).  Without limiting the

                                       26

foregoing,   the  parties  agree  to  treat  all  liabilities  of  SCR  and  its
Subsidiaries  as  "qualified   liabilities"   within  the  meaning  of  Treasury
Regulation ss.  1.707-5a)(6).  SCR represents to Vornado OP and Vornado REIT for
this purpose that, to the best of its knowledge,  all liabilities of SCR and its
Subsidiaries  outstanding  at the  time  of  the  Merger  constitute  "qualified
liabilities" within the meaning of Treasury Regulation ss. 1.707-5a)(6). Vornado
OP and  Vornado  REIT  shall  not,  at any time  during or with  respect  to the
Protected Period,  take any contrary or inconsistent  position in any federal or
state income tax returns (including,  without limitation,  information  returns,
such  as  Forms  K-1,  provided  to  partners  in  Vornado  OP  and  returns  of
Subsidiaries  of Vornado OP) or any  dealings  involving  the  Internal  Revenue
Service (including,  without limitation, any audit, administrative appeal or any
judicial  proceeding  involving  the income tax returns of Vornado OP or the tax
treatment  of any  holder  of  partnership  interests  Vornado  OP),  except  as
permitted pursuant to Section 10(c) below.

         (b) Notice of Tax Audits. If any claim, demand, assessment (including a
notice of proposed  assessment) or other assertion is made with respect to Taxes
against SCR or Vornado OP the  calculation of which involves a matter covered in
this Agreement ("Tax Claim") or if Vornado REIT,  Vornado OP or SCR receives any
notice  from any  jurisdiction  with  respect to any  current  or future  audit,
examination,  investigation or other proceeding  ("Proceeding") involving SCR or
Vornado OP or that  otherwise  could involve a matter  covered in this Agreement
and could  directly  or  indirectly  affect the SCR  Unitholders  (adversely  or
otherwise),  then Vornado REIT,  Vornado OP or SCR, as applicable shall promptly
notify SCR GP, as representative of the SCR Unitholders of such Tax Claim or Tax
Proceeding.

         (c) Control of Tax Proceedings. Vornado REIT, as the general partner of
Vornado OP shall have the right to control the defense, settlement or compromise
of any Proceeding or Tax Claim;  provided,  however, that Vornado REIT shall not
consent to the entry of any judgment or enter into any  settlement  with respect
to such Tax Claim or Tax Proceeding without the prior written consent of SCR GP,
as representative of the SCR Unitholders  (unless,  and only to the extent, that
any  Taxes  required  to be  paid  by the  SCR  Unitholders  who  are  Protected
Unitholders as a result thereof would be required to be reimbursed by Vornado OP
and  Vornado  REIT  under  Article 5 and  Vornado OP and  Vornado  REIT agree in
connection  with such  settlement or consent,  to make such required  payments);
provided further that Vornado OP shall keep SCR GP duly informed of the progress
thereof  to the extent  that such  Proceeding  or Tax Claim  could  directly  or
indirectly  affect  (adversely or otherwise) the SCR Unitholders and that SCR GP
shall have the right to review and  comment on any and all  submissions  made to
the to Internal Revenue Service  ("IRS"),  a court, or other  governmental  body
with  respect  to such Tax  Claim or Tax  Proceeding  and that  Vornado  OP will
consider such comments in good faith.  As a condition to withholding its consent
to a settlement pursuant to the preceding  sentence,  the SCR GP (i) must have a
reasonable  basis to believe that such settlement  would have a material adverse
impact on one or more SCR  Unitholders  with respect to a matter covered by this
Agreement  and that such impact  would be  different  from the impact that would
result for other holders of Vornado OP Units who are not SCR Unitholders  (which
the SCR GP, upon request from Vornado OP, shall describe in reasonable detail in
writing), (ii) the SCR GP must believe, based upon the advice of Hogan & Hartson
L.L.P.  or Arthur  Andersen  LLP (or another  comparable  firm of  attorneys  or
accountants),  that it is more likely than not that the position asserted by the
SCR GP would  prevail if it were to be  asserted in a judicial

                                       27

proceeding  (and upon request of Vornado OP, the SCR GP shall provide to Vornado
OP a letter from such counsel or accountants  confirming such advice), and (iii)
the SCR GP shall offer to assume the subsequent costs of defending and asserting
the  position  asserted by the SCR GP (but not any other costs  associated  with
such  proceeding  or any  other  issues  involved  therein);  provided  that the
foregoing  shall not apply with  respect to, or  otherwise  restrict or limit or
restrict in any matter, the exercise by the SCR GP or any of the SCR Unitholders
of any rights or privileges  provided for in Sections  6221-6234 of the Code and
the Treasury Regulations  thereunder or in the Vornado OP Partnership  Agreement
in  connection  with any  examination  of  federal or state  income tax  matters
related to SCR or Vornado OP.

         (d) Timing of Tax Returns;  Periodic Tax Information.  Vornado OP shall
cause to be delivered to the SCR Unitholders, no later than July 15 of each year
(beginning  in 2003),  the Forms K-1 that  Vornado OP is  required to deliver to
such SCR Unitholders  with respect to the prior taxable year. In the case of the
Forms K-1 relating to taxable  year 2001 of SCR,  Vornado  shall  engage  Arthur
Andersen and cause Arthur  Andersen to prepare such Forms K-1 to be delivered to
the SCR Unitholders no later than March 31, 2002. In addition, Vornado OP agrees
to provide to Messrs.  Robert Smith and Robert Kogod, upon request,  an estimate
of the taxable income expected to be allocable for a specified taxable year from
Vornado OP to the Smith and Kogod  families and the entities  that they control,
provided  that  such  estimates  shall  not  be  required  to be  provided  more
frequently than once each calendar quarter.

                                   ARTICLE 11
                           AMENDMENT OF THIS AGREEMENT

         This Agreement may not be amended, directly or indirectly (including by
reason of a merger  between  Vornado OP and another  entity) except by a written
instrument signed by Vornado,  as general partner of Vornado OP, and approved by
(i) the SCR Partners holding  seventy-six  percent (76%) of the then outstanding
Protected  Units and (ii) if any of Robert H. Smith,  Robert P.  Kogod,  Clarice
Smith or Arlene  Kogod is then  living,  the  consent of each such  person  then
living;  provided,  however,  that any  amendment  that would permit a sale of a
Protected  Property or other action in violation of Article 2 or the refinancing
of debt or any other  action with  respect to debt in  violation of Article 3 or
Article 4, shall not be  permitted  without the  written  approval of holders of
seventy-six  percent (76%) of the then  outstanding  Protected Units held by SCR
Partners that would be adversely affected by such actions.

                                   ARTICLE 12
                          EARLY TERMINATION OF EXTENDED
                              TAX PROTECTED PERIOD

         The  Extended  Tax  Protected  Period  shall  terminate  prior  to  the
expiration thereof at 12:01 AM on January 1, 2022 (or if earlier,  upon the date
of death of the last to survive of Robert H. Smith,  Clarice R. Smith, Robert P.
Kogod, or Arlene R. Kogod) as follows:

          (i) the Extended Tax Protected  Period as to any SCR Unitholder  shall
     terminate only as to that SCR Unitholder upon a Transfer (as defined in the

                                       28

     Lock-up  Agreement)  of  Vornado  Securities  (as  defined  in the  Lock-up
     Agreement)  originally  issued  to such SCR  Unitholder  in the  Merger  in
     violation of the Lock-up Agreement applicable to such SCR Unitholder; and

          (ii) the Extended Tax Protected  Period shall  terminate as to all SCR
     Unitholders  that have entered into Lock-up  Agreements in connection  with
     the closing of the Merger (to the extent not earlier terminated pursuant to
     clause (i) hereof)  upon a Transfer by a member of the Smith  Family or the
     Kogod  Family  or any of their  Permitted  Transferees  (as such  terms are
     defined in the Merger Agreement) as a result of which the Smith Family, the
     Kogod Family, and their Permitted  Transferees no longer  Beneficially Own,
     after  giving  effect to such  Transfer,  at least (x) 50% of the  original
     aggregate  number  of VNOP  Units  (or  Vornado  Common  Shares  issued  in
     redemption  thereof)  issued to members  of the Smith  Family and the Kogod
     Family in the Merger or (ii) 100% of the original  aggregate  value of VNOP
     Units (or Vornado  Common Shares issued in  redemption  thereof)  issued to
     members of the Smith Family and the Kogod Family in the Merger (which value
     of the retained  Vornado  Securities  shall be measured only at the time of
     the  applicable  Transfer  based on the closing  price of a Vornado  Common
     Share  on the  NYSE  after  closing  of  trading  on the  date  immediately
     preceding  the  date of the  applicable  Transfer,  which  value  shall  be
     compared to the original value of the VNOP Units issued to the  undersigned
     in the Merger  (based on an assumed  price of $41.00  per VNOP  Unit)).  In
     determining  whether  a  Transfer  described  in this  paragraph  (ii)  has
     occurred,  the two provisos in Section  2(a)(iii) of the Lock-up  Agreement
     and the  provisions  of Sections  2(b),  (c),  (d),  and (e) of the Lock-up
     Agreement  shall be applied.  Except as  otherwise  indicated,  capitalized
     terms used in this subparagraph (ii) that are not otherwise defined in this
     Agreement  shall  have  the  meanings  ascribed  to  them  in  the  Lock-Up
     Agreement.

If  Vornado  OP  believes  an SCR  Unitholder  or, if  applicable,  a  Permitted
Transferee of such SCR Unitholder has made a Transfer (as defined in the Lock-up
Agreement) in violation of the applicable Lock-Up Agreement that has resulted in
a  termination  of the Extended Tax  Protected  Period under clause (i) or (ii),
Vornado  will  notify  such SCR  Unitholder  of such  determination  and the SCR
Unitholder  shall have the  opportunity  to contest such  determination  (and no
Extended Tax Protected  Period shall  terminate as a result  thereof  unless and
until such contest is resolved and such  resolution  results in a  determination
that a Transfer  (as  defined in the  Lock-up  Agreement)  in  violation  of the
applicable  Lock-Up  Agreement in fact occurred.  Vornado shall promptly provide
all SCR  Unitholders  who have the benefit of an Extended Tax  Protected  Period
notice in the event of a termination of the Extended Tax Protected  Period under
clause (ii).

                                   ARTICLE 13
                                  MISCELLANEOUS

         (a) Additional Actions and Documents. Each of the parties hereto hereby
agrees to take or cause to be taken such further actions,  to execute,  deliver,
and file or cause to be executed,  delivered  and filed such further  documents,
and will obtain  such

                                       29

consents,  as may be  necessary  or as may be  reasonably  requested in order to
fully effectuate the purposes, terms and conditions of this Agreement.

         (b)  Assignment.  No party  hereto  shall  assign  its or his rights or
obligations  under this Agreement,  in whole or in part,  except by operation of
law, without the prior written consent of the other parties hereto, and any such
assignment  contrary to the terms  hereof shall be null and void and of no force
and effect.

         (c)  Successors and Assigns.  This Agreement  shall be binding upon and
shall  inure to the benefit of the  Protected  Unitholders  (through  SCR GP, as
representative  of the SCR  Unitholders)  and their  respective  successors  and
permitted assigns,  whether so expressed or not. This Agreement shall be binding
upon  Vornado  REIT,  Vornado  OP, and any entity  that is a direct or  indirect
successor,  whether  by  merger,  transfer,  spin-off  or  otherwise,  to all or
substantially  all of the  assets of either  Vornado  REIT or Vornado OP (or any
prior successor thereto as set forth in the preceding portion of this sentence),
provided that none of the foregoing  shall result in the release of liability of
Vornado REIT and Vornado OP hereunder. Vornado REIT and Vornado OP covenant with
and for the benefit of the SCR  Unitholders not to undertake any transfer of all
or  substantially  all of the  assets  of  either  entity  (whether  by  merger,
transfer,   spin-off  or  otherwise)   unless  the  transferee  has  in  writing
acknowledged  and  agreed  to be  bound  by this  Agreement,  provided  that the
foregoing shall not be deemed to permit any transaction  otherwise prohibited by
this Agreement.

         (d) Modification;  Waiver. No failure or delay on the part of any party
hereto in  exercising  any power or right  hereunder  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the parties  hereunder are cumulative
and not exclusive of any rights or remedies which they would  otherwise have. No
modification  or waiver of any provision of this  Agreement,  nor consent to any
departure by any party  therefrom,  shall in any event be  effective  unless the
same shall be in  writing,  and then such waiver or consent  shall be  effective
only in the specific  instance and for the purpose for which given. No notice to
or demand  on any party in any case  shall  entitle  such  party to any other or
further notice or demand in similar or other circumstances.

         (e)    Representations    and    Warranties     Regarding    Authority;
Noncontravention.

          (i)  Representations  and  Warranties  of Vornado REIT and Vornado OP.
     Each of Vornado  REIT and Vornado OP has the  requisite  corporate or other
     (as the case may be) power and  authority to enter into this  Agreement and
     to perform is respective obligations hereunder.  The execution and delivery
     of  this  Agreement  by  each  of  Vornado  REIT  and  Vornado  OP and  the
     performance of each of its respective  obligations hereunder have been duly
     authorized by all necessary trust,  partnership,  or other (as the case may
     be)  action  on the part of each of  Vornado  REIT  and  Vornado  OP.  This
     Agreement  has been duly executed and delivered by each of Vornado REIT and
     Vornado  OP and  constitutes  a valid  and  binding  obligation  of each of
     Vornado REIT and Vornado OP,  enforceable  against each of Vornado REIT and
     Vornado OP in accordance  with its terms,  notwithstanding  Sections

                                       30

     7.1.E, 7.8.B, 10.1, 10.2, and 10.3 of the Partnership Agreement,  except as
     such enforcement may be limited by (i) applicable  bankruptcy or insolvency
     laws (or other laws affecting  creditors' rights generally) or (ii) general
     principles of equity.  The execution and delivery of this Agreement by each
     of Vornado REIT and Vornado OP do not, and the  performance  by each of its
     respective  obligations hereunder will not, conflict with, or result in any
     violation  of (i) the Vornado OP  Partnership  Agreement  or (ii) any other
     agreement  applicable to Vornado REIT and/or Vornado OP, other than, in the
     case of clause  (ii),  any such  conflicts  or  violations  that  would not
     materially  adversely affect the performance by Vornado OP and Vornado REIT
     of their obligations hereunder.

          (ii) Representations and Warranties of SCR and SCR GP. Each of SCR and
     SCR GP has the requisite  corporate or other (as the case may be) power and
     authority  to enter  into  this  Agreement  and to  perform  is  respective
     obligations hereunder. The execution and delivery of this Agreement by each
     of SCR and SCR GP and the performance of each of its respective obligations
     hereunder have been duly authorized by all necessary trust, partnership, or
     other  (as the case may be)  action  on the part of each of SCR and SCR GP.
     This  Agreement has been duly executed and delivered by each of SCR and SCR
     GP and  constitutes  a valid and binding  obligation of each of SCR and SCR
     GP,  enforceable  against  each of SCR and SCR GP in  accordance  with  its
     terms,  except  as  such  enforcement  may be  limited  by  (i)  applicable
     bankruptcy or insolvency  laws (or other laws affecting  creditors'  rights
     generally) or (ii) general principles of equity. The execution and delivery
     of this Agreement by each of SCR and SCR GP do not, and the  performance by
     each of its respective  obligations  hereunder will not,  conflict with, or
     result in any  violation of (i) the SCR  Partnership  Agreement or (ii) any
     other  agreement  applicable  to SCR and SCR GP, other than, in the case of
     clause (ii),  any such  conflicts or violations  that would not  materially
     adversely  affect the  performance  by SCR and SCR GP of their  obligations
     hereunder.

         (f)  Captions.  The  Article  and Section  headings  contained  in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose,  and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

         (g)  Notices.  All  notices  and  other  communications  given  or made
pursuant  hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted,  and shall be effective
upon receipt,  if delivered  personally,  mailed by registered or certified mail
(postage  prepaid,  return  receipt  requested)  to the parties at the following
addresses  (or at such other  address for a party as shall be  specified by like
changes of address) or sent by electronic  transmission to the telecopier number
specified below:

                                       31

          (i)  if to SCR GP, as representative of the SCR Unitholders, to:

                     Charles E. Smith Commercial Realty, LLC
                     2345 Crystal Drive
                     Crystal City
                     Arlington, Virginia  22202
                     Attention:  Robert H. Smith
                                 Robert P. Kogod
                                 Robert D. Zimet
                     Facsimile:  (703) 769-1305

          (ii) if to Vornado OP or Vornado REIT, to:

                     Vornado Realty Trust
                     Vornado Realty L.P.
                     888 Seventh Avenue, 44th Floor
                     New York, New York  10019
                     Attention:  Steven Roth
                                 Michael D. Fascitelli
                     Facsimile:  (212) 894-7000

               and

                     Vornado Realty Trust
                     Vornado Realty L.P.
                     210 Route 4 East
                     Paramus, New Jersey  07652
                     Attention:  Joseph Macnow
                     Facsimile:  (201) 587-1000

Each party may designate by notice in writing a new address to which any notice,
demand,  request or  communication  may thereafter be so given,  served or sent.
Each notice,  demand,  request,  or communication which shall be hand delivered,
sent,  mailed,  telecopied or telexed in the manner  described  above,  or which
shall be delivered to a telegraph company,  shall be deemed  sufficiently given,
served,  sent,  received  or  delivered  for all  purposes at such time as it is
delivered to the addressee (with the return receipt,  the delivery  receipt,  or
(with respect to a telecopy or telex) the  answerback  being deemed  conclusive,
but not  exclusive,  evidence of such  delivery)  or at such time as delivery is
refused by the addressee upon presentation.

         (h)  Counterparts.  This  Agreement  may be  executed  in  two or  more
counterparts,  all of which shall be considered  one and the same  agreement and
each of which shall be deemed an original.

         (i)  Governing  Law.  The   interpretation  and  construction  of  this
Agreement,  and all matters relating  thereto,  shall be governed by the laws of
the State of Delaware, without regard to the choice of law provisions thereof.

                                       32

         (j) Consent to Jurisdiction; Enforceability.

              (i) This  Agreement and the duties and  obligations of the parties
hereunder  shall be enforceable  against any of the parties in the courts of the
State of  Delaware.  For such  purpose,  each party  hereto  hereby  irrevocably
submits to the  nonexclusive  jurisdiction  of such  courts and agrees  that all
claims in respect of this  Agreement may be heard and  determined in any of such
courts.

              (ii) Each party  hereto  hereby  irrevocably  agrees  that a final
judgment  of any of the  courts  specified  above in any  action  or  proceeding
relating  to this  Agreement  shall be  conclusive  and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

         (k) Severability.  If any part of any provision of this Agreement shall
be invalid or  unenforceable  in any respect,  such part shall be ineffective to
the  extent of such  invalidity  or  unenforceability  only,  without in any way
affecting the remaining  parts of such provision or the remaining  provisions of
this Agreement.

         (l) Costs of Disputes.  Except as otherwise expressly set forth in this
Agreement,  the nonprevailing  party in any dispute arising hereunder shall bear
and pay the  costs  and  expenses  (including,  without  limitation,  reasonable
attorneys'  fees and expenses)  incurred by the  prevailing  party or parties in
connection with resolving such dispute.

                                       33

                  IN WITNESS WHEREOF, Vornado REIT, Vornado OP, SCR and SCR GP
have caused this Agreement to be signed by their respective officers (or general
partners) thereunto duly authorized all as of the date first written above.

                                        VORNADO REALTY TRUST

                                        By: /s/ JOSEPH MACNOW
                                           -------------------------------------
                                        Name:  Joseph Macnow
                                             -----------------------------------
                                        Title: Executive Vice President -
                                               Finance and Administration and
                                               Chief Executive Officer
                                              ----------------------------------

                                        VORNADO REALTY L.P.

                                        By:  Vornado  Realty  Trust,   its  sole
                                             general partner

                                             By: /s/ JOSEPH MACNOW
                                                --------------------------------
                                             Name:  Joseph Macnow
                                                  ------------------------------
                                             Title: Executive Vice President -
                                                    Finance and Administration
                                                    and Chief Executive Officer
                                                   -----------------------------

                                        CHARLES E. SMITH COMMERCIAL REALTY L.P.

                                        By:  Charles  E. Smith  Realty,  L.L.C.,
                                             its sole general partner

                                             By: /s/ PAUL F. LARNER
                                                --------------------------------
                                             Name:  Paul F. Larner
                                                  ------------------------------
                                             Title: Chief Financial Officer
                                                   -----------------------------

                                        CHARLES E.  SMITH  REALTY,  L.L.C.,  for
                                        itself  and as  representative  of  each
                                        holder  of   partnership   interests  in
                                        Charles E. Smith Commercial  Realty L.P.
                                        (other  than   Vornado   CESCR  LLC  and
                                        Vornado  CESCR  II  LLC),  each of which
                                        holder is a third party  beneficiary  of
                                        this Agreement

                                             By: /s/ PAUL F. LARNER
                                                --------------------------------
                                             Name:  Paul F. Larner
                                                  ------------------------------
                                             Title: Chief Financial Officer
                                                   -----------------------------

Exhibit 23.1 
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 
             As independent public accountants, we hereby consent to the incorporation of our report included in Exhibit 99.1 of this Form 8-K/A, into Vornado Realty Trust’s previously filed Registration Statements File Nos. 333-36080, 333-64015, 333-50095, 333-52573, 333-29011, 333-09159, 333-76327, 333-89667, 333-81497, 333-40787, 333-29013 and 333-68462. 
 	ARTHUR ANDERSEN LLP	
Vienna, Virginia
March 15, 2002 
                                                                    Exhibit 99.1

                  CHARLES E. SMITH COMMERCIAL REALTY L.P.

                  CONSOLIDATED FINANCIAL STATEMENTS
                  AS OF DECEMBER 31, 2001
                  TOGETHER WITH AUDITORS' REPORT

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Unitholders of
Charles E. Smith Commercial Realty L.P.:

We have audited the accompanying  consolidated balance sheet of Charles E. Smith
Commercial  Realty L.P. and its  subsidiaries  (the "Operating  Partnership",  a
Delaware  limited   partnership)  as  of  December  31,  2001  and  the  related
consolidated statement of income, changes in partners' deficit and comprehensive
income, and cash flows for the year then ended.  These financial  statements are
the responsibility of the Operating Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Charles E. Smith  Commercial
Realty L.P. and its  subsidiaries  as of December  31, 2001,  and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

                                                        ARTHUR ANDERSEN LLP

Vienna, Virginia
February 22, 2002

                     CHARLES E. SMITH COMMERCIAL REALTY L.P.
                           Consolidated Balance Sheet
                             As of December 31, 2001
                             (Dollars in Thousands)

ASSETS
Rental property, net of accumulated depreciation                    $ 1,193,397
Escrows and tenants' security deposits - restricted                      31,828
Tenant and other receivables, net of allowance
       for doubtful accounts of $1,091                                   20,664
Accrued rental income                                                    24,133
Deferred charges, net of accumulated amortization                        21,917
Investment in joint venture                                               8,424
Other assets                                                              7,934
                                                                    ------------
      Total assets                                                  $ 1,308,297
                                                                    ============

LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
      Mortgage notes payable                                        $ 1,470,057
      Line of credit                                                     33,000
      Accounts payable and accrued expenses                              34,564
      Accounts payable - related parties                                  1,469
      Rents received in advance                                           6,703
      Tenants' security deposits                                          3,919
      Other liabilities                                                   7,174
                                                                    ------------
              Total liabilities                                       1,556,886
                                                                    ============

Commitments and contingencies

Convertible, redeemable Class C unitholders (2.5 million units
      authorized, issued, and outstanding, $24 per unit carrying
      and redemption amount)                                             59,164

Partners' deficit:
      Cumulative, convertible, preferred Class D unitholders
           (7.7 million units authorized, issued, and outstanding)       241,900
      Class A unitholders (19.7 million units authorized, issued,
           and outstanding)                                            (619,015)
      Accumulated earnings                                               69,998
      Accumulated comprehensive loss                                       (636)
                                                                    ------------
              Total partners' deficit                                  (307,753)
                                                                    ------------
      Total liabilities and partners' deficit                        $1,308,297
                                                                    ============

  The accompanying notes are an integral part of this consolidated statement.

                     CHARLES E. SMITH COMMERCIAL REALTY L.P.
                        CONSOLIDATED STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                             (DOLLARS IN THOUSANDS)

Revenues
Property rentals                                                $ 354,818
Expense reimbursements                                              9,890
Property management and leasing                                    17,794
                                                        ------------------
    Total revenues                                                382,502

EXPENSES
Operating                                                          86,699
Real estate taxes                                                  25,565
Ground rent                                                         1,223
Depreciation and amortization                                      53,936
General and administrative                                         19,737
Other                                                               1,822
                                                        ------------------
    Total operating expenses                                      188,982
                                                        ------------------

Operating income                                                  193,520

Income from unconsolidated joint venture                              371
Interest income                                                     1,604
Interest expense                                                 (112,695)
                                                        ------------------

Net income before extraordinary item                               82,800

Extraordinary loss on early extinguishment of debt                    (87)
                                                        ------------------

Net income                                                         82,713

Class D preferred unit distributions                              (15,080)
                                                        ------------------

Net income applicable to Class A and
    Class C unitholders                                          $ 67,633
                                                        ==================

  The accompanying notes are an integral part of this consolidated statement.

                                         CHARLES E. SMITH COMMERCIAL REALTY L.P.
                     CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT AND COMPREHENSIVE INCOME
                                           FOR THE YEAR ENDED DECEMBER 31, 2001
                                                  (DOLLARS IN THOUSANDS)

                                                           PREFERRED                ACCUMULATED
                                                CLASS A     CLASS D    ACCUMULATED COMPREHENSIVE   PARTNERS'     COMPREHENSIVE
                                              UNITHOLDERS  UNITHOLDERS  EARNINGS       LOSS         DEFICIT          INCOME
                                              ------------ ----------- ----------- -------------- ------------  ----------------
                                                                                                  
BALANCE, December 31, 2000                     $ (616,115) $ 241,900     $ 55,266            $ -   $ (318,949)
    Amortization of unit grants                       490          -            -              -          490
    Contributions                                     216          -            -              -          216
    Distributions                                       -          -      (67,981)             -      (67,981)
    Repurchase of partnership units                (3,460)         -            -              -       (3,460)
    Other                                            (146)         -            -              -         (146)
    Net income                                          -          -       82,713              -       82,713            82,713
    Unrealized loss on marketable securities            -          -            -              -            -                (2)
    Change in fair value of the swap agreements         -          -            -              -            -              (634)
                                                                                                                 ---------------
    Other comprehensive loss                            -          -            -           (636)        (636)             (636)
                                                                                                                 ---------------
    Comprehensive Income                                                                                             $   82,077
                                               ---------------------------------------------------------------   ===============
BALANCE, December 31, 2001                     $ (619,015) $ 241,900     $ 69,998         $ (636)  $ (307,753)
                                               ===============================================================

  The accompanying notes are an integral part of this consolidated statement.

                     CHARLES E. SMITH COMMERCIAL REALTY L.P.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                             (DOLLARS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                         $ 82,713
  Adjustments to reconcile net income to net cash provided by
    operating activities-
      Depreciation and amortization                                    53,936
      Amortization of deferred financing charges                        2,444
      Amortization of unit grants                                         490
      Provision for loss on marketable securities                       1,423
      Extraordinary item                                                   87
      Income from unconsolidated joint venture                           (371)
      Loss on asset disposals                                              73
      Lease acquisition costs                                          (4,039)
      Decrease in accrued rental income                                   160
      Decrease in tenant and other receivables                          4,781
      Increase in other assets                                         (1,921)
      Increase in rents received in advance                             1,206
      Increase in accounts payable and accrued expenses                 5,092
      Increase in tenants' security deposits                              246
      Decrease accounts payable - related parties                        (486)
      Decrease in other liabilities                                      (375)
                                                                   -----------
         Net cash provided by operating activities                    145,459
                                                                   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to rental property                                        (93,040)
  Decrease in escrows and tenants' security deposits                    5,500
  Distributions from joint venture                                        694
                                                                   -----------
           Net cash used in investing activities                      (86,846)
                                                                   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of mortgages payable                                     (76,935)
  Proceeds from mortgages payable                                      88,762
  Paydown of line of credit                                           (70,500)
  Borrowings on line of credit                                         69,500
  Merger costs                                                         (3,519)
  Payment of financing fees                                              (551)
  Repurchase of partnership units                                      (3,460)
  Contributions                                                           216
  Distributions to partners                                           (67,981)
                                                                   -----------
           Net cash used in financing activities                      (64,468)
                                                                   -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                              (5,855)
CASH AND CASH EQUIVALENTS, beginning of year                            5,855
                                                                   -----------
CASH AND CASH EQUIVALENTS, end of year                               $      -
                                                                   ===========

  The accompanying notes are an integral part of this consolidated statement.

                     CHARLES E. SMITH COMMERCIAL REALTY L.P.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2001

1.    ORGANIZATION AND FORMATION OF OPERATING PARTNERSHIP:

Charles E. Smith  Commercial  Realty L.P.  (the  "Operating  Partnership"),  was
formed on July 25, 1997, as a Delaware limited partnership. On October 31, 1997,
the  Operating  Partnership  completed  its  initial  consolidation  of  certain
property partnerships and property service companies (the "CES Group"); prior to
October 31, 1997, the Operating  Partnership had no operations.  Simultaneously,
the  entities  that owned the  properties  and the  property  service  companies
included  in  the  CES  Group  (the  "Predecessor   Partners")  contributed  the
properties and service  businesses to the Operating  Partnership (or to entities
owned by the  Operating  Partnership)  and  received  in  exchange,  directly or
indirectly, limited partnership units in the Operating Partnership. In addition,
Vornado Realty Trust  (Vornado  Realty Trust and its  consolidated  subsidiaries
including   Vornado  Realty  L.P.  are  herein  after  referred  to  as  "VRLP")
contributed  $60  million  on  October  31,  1997  in  return  for  2.5  million
convertible  redeemable  Class  C  units.  As  a  result  of  the  initial  1997
consolidation,    and   subsequent   consolidations   of   additional   property
partnerships,  the Operating  Partnership issued Operating  Partnership units to
the  Predecessor  Partners of the  entities  acquired.  Because of prior  common
ownership and management,  contributed  assets and liabilities  were recorded at
their  historical  net book  value,  which  also  resulted  in the  transfer  of
approximately  $605.4 million of net carry-over equity deficits to the Operating
Partnership.

On March  3,  1999,  VRLP  contributed  to the  Operating  Partnership  the land
previously  subject  to  certain  ground  leases  under:  (1) eight  properties,
containing  approximately  2.5 million square feet,  that were subject to ground
leases  requiring  minimum  rental  plus 50% of net cash  flows,  and (2)  seven
properties,  containing approximately 1.2 million square feet, that were subject
to a ground lease requiring  minimum rental and 5.1% of net cash flow. VRLP also
contributed a 50%  ownership in five  properties  (the "Crystal  Parks") and the
ground leases for the land  underneath  the Crystal  Parks.  In return for these
contributions,   the  VRLP  received   approximately  7.7  million   cumulative,
convertible,   preferred  Class  D  limited   partnership  units  for  estimated
consideration  of  approximately  $242 million.  As a result of this transaction
(the "March 1999  Transaction"),  VRLP increased its effective  ownership in the
Operating   Partnership  from   approximately  11%  at  December  31,  1998,  to
approximately  34%, and the size of the Board of Managers of the general partner
of the Operating Partnership was increased from two to three managers, with VRLP
appointing  the  additional  new manager.  The March 1999  Transaction  has been
accounted  for as a  purchase  and the  $242  million  purchase  price  has been
allocated to the land acquired.

As of December  31, 2001,  the  Operating  Partnership  had  approximately  19.7
million Class A units, 2.5 million Class C units, and  approximately 7.7 million
Class D units outstanding.

MERGER

On  January  1,  2002,  VRLP  purchased  the  remaining  66%  of  the  Operating
Partnership  units that it did not previously  own. VRLP  exchanged  0.7898 of a
Class A unit of VRLP for each  Class A unit of the  Operating  Partnership.  The
consideration  paid  for the  remaining  66% of the  Operating  Partnership  was
approximately  $1.6  billion.  This  consisted of 15.6 million newly issued VRLP
units, valued at $608 million, and $985 million of debt.  Approximately  609,000
Class A units of VRLP issued in the merger,  will be held in escrow,  subject to
certain indemnification  provisions. This transaction will be accounted

                                       1

for as a purchase. In addition, the Operating Partnership incurred approximately
$3.5  million  of merger  costs for which  VRLP is  contractually  obligated  to
reimburse  the  Operating  Partnership.  These costs have been included in other
assets on the accompanying consolidated balance sheet.

CURRENT OPERATIONS

The Operating  Partnership  and its  subsidiaries  are engaged in the ownership,
operation,  management,  leasing,  acquisition,  expansion,  and  development of
primarily  commercial office building  properties.  As of December 31, 2001, the
Operating Partnership owned, either through wholly-owned subsidiaries or through
its  non-controlling  general  partner  interest in a joint venture,  fifty-four
office  properties  (the  "Properties")  containing  approximately  13.0 million
square  feet of office  space  including  approximately  297,000  square feet of
retail  space as  follows:  (1) a 100% fee  interest in  twenty-five  properties
containing  approximately  7.0 million  square feet located in Crystal City, VA;
(2) a 100% fee interest in one property containing  approximately 174,000 square
feet  located  in  Arlington  County,  VA;  (3) a 100%  fee  interest  in  eight
properties containing  approximately 2.5 million square feet located in Bailey's
Crossroads,   VA;  (4)  a  100%  fee  interest  in  four  properties  containing
approximately  868,000 square feet located in  Washington,  D.C.; (5) a 100% fee
interest  in three  properties  containing  approximately  474,000  square  feet
located  in  Tyson's  Corner,  VA;  (6) a 100% fee  interest  in six  properties
containing  approximately  899,000 square feet located in Reston, VA; (7) a 100%
interest in one property containing  approximately 204,000 square feet, which is
subject to a ground  lease with a third party,  located in  Bethesda,  MD; (8) a
100% interest in two properties  containing  approximately  609,000 square feet,
which are subject to ground leases with a third party, located in Clarendon, VA;
(9) a 100%  interest in one property  containing  approximately  190,000  square
feet,  which is  subject  to a  ground  lease  with a third  party,  located  in
Washington,  D.C, and (10) a 20%  non-controlling  general partner interest in a
partnership owning three properties containing approximately 541,000 square feet
in Tyson's Corners,  VA (the "Joint  Venture").  The Operating  Partnership also
owns a 100% ownership interest in a commercial  management company that provides
leasing and management services to the Properties and to third parties.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The  accompanying  consolidated  balance sheet as of December 31, 2001,  and the
consolidated  statement of income,  partners' deficit and comprehensive  income,
and cash  flows for the year then  ended,  include  all of the  accounts  of the
Operating  Partnership and its majority owned  subsidiaries  where the Operating
Partnership  exercises  control.  All  significant   intercompany  balances  and
transactions have been eliminated.

RENTAL PROPERTY

With the exception of the Joint Venture,  the assets  acquired in the March 1999
Transaction,  the nine properties acquired in 2000, and a wholly-owned  property
containing  approximately  400,000  square feet which was completed in September
2001,  which are recorded at their actual cost,  rental  property is recorded at
carry over basis and therefore is at the Predecessor  Partners'  historical cost
net of  accumulated  depreciation  at the  time  of  contribution.  The  cost of
buildings and improvements  excludes  financing costs,  interest costs, and real
estate  taxes  incurred  during  the  original  construction  period  except for
properties  constructed  subsequent to December 15, 1979, and December 31, 1982,
the dates for which Statement of Financial Accounting Standards ("SFAS") No. 34,
Capitalization  of Interest  Cost

                                       2

and No. 67,  Accounting for Costs and Initial  Rental  Operations of Real Estate
Projects,  respectively,  became effective. Ordinary repairs and maintenance are
expensed as incurred; major replacements and improvements are capitalized.

Depreciation  is computed  using the  straight-line  method  over the  following
estimated useful asset lives:

     Buildings and improvements..............20 to 40 years
     Furniture, fixtures, and equipment......5 to 10 years
     Tenant improvements.....................Lesser of lease term or useful life

When  assets  are  sold  or  retired,   their  costs  and  related   accumulated
depreciation  are removed from the accounts,  with the resulting gains or losses
reflected in net income for the period.

Impairment  losses on  long-lived  assets used in  operations  are recorded when
events and  circumstances  indicate  that the assets  might be impaired  and the
estimated  undiscounted  cash flows (before interest expense) to be generated by
those  assets  are less  than the  carrying  amount  of those  assets.  Upon the
determination that impairment has occurred, those assets will be reduced to fair
value.  No such  impairment  losses have been  recognized  during the year ended
December 31, 2001.

CASH AND CASH EQUIVALENTS

For  purposes  of the  consolidated  statement  of cash  flows,  cash  and  cash
equivalents include amounts invested in overnight  repurchase  agreements backed
by U. S.  government  obligations  and other U.S.  government  obligation  money
funds, all with purchased maturities of three months or less.

ESCROWS AND TENANTS' SECURITY DEPOSITS

At December 31, 2001,  escrows  primarily  include  externally  restricted funds
established  pursuant to agreements  for tenants'  security  deposits and lender
agreements requiring escrowed property taxes, insurance,  and tenant and capital
improvements.

DEFERRED CHARGES

Deferred  charges  consist  primarily  of deferred  financing  charges and lease
acquisition  costs.  Fees  incurred  to  obtain  long-term  financing  have been
deferred and are being  amortized over the terms of the  respective  loans using
the effective interest method. The amortization of deferred financing charges is
included in  interest  expense in the  accompanying  consolidated  statement  of
income.  Costs  incurred  in the  successful  negotiation  of leases,  including
brokerage,  legal,  and other costs,  have been  deferred and are amortized on a
straight-line basis over the terms of the respective leases.

INVESTMENT IN JOINT VENTURE

In July 1999, a wholly-owned subsidiary of the Operating Partnership contributed
approximately $8.9 million to acquire a twenty percent  non-controlling  general
partner interest in the Joint Venture. The Joint Venture owns and operates three
properties  containing  approximately  401,000 square feet of office and 140,000
square feet of retail space.  Additionally,  the Operating  Partnership provides
property  management and leasing  services to the Joint  Venture.  The Operating
Partnership   accounts  for  this  investment  under  the  equity  method.  This
investment  was  recorded  initially  at cost and is adjusted  by the  Operating
Partnership's  share of  subsequent  income  (loss) and cash  contributions  and
distributions.

                                       3

REVENUE RECOGNITION

Minimum  rental income is recognized on a  straight-line  basis over the term of
the lease,  regardless  of when payments are due.  Accrued  rental income on the
accompanying consolidated balance sheet represents the cumulative minimum rental
income recognized in excess of rental payments currently due. Rent currently due
in excess of minimum rental income recognized was approximately $160,000 for the
year ended  December 31,  2001.  Additionally,  certain of the lease  agreements
contain provisions that provide for contingent rentals based on reimbursement of
the tenants'  share of real estate taxes and increases in operating  expenses in
excess of  specified  amounts.  Contingent  rentals are  recognized  as they are
earned.

Property  management  and leasing fees are  generally  based on a percentage  of
gross monthly  revenue of managed  properties  and are  recognized as revenue as
they  are  earned.  Leasing  commissions  and  facilities  management  fees  are
recognized as revenue as they are earned.

INCOME TAXES

The accompanying  consolidated financial statements do not contain any provision
for federal income taxes. All federal income tax liabilities and/or tax benefits
are passed through to the partners in accordance with the Operating  Partnership
agreement and the Internal Revenue Code.

The  Operating  Partnership  calculates  its  provision for District of Columbia
franchise taxes in accordance with SFAS No.109,  Accounting for Income Taxes. As
of December  31,  2001,  the  Operating  Partnership  had deferred tax assets of
approximately $1.3 million, which are included as a component of other assets on
the  accompanying  consolidated  balance  sheet.  The  deferred  tax  assets are
primarily a result of temporary  differences in the timing of the recognition of
depreciation expense and rental revenue for financial reporting purposes and tax
purposes.  The Operating  Partnership expects to realize the deferred tax assets
over the time periods in which the related temporary differences reverse.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
Business  Combinations  (effective July 1, 2001) and SFAS No. 142,  Goodwill and
Other  Intangible  Assets  (effective  January 1, 2002).  SFAS No. 141 prohibits
pooling-of-interests  accounting for  acquisitions.  SFAS No. 142 specifies that
goodwill and some  intangible  assets will no longer be amortized but instead be
subject to periodic impairment  testing. In June 2001, the Financial  Accounting
Standards   Board  issued  SFAS  No.  143,   Accounting  for  Asset   Retirement
Obligations,  which is  effective  for the  Operating  Partnership  in the first
quarter of 2003.  SFAS No. 143 requires an entity to recognize the fair value of
a  liability  for an asset  retirement  obligation  in the period in which it is
incurred if a reasonable estimate of fair value can be made. In August 2001, the
Financial  Accounting  Standards  Board issued SFAS No. 144,  Accounting for the
Impairment  or Disposal of Long-Lived  Assets,  which  supersedes  SFAS No. 121,
Accounting for

                                       4

the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS No. 144 is effective  for the  Operating  Partnership  in first  quarter of
2002.  The Operating  Partnership  does not believe that any of these  standards
will materially impact its financial statements.

During  1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is effective
for the  years  beginning  after  June 15,  2000 as  amended  by SFAS  No.  137,
Accounting for Derivative  Instruments and Hedging  Activities - Deferral of the
Effective  Date of FASB  Statement  No. 133- an Amendment of FASB  Statement No.
133. The  Operating  Partnership  adopted  SFAS No. 133 in the first  quarter of
2001.

The Operating Partnership has identified two financial instruments which qualify
as  derivative  instruments  in  accordance  with SFAS No.  133.  The  Operating
Partnership's  investment  securities  include stock purchase  warrants received
from  companies  that provide  fiber-optic  network and broadband  access to the
Operating  Partnership's  office  tenants.  Statement  No.  133  requires  these
warrants to be marked to fair value at the end of each reporting period with the
change in value  recognized  currently in earnings.  For the year ended December
31,  2001,  the  Operating  Partnership  recorded a $1.4  million  loss in other
expense on the  consolidated  statement  of income  related  to these  warrants.
Additionally,  during 2001, the Operating  Partnership  entered into an interest
rate swap to convert the interest rate on $50 million of variable rate debt to a
fixed rate (the "Hedge").  The Hedge is effective for the period January 2, 2002
through July 2, 2002. Fixing the rate on this debt with an interest rate swap is
consistent with the Operating Partnership's strategy of minimizing interest rate
risk. The swap was designed to mirror the underlying variable rate debt in terms
of index,  reset, and  amortization.  Due to the nature of the terms of the swap
and  the  underlying  debt,  the  Operating  Partnership   determined  that  the
derivative instrument is highly effective.  Consequently, the unrealized loss of
$634,000  is  included  as a  component  of other  comprehensive  income  on the
accompanying   consolidated  statement  of  changes  in  partners'  deficit  and
comprehensive income in accordance with SFAS No. 133.

3.   RENTAL PROPERTY:

Rental  property  as of  December  31,  2001,  consists  of  the  following  (in
thousands):

                                                            DECEMBER 31,
                                                                2001
                                                            ------------
     Land                                                   $  318,320
     Buildings, improvements and tenant improvements         1,357,595
     Construction in process                                    21,202
                                                            ------------
          Subtotal                                           1,697,117
     Less- Accumulated depreciation                           (503,720)
                                                            ------------
          Total                                             $1,193,397
                                                            ============

Depreciation  expense related to rental property was approximately $51.3 million
for the year ended  December 31, 2001.  Repairs and  maintenance  expense of the
Operating  Partnership  was  approximately  $14.8  million  for the  year  ended
December 31, 2001.

                                       5

4.  DEFERRED CHARGES:

Deferred  charges  as of  December  31,  2001,  consist  of  the  following  (in
thousands):

                                                            DECEMBER 31,
                                                                2001
                                                            ------------
     Lease acquisition costs                                $   39,286
     Deferred financing charges                                 19,702
                                                            ------------
          Subtotal                                              58,988
     Less- Accumulated amortization                            (37,071)
                                                            ------------
          Total                                             $   21,917
                                                            ============

Amortization  expense of lease acquisition costs was approximately  $2.6 million
for the year ended December 31, 2001. Amortization expense of deferred financing
charges was approximately $2.4 million for the year ended December 31, 2001, and
is included in interest  expense on the accompanying  consolidated  statement of
income.

5.  LEASING ACTIVITIES:

Future  minimum lease  payments to be received  under  noncancellable  operating
leases at December 31, 2001, expiring on various dates through December 2025 are
as follows (in thousands):

     YEAR ENDING
     DECEMBER 31,                                              AMOUNT
     ------------                                           -----------
         2002                                               $   324,543
         2003                                                   272,711
         2004                                                   206,959
         2005                                                   139,023
         2006                                                    96,345
     Thereafter                                                 354,457
                                                            -----------
                                                            $ 1,394,038
                                                            ===========

As of December 31, 2001, one major tenant,  the General Services  Administration
("GSA"),  occupied approximately 43 percent of the Operating Partnership's total
square feet.  Included  within the GSA amounts is the United  States  Patent and
Trademark  Office  ("PTO"),  which  occupies  approximately  15  percent  of the
Operating Partnership's total square feet in 17 of the Properties.  The majority
of the PTO space is under leases that expire between 2003 and 2006.

GSA has conducted a competition for the  consolidation of the PTO in up to eight
buildings  in  Northern  Virginia  pursuant  to a  new  twenty-year  lease.  The
Operating  Partnership  was one of three  finalists for this  long-term  housing
solution  for the PTO. On June 1, 2000,  GSA awarded a lease to the offeror of a

                                       6

site in Alexandria,  Virginia,  and not the Operating  Partnership.  The June 1,
2000 lease for the  Alexandria  site was  modified  pursuant  to an amended  and
restated  lease dated  December  19,  2001.  Pursuant  to the new lease,  PTO is
expected to occupy the new site  beginning in late 2003 and  continuing  through
May 2005.

The Operating  Partnership and certain of the individual ownership entities have
filed suit in the United  States  Court of Federal  Claims  seeking a  permanent
injunction  to bar the  implementation  of the amended and restated  lease dated
December 19, 2001. The Operating  Partnership is contending  that the government
violated  federal  procurement  laws by making  post-award  modifications to the
original June 1, 2000 lease that materially  altered the  fundamental  nature of
the transaction  solely for the benefit of one bidder.  A hearing in the case is
scheduled for March 2002.

6.  MORTGAGE NOTES PAYABLE:

The Operating  Partnership has mortgage loans as follows as of December 31, 2001
(in thousands):

                                                                   INTEREST
PROPERTY                                            BALANCE          RATE         MATURITY
- ------------------------------------------------------------------------------------------

FIXED RATE DEBT
CESC 1750 Pennsylvania Avenue L.L.C.                   $34,458     10.21%         05/15/02
CESC Plaza L.P. & CESC Plaza Five L.P.                  71,849      6.70%         10/01/04
CESC One Democracy Plaza L.P.                           27,383      8.77%         02/01/05
CESC Reston Executive Center L.L.C.                     72,500      7.83%         01/01/06
Fifth Crystal Park Associates L.P.,  Tranche A          40,500      6.80%         07/01/06
Fifth Crystal Park Associates L.P.,  Tranche B           3,774      8.39%         07/01/06
CESC One Skyline Place, L.L.C., Tranche A               14,163      8.30%         08/01/06
CESC One Skyline Place, L.L.C, Tranche B                 9,975      6.93%         08/01/06
CESC Two Skyline Place, L.L.C.                          14,163      8.30%         08/01/06
Second Crystal Park Associates L.P.                     52,229      7.05%         08/01/07
CESC Six Skyline Place, L.L.C.                          34,685      8.05%         11/01/07
CESC Two Courthouse Plaza L.P.                          33,947      7.19%         01/01/08
CESC Square Four L.L.C.                                 49,586      8.07%         10/01/10
CESC Mall L.L.C.                                        61,148      9.89%         12/15/11
CESC Gateway Two L.P.                                   36,787      7.03%         08/01/13
Third Crystal Park Associates, L.P.                     61,601      7.03%         08/01/13
CESC Square L.L.C.                                      92,867      7.81%         11/01/14
CESC Gateway/Square L.L.C.                             117,110      7.94%         10/01/24
CESC Crystal/Rosslyn L.L.C.                             73,371      6.90%         11/11/27
CESC One Courthouse Plaza L.L.C.                        46,760      7.19%         01/01/28
CESC Four and Five Skyline Place L.L.C.                 48,349      6.86%         01/01/28
CESC One Skyline Tower L.L.C.                           66,602      7.05%         06/11/28
CESC Three Skyline Place L.L.C.                         17,806      7.05%         06/11/28
Fourth Crystal Park Associates L.P.                     64,703      6.51%         09/01/28
First Crystal Park Associates L.P.                      54,959      8.11%         10/01/29

                                        7

                                                                         
CESC 1101, 1730, 1140, & 1150 Streets, L.L.C.           93,729      7.99%         08/01/30
VARIABLE RATE DEBT
CESC Seventh Skyline Place L.L.C. construction
      loan                                               51,030     5.69%         04/14/02
CESC Tyson's Dulles Plaza, L.L.C.                        70,000     6.78%         06/30/03
CESC Commerce Executive Park, L.L.C.                     54,033     7.55%         07/31/03

                                                    ------------
                                                    $ 1,470,057
                                                    ============

On July 5, 2001, the Operating Partnership completed a $52.5 million refinancing
of Second  Crystal Park  Associates  L.P.'s  mortgage  loan.  The new loan bears
interest  at a fixed rate of 7.05% and  matures  on August 1,  2007.  All of the
proceeds from the new loan plus  approximately $7.2 million in cash were used to
repay  the  existing   mortgage  loan  of   approximately   $59.7  million.   An
extraordinary  loss of $87,000 was  recognized  on the early  extinguishment  of
debt.

During 2001, the Operating Partnership borrowed an additional $10 million on its
CESC One Skyline Place,  L.L.C.  mortgage.  The new tranche expires on August 1,
2006, and has an interest rate of 6.93%.

Borrowings on the construction  loan bear interest at a rate which is the higher
of the Prime Rate on the day of the draw or the  Federal  Funds Rate on that day
plus 50 basis points,  or at a rate of the London Interbank Offer Rate ("LIBOR")
plus 135 basis  points.  The  construction  loan was  obtained  to  finance  the
development  of an  approximately  400,000  square  foot  office  building  on a
property located in Bailey's Crossroads,  VA. Construction was completed on this
building in September 2001. The construction  loan is collateralized by the land
and improvements and is partially  guaranteed by the Operating  Partnership.  In
February of 2002, the Operating  Partnership  exercised its option to extend the
maturity on this loan from April of 2002 to October  2002.  An extension  fee of
approximately $66,000 was paid in 2002 related to this extension.

As  of  December  31,  2001,   mortgage  notes  payable  consists  of  27  loans
collateralized by the land owned by the Operating Partnership, the land owned by
the ground lessors, and substantially all of the buildings and improvements. The
mortgage  notes payable are generally due in monthly  installments  of principal
and  interest  and  mature at various  dates  through  August 1, 2030.  The CESC
Tyson's  Dulles  Plaza,  L.L.C.  mortgage  note has a variable rate of 150 basis
points over LIBOR. The CESC Commerce Executive Park, L.L.C.  mortgage note has a
variable rate of 130 basis points over LIBOR.  The loan is currently  segregated
into 2 tranches.

The scheduled principal payments of mortgage notes payable at December 31, 2001,
are as follows (in thousands):

                                       8

     YEAR ENDING
     DECEMBER 31,                                              AMOUNT
     ------------                                           -----------
         2002                                               $   104,463
         2003                                                   142,743
         2004                                                    88,941
         2005                                                    47,941
         2006                                                   167,744
     Thereafter                                                 918,225
                                                            -----------
                                                            $ 1,470,057
                                                            ===========

Certain   mortgage  notes  payable  are  subject  to  prepayment   penalties  or
defeasance,  typically calculated based on yield maintenance, in the event of an
early principal repayment.

In connection with certain loans,  lenders have required certain of the entities
to  establish  escrows  for real  estate  taxes,  insurance,  capital and tenant
improvements,  leasing costs, and capital reserves.  The escrows are held by the
lenders in money market accounts and had an aggregate carrying value at December
31, 2001 of approximately $31.1 million.

At December 31, 2001,  the management of the Operating  Partnership  believes it
was in compliance with all loan covenants on its outstanding mortgages.

7.  LINE OF CREDIT:

On October 26, 2000, the Operating Partnership obtained a $200 million revolving
line of credit (the "Line") of which $33 million was  outstanding as of December
31, 2001.  The Line expires on October 26, 2003. The Operating  Partnership  has
two one-year options to extend the expiration date of the Line. Borrowings under
the Line bear  interest at a base rate (the  greater of the  Federal  Funds Rate
plus 50 basis points or the lender's Prime Rate) plus a range of 50 to 125 basis
points depending on the leverage ratio of the Operating  Partnership,  or a rate
of LIBOR plus a range of 225 to 300 basis points depending on the leverage ratio
of the  Operating  Partnership.  The  Operating  Partnership  pays an annual fee
ranging from 15 to 25 basis points of the unused  portion of the Line  depending
on the leverage ratio of the Operating  Partnership.  The Line contains  certain
financial covenants, including maintenance of minimum net worth and debt service
coverage ratios, maximum leverage ratio, and minimum cash reserves.

The merger of the Operating  Partnership  with VRLP on January 1, 2002 triggered
the Operating Partnership's  non-compliance with certain terms and conditions of
the Line.  The  merger-related  defaults  were waived by the lenders for 90 days
until March 31, 2002.  The  Operating  Partnership  plans to terminate  the Line
effective  March 5, 2002.  On January 4, 2002,  the  outstanding  balance of $33
million on the Line was repaid by VRLP.

8.  RELATED-PARTY TRANSACTIONS:

Commercial  management  and leasing fee revenues  from entities in which certain
partners of the Operating Partnership exercise control amounted to approximately
$3.2 million for the year ended December 31, 2001.

                                       9

In 1994, Charles E. Smith Management,  Inc. ("CESMI"), and Facilities Management
Corporation  ("FMC"),  the predecessor  entities to Charles E. Smith Real Estate
Services  L.P.   ("CESRES"),   a   wholly-owned   subsidiary  of  the  Operating
Partnership,  entered  into a  cost-sharing  agreement  with  Charles  E.  Smith
Residential  Realty,  Inc.  ("SRW"),  a related  entity,  under which  CESRES is
required to reimburse SRW for legal, systems, human resources, payroll, accounts
payable, and other administrative  functions. The agreement was for one year and
automatically  renews on an annual  basis until such time as either  party gives
notice of nonrenewal.  CESRES is allocated expenses based on formulas determined
by the Operating  Partnership's and SRW's management.  Human resources,  payroll
department  expenses,  and  office  support  are  allocated  primarily  based on
employee  head count.  Legal and systems  costs were  allocated  based on actual
usage.  Accounts  payable  department costs are allocated based on the estimated
nonpayroll expenditures. Included in expenses for the Operating Partnership were
allocated expenses of approximately $2.7 million for the year ended December 31,
2001.  Although  these  agreements  were  not  negotiated  at arms  length,  the
Operating  Partnership  believes,  based upon  comparable  fees charged by other
service providers, that their terms are fair to the Operating Partnership.

On  October  31,  2001,  SRW merged  with  Archstone  Communities  Trust to form
Archstone-Smith  Operating Trust ("ASN").  As a result of this transaction,  the
Operating Partnership is currently establishing internal personnel and resources
to perform  the  functions  previously  provided  by SRW and  currently  by ASN,
together SRW/ASN, including: legal, systems, human resources,  payroll, accounts
payable,  and other administrative  services.  This transition is expected to be
completed by the second quarter of 2002. The cost sharing agreement will then be
limited to office services, certain executive office expenses, as well as shared
conference, lunch, and training rooms.

     o   Substantially  all of the Properties'  tenant  construction  management
         services,  engineering,  repair, and maintenance services and insurance
         placement  services are provided by operating  subsidiaries of SRW/ASN.
         Certain  partners  of the  Operating  Partnership  are  also  officers,
         directors,  and  shareholders of SRW/ASN.  These  agreements  expire in
         2005. Fees for these services are computed as follows:

         -   Tenant  Construction  Management - The  Properties pay SRW/ASN fees
             equal  to 15% of the  total  cost  of a  project  for  construction
             management  services  related  to tenant  renovations  and  certain
             building improvements and repairs.

         -   Engineering,  Repair,  and Maintenance - The Properties pay SRW/ASN
             fees for  engineering,  repair,  and maintenance  services based on
             time incurred and in lieu of engineering and maintenance  wages and
             benefits to employees and payments to third-party contractors. Such
             amounts  are  based on costs  incurred  by  SRW/ASN,  including  an
             overhead charge.

         -   Insurance - The Properties pay SRW/ASN fees for insurance placement
             services based on a percentage of the insurance premiums.

                                       10

Total payments to SRW/ASN for the year ended December 31, 2001,  were as follows
(in thousands):

                                                             YEAR ENDED
                                                            DECEMBER 31,
                                                                2001
                                                            ------------
             Tenant construction management                 $   14,470
             Engineering, repair and maintenance                18,515
             Insurance                                           1,119
                                                            ------------
                  Total                                     $   34,104
                                                            ============

     o   For  the  year  ended  December  31,  2001,  the  Properties   incurred
         environmental   services   fees  of   approximately   $1.4  million  to
         Environmental  Control Associates ("ECA"), a joint venture in which the
         Operating  Partnership has a 74.61%  interest.  ECA owns and operates a
         central    environmental   control   system   that   controls   various
         energy-consuming devices, equipment, and machinery located in buildings
         purchasing its services. A subsidiary of SRW/ASN manages ECA for a fee,
         which was approximately $211,000 for the year ended December 31, 2001.

     o   One of the Properties leases approximately 85,000 square feet of office
         space to SRW/ASN under noncancellable operating lease agreements. These
         lease  agreements  expire on April  2004.  The lease  contains  certain
         provisions for  escalations in the event of increased real estate taxes
         and  operating  expenses.  SRW/ASN is allocated  its portion of certain
         rents for space  shared with  affiliated  entities.  Rent is  allocated
         ratably based on the amount of square footage  occupied by each entity.
         For the year ended December 31, 2001,  revenues under these leases were
         approximately  $3.1 million.  The lease agreement between the Operating
         Partnership and ASN is currently under  negotiation.  It is anticipated
         that a new lease  agreement  will be in place by the  beginning  of the
         second quarter of 2002.

     o   In August 1999 and December 1999, the Operating  Partnership acquired a
         total  of four  development  contracts  (one  third  party  development
         contract,  one related party development contract,  and two development
         contracts with Operating Partnership  properties) from Charles E. Smith
         Construction,   Inc.  for  approximately  $1.3  million.  The  cost  of
         approximately   $600,000  for  the  two   development   contracts  with
         properties  not owned by the  Operating  Partnership  is  included as a
         component  of other  assets on the  accompanying  consolidated  balance
         sheet and will be amortized on a straight-line  basis over the terms of
         the respective development contracts.  These development contract costs
         were fully amortized as of December 31, 2001. The cost of approximately
         $700,000 for the two development  contracts with Operating  Partnership
         properties  is  recorded  as a  component  of  rental  property  in the
         accompanying consolidated balance sheet.

     o   CESRES  leases  approximately  5,200 feet from a related party under an
         operating lease agreement on a month to month basis. The lease contains
         a provision for escalations in the event of increased real estate taxes
         and operating expenses.  In addition CESRES is allocated its portion of
         certain  rents for  space  shared  with  affiliated  entities.  Rent is
         allocated  ratably  based on the amount of square  footage  occupied by
         each entity.  For the year ended  December 31,  2001,  rental  payments
         under these leases approximated $246,000.

                                       11

     o   During 1992, one of the Properties bought out the lease of Crystal Food
         Services  of  Virginia,  Inc.  ("CFS"),  a related  entity,  as part of
         management's decision to increase the number of nationally known retail
         tenants. Under the terms of the buyout, the property is required to pay
         CFS 100% of the increased  cash flow for ten years.  For the year ended
         December 31, 2001, payments to this entity were approximately $91,000.

9.  ACCUMULATED COMPREHENSIVE LOSS:

The Operating Partnership's  accumulated comprehensive loss in 2001 consisted of
$2,000 of unrealized  loss on marketable  securities and $634,000 for the change
in fair value of the swap agreements.

10.  COMMITMENTS AND CONTINGENCIES:

GROUND LEASES

Two of the Properties have ground leases that provide for an annual base rent of
the greater of $50,000 or 50% of the  properties'  net cash flows after  certain
debt service and certain operating expenses; these ground leases expire in 2062.

One of the Properties has a ground lease with certain Class A unitholders of the
Operating  Partnership  that provides for an annual rent based upon 6 percent of
the appraised value of the land,  adjusted every ten years, but in no event less
than the prior period's  rent.  This ground lease is subordinate to the mortgage
debt on the  property  and expires in 2061.  The annual rent is $548,808 for the
ten-year period ending April 30, 2002.

Another  one of the  Properties  has a ground  lease  that  expires  in 2084 and
provides for a fixed rent  payment  that  increases  5.5 percent  annually.  The
minimum ground rent expense for 2001 was $339,357.

At the  expiration of the ground  leases,  the land and all of the  improvements
thereon will revert to the ground  lessor.  The future minimum annual rentals as
of December 31, 2001, for the ground leases are as follows (in thousands):

     YEAR ENDING
     DECEMBER 31,                                              AMOUNT
     ------------                                           -----------
         2002                                               $     1,007
         2003                                                     1,027
         2004                                                     1,047
         2005                                                     1,069
         2006                                                     1,092
     Thereafter                                                 580,800
                                                            -----------
                                                            $   586,042
                                                            ===========

Ground rent expense for the year ended December 31, 2001 was approximately  $1.2
million.

BENEFIT PLANS

                                       12

Substantially  all  employees  of the  Operating  Partnership  are  eligible  to
participate  in the Charles E. Smith  Companies  Employees'  Retirement  Plan, a
profit-sharing  plan  (the  "Plan").   Contributions  to  the  Plan  consist  of
discretionary  and matching  contributions  determined  annually by the Board of
Managers.  For discretionary and matching contributions related to periods prior
to  December  31,  1999,  and for  matching  contributions  related  to  periods
subsequent  to  December  31,  1999,  vesting  is based  on years of  continuous
service.  A  participant  is 100 percent  vested in  discretionary  and matching
contributions  related to periods  prior to December 31,  1999,  and in matching
contributions  related to periods subsequent to December 31, 1999, plus earnings
thereon after five years of service.  Participants  are  immediately 100 percent
vested in discretionary  contributions  plus earnings thereon related to periods
subsequent  to  December  31,  1999.  For the  year  ended  December  31,  2001,
contributions  to the Plan  included in operating  expenses  were  approximately
$564,000, of which approximately $447,000 was discretionary.

LITIGATION

CESRES  and the  Properties  are  defendants  in a number of  actions  generally
resulting  from their roles as  management  agent or as property  owners.  These
actions are  generally  insured  cases and are being  defended by the  Operating
Partnership's  insurance  carriers.  In the opinion of management,  based on the
advice of legal  counsel,  the  resolution of such  litigation  will not have an
adverse effect on the financial position or results of operations.

11.   FAIR VALUE OF FINANCIAL INSTRUMENTS:

SFAS No. 107,  Disclosures About Fair Value of Financial  Instruments,  requires
disclosure  about the fair value for all  financial  instruments.  The  carrying
values of escrows and tenants' security deposits, receivables,  accounts payable
and accrued expenses,  and other assets and liabilities are reasonable estimates
of their fair  values  because  of the short  maturities  of these  instruments.
Mortgage  notes  payable  have an  aggregate  fair value of  approximately  $1.5
billion as of December 31, 2001,  based on the remaining  maturities of the debt
and interest rates  currently  available to the Properties for debt with similar
terms and remaining maturities.

12.   INCENTIVE PLANS:

The Operating  Partnership  applies Accounting  Principles Board Opinion No. 25,
Accounting  for Stock  Issued  to  Employees,  and  related  interpretations  in
accounting  for  its  plans.  Accordingly,  no  compensation  expense  has  been
recognized for its stock-based  compensation plans other than for the restricted
unit plan. Had  compensation  cost for the Operating  Partnership  employee unit
option plan been determined based on the fair value at the grant date consistent
with the methodology  prescribed under SFAS No. 123,  Accounting for Stock-Based
Compensation,  the Operating Partnership's net income would have been reduced by
approximately  $2.0 million for the year ended December 31, 2001. The fair value
of the  options  issued  in 2001 is  estimated  at  approximately  $58,000.  The
following  assumptions were used:  dividend yield of 4.8%,  volatility of 21.7%,
average risk-free interest rate of 5.1%, and expected life of 10 years.

OPTION PLAN

                                       12

The Operating  Partnership maintains an employee stock and unit option plan (the
"Option  Plan")  designed for executive  officers and other key employees of the
Operating  Partnership.  The  Option  Plan  authorizes  the  issuance  of  up to
approximately  1,836,000 Class A limited  partnership  units pursuant to options
granted ("Unit Options").

Unit Options outstanding under the Option Plan are as follows:

                                                 NUMBER     WEIGHTED AVERAGE     OPTIONS
                                               OF OPTIONS    EXERCISE PRICE    EXERCISEABLE
                                               ----------   ----------------   ------------

Unit Options outstanding, December 31, 2000    1,333,400        $29.85           430,844

Unit Options granted                              10,000         34.00

Unit Options exercised                            (9,000)        24.00

Unit Options cancelled                           (84,982)        28.64
                                               ----------   ----------------   ------------
Unit Options outstanding, December 31, 2001    1,249,418        $30.01           609,768
                                               ----------   ----------------   ------------

The exercise price of Unit Options granted under the Option Plan may not be less
than  the fair  market  value of the  limited  partnership  units on the date of
grant.  Payments for units  granted  under the Option Plan must be made in cash.
The weighted average remaining  contractual life of Unit Options  outstanding as
of December 31, 2001 was 7.21 years.

Unit Options  granted under the Option Plan have a maximum term of ten years and
vest generally in three to five equal annual installments beginning on the first
anniversary of the date of grant. Generally, Unit Options terminate three months
after the optionee's  termination of employment with the Operating  Partnership.
The  Executive  Compensation  Committee  of the Board of Managers  may  provide,
however,  that an Unit Option may be exercised  over a longer  period  following
termination  of employment,  but in no event beyond the  expiration  date of the
Unit Option.

As a result of the merger  with VRLP on January 1, 2002,  293,334 of the 478,418
outstanding $24 Unit Options were exchanged for cash by VRLP. The purchase price
of each $24 Unit Option  exchanged for cash was $8.38 per unit, which represents
the difference  between the stipulated value of $32.38 for a $24 Unit Option and
its exercise price of $24. The remaining 205,084 $24 Unit Options were exchanged
for fully vested VRLP stock  options.  The $24 Unit Options  exchanged  for VRLP
stock  options  were  converted  at a ratio of 0.7898 VRLP stock option to 1 $24
Unit Option. Of the 751,000 $34 Unit Options,  31,000 were exchanged for cash at
a rate of $3.50 multiplied by the number of exercisable Unit Options held by the
optionee.  The remaining  $34 Unit Options were  exchanged for fully vested VRLP
stock  options at a  conversion  ratio of 0.7898 VRLP stock option to 1 $34 Unit
Option.

                                       14

RESTRICTED UNIT PLAN

The Operating  Partnership  adopted a restricted unit plan (the Restricted Plan)
for executive  officers and other key  employees of the  Operating  Partnership.
This  Restricted  Plan was amended on January 21, 2001 to allow for the issuance
of up to 250,000 Class A limited  partnership units.  Restricted units that have
not  vested at the time of an  employee's  termination  of  employment  with the
Operating  Partnership will be forfeited except where such termination occurs by
reason of death or disability.  Any restricted  units forfeited  pursuant to the
vesting  provisions  of the  Restricted  Plan will again be available  for award
under the  Restricted  Plan.  As of December 31, 2001,  155,544  Class A limited
partnership  restricted units had been awarded to certain executive officers and
key  employees.  These  grants  vest in two to four  equal  annual  installments
beginning on the first anniversary of the date of grant, subject to acceleration
of vesting upon a change of control of the Operating Partnership. As of December
31, 2001, 50,186 Class A limited partnership restricted units are vested. During
the year ended December 31, 2001, compensation expense related to the restricted
unit grants was approximately  $490,000 based on the estimated fair market value
of the Operating Partnership units at the date of grant.

As a result of the merger with VRLP on January 1, 2002, all the restricted units
became fully vested and were converted into VRLP unrestricted  partnership units
at a conversion ratio of 0.7898 VRLP unit to 1 Operating Partnership unit.

On January 26, 2001,  the  Operating  Partnership  implemented  a new  incentive
compensation  program  whereby certain  eligible  employees were awarded phantom
units in the  Operating  Partnership.  These  phantom  units allow the holder to
receive quarterly cash distributions equivalent to those received by partners of
the  Operating  Partnership,  assuming  the holder is employed by the  Operating
Partnership  at the time the  distributions  are  paid.  The  phantom  units are
considered  50% vested two years from the grant date. At that time,  the holders
of the phantom units can elect to either  exchange the vested  phantom units for
the value of the units,  as determined by the Operating  Partnership,  or retain
the phantom units and continue to receive quarterly cash  distributions.  If the
holder elects to receive cash for the vested phantom  units,  the holder will no
longer  receive  cash  distributions  on those  units.  The  phantom  units  are
considered  100% vested four years from the grant date.  Once fully vested,  the
holder of the phantom  units will receive  either the cash value for 100% of the
phantom  units  or the  remaining  50% of the  phantom  units  depending  on the
holder's  election made initially after two years.  The holder does not have the
option to continue holding the phantom units once they become fully vested.  The
value of the phantom units is determined solely by the Operating  Partnership at
the time of payment. If at any time subsequent to the grant date the employee is
terminated,  the phantom units cease to exist as do all benefits associated with
them.  The  holders  of the  phantom  units are not  partners  in the  Operating
Partnership.  The  Operating  Partnership  accrues a liability  over the vesting
period of the phantom  units based on its  estimate of the value it will pay out
and records all cash  distributions  as expense  when paid.  As of December  31,
2001,  the  Operating  Partnership  had  recognized  approximately  $301,000  in
compensation expense related to these phantom units.

In connection with the merger agreement with VRLP, the outstanding phantom units
were bought out in December of 2001 at $32.38 per phantom unit.  These costs are
included in the merger costs discussed in Note 1.

13.  CONVERTIBLE, REDEEMABLE CLASS C UNITS:

As discussed in Note 1, the Operating Partnership has issued 2.5 million Class C
limited  partnership  units.  The Class C unitholder  has the right to cause the
Operating Partnership to redeem all of its Class

                                       15

C units on or after October 31, 2007. The redemption price will be $24 per Class
C unit,  payable in cash or by a five-year  note at the Operating  Partnership's
discretion.  The Class C unitholder  has the same rights in  liquidation  as the
Class A unitholders. The Class C units are convertible into Class A units at any
time at the  option of the holder and will  automatically  convert  into Class A
units  upon   consummation   of  an  Initial  Public  Offering  or  Public  REIT
Transaction,  as defined. The Class C unitholder also has a contractual right to
cause the  Operating  Partnership  to redeem its Class C units in the event of a
merger  or  similar  transaction  involving  the  Operating  Partnership,  for a
redemption  price equal to the value received in such transaction for the number
of Class A units into which such Class C units are then convertible. The Class C
units  vote  along  with the Class A and Class D units as a single  class on all
matters,  except any  amendments to the terms of the Class C units,  as to which
they vote as a separate class. The accompanying consolidated statement of income
includes net income  applicable  to Class A and Class C  unitholders  as Class C
preferential distributions do not accrue until November 1, 2007.

On January 1, 2002,  the Class C units were  cancelled as a result of the merger
with VRLP.

14.  CUMULATIVE, CONVERTIBLE, PREFERRED CLASS D UNITS:

As  discussed  in Note 1, in  March  1999,  VRLP  contributed  to the  Operating
Partnership  certain assets in return for approximately 7.7 million  cumulative,
convertible, preferred Class D limited partnership units. Each Class D preferred
unit is entitled to receive a cumulative  preferential  cash  distribution on an
annual basis of $1.81 in the first year following issuance,  $1.89 in the second
year following issuance,  $1.97 in the third year following issuance,  and $2.05
in the fourth year  following  issuance  and  thereafter  until  February  2024.
Accrued  Class  D  preferred  distribution  amounts  that  are  not  paid on the
applicable distribution payment dates accumulate, compounded quarterly until the
arrearage is fully paid,  at interest  rates ranging from 7.75% during the first
year following  issuance to 8.50% during the fourth year following  issuance and
thereafter (subject to a 2% reduction in rate after a Public REIT Transaction or
an  Initial  Public  Offering).  So long  as any  Class D  preferred  units  are
outstanding,  no  distributions  on Class A units,  Class C units,  or any other
class or series of units of the  Operating  Partnership  over  which the Class D
preferred units have priority in the payment of  distributions  ("Junior Units")
can be  declared  or paid  unless all  accrued  Class D  preferred  distribution
amounts are declared and paid. Aggregate  distributions on each Class A unit for
each  applicable  year to date or annual  period may not  exceed  the  aggregate
distributions  for such  period  on each  Class D  preferred  unit  (subject  to
customary    antidilution    adjustments    for   splits,    combinations    and
recapitalizations).

In the event of a  liquidation,  dissolution,  or  winding  up of the  Operating
Partnership,  the holders of the Class D preferred units are entitled to receive
a  distribution  equal to the full amount of all  accrued and unpaid  cumulative
Class D preferred  distribution amounts before any distribution of assets of the
Operating  Partnership  is made to the  holders of Junior  Units.  Additionally,
after payment of any other preferential distributions or liquidation preferences
in  respect of  interests  in the  Operating  Partnership,  upon a  liquidation,
dissolution,  or winding up, the holders of the Class D preferred units are also
entitled  to  participate  in the  distribution  of the assets of the  Operating
Partnership  ratably with the holders of the Class A units,  Class C units,  and
any  other  common  units of the  Operating  Partnership  then  outstanding,  in
accordance with the holders' respective capital accounts.

Class D preferred  units are  convertible  into Class A units at any time at the
option of the holder on a one-for-one  basis (subject to customary  antidilution
adjustments for splits,  combinations  and  recapitalizations).  Any accrued but
unpaid Class D preferred  distribution  amounts  outstanding at the time of such
optional  conversion  will also be  converted  into Class A units at the rate of
$31.50 per Class

                                       16

A unit  (subject to similar  adjustments).  On February  15,  2024,  all Class D
preferred units will  automatically  convert into Class A units on a one-for-one
basis (subject to similar adjustments), or if all Class D preferred distribution
amounts accrued on or prior to such date have not been paid in full, then on the
first  date  thereafter  on which  such  payment  is made in full.  The  Class D
preferred  units vote along with the Class A and Class C units as a single class
on all  matters  except  any  amendments  to the terms of the Class D  preferred
units,  as to which they vote as a separate  class.  The Class D preferred units
are not redeemable  except following  conversion into Class A units, and then to
the same  extent as other Class A units are  redeemable  following a Public REIT
Transaction or Initial Public Offering.

VRLP has a right of first opportunity,  subject to certain terms and conditions,
to purchase  common  equity and  convertible  and hybrid debt  securities  to be
issued by the  Operating  Partnership  at a price  below  $31.50 per unit and to
maintain  its  percentage  equity  ownership  in the  event  that the  Operating
Partnership  issues common equity or convertible or hybrid debt  securities at a
price equal to or greater  than $31.50 or if the  Operating  Partnership  issues
nonconvertible preferred equity securities at any price.

On January 1, 2002,  the Class D preferred  units were  cancelled as a result of
the merger with VRLP.

15.  SUPPLEMENTAL CASH FLOW DATA:

Information  on non-cash  investing and cash paid for interest is as follows (in
thousands):

                                                        YEAR ENDED
                                                       DECEMBER 31,
                                                           2001
                                                       ------------
Cash paid for interest, net of amounts capitalized     $   110,755
Capitalized interest                                         3,195

                                       17

                                                                    Exhibit 99.2

                        UNAUDITED PRO FORMA CONSOLIDATED
                              FINANCIAL STATEMENTS

         The following  unaudited pro forma consolidated  financial  information
presents (i) the consolidated pro forma balance sheet of Vornado Realty Trust as
of December  31, 2001,  as if the merger had occurred on December 31, 2001,  and
(ii) the consolidated pro forma income statement of Vornado Realty Trust for the
year ended December 31, 2001, as if the merger had occurred on January 1, 2001.

         The  unaudited  pro forma  consolidated  financial  information  is not
necessarily  indicative  of  what  Vornado  Realty  Trust's  actual  results  of
operations or financial  position  would have been had these  transactions  been
consummated  on the dates  indicated,  nor does it purport to represent  Vornado
Realty  Trust's  results of  operations  or  financial  position  for any future
period.  In  management's  opinion,  all  adjustments  necessary to reflect this
transaction have been made.

         The unaudited consolidated pro forma financial information should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K for the year ended December 31, 2001,
filed with the Securities and Exchange Commission on March 11, 2002, and the
consolidated financial statements and notes thereto of Charles E. Smith
Commercial Realty L.P. ("CESCR") as of and for the year ended December 31, 2001,
which are attached to this Form 8-K/A as exhibit 99.1.

         The  unaudited  pro  forma  consolidated  financial  statements  do not
reflect the  non-recurring  costs and expenses  associated with  integrating the
operations of the two limited partnerships, nor any of the anticipated recurring
expense savings arising from the integration. Costs of integration may result in
significant  non-recurring  charges to the combined  results of operations after
completion of the merger;  however,  the actual amount of such charges cannot be
determined  until the transition  plan relating to the integration of operations
is completed.

                                                    VORNADO REALTY TRUST
                                            PRO FORMA CONSOLIDATED BALANCE SHEET
                                                   AS OF DECEMBER 31, 2001
(amounts in thousands)

                                                     VORNADO        CESCR        PRO FORMA          TOTAL
                                                    HISTORICAL     HISTORICAL    ADJUSTMENTS      PRO FORMA
                                                   -----------    -----------   ---------------   ----------
                                                                                      
 ASSETS

 Real Estate, Net                                  $ 4,183,986    $ 1,193,397   $ 1,302,045 (A)   $6,668,448
                                                                                     (4,312)(C)
                                                                                     (6,668)(D)
 Investments and Advances
   to Partially-Owned Entities                       1,270,195          8,424      (347,263)(B)      931,356
 Notes and Mortgages Receivable                        258,555              -             -          258,555
 Cash and Cash Equivalents                             265,584              -       (30,000)(F)      235,584
 Receivable Arising from the
   Straight-lining of Rents                            138,154         24,133       (24,133)(A)      142,466
                                                                                      4,312 (C)
 Other Assets                                          660,869         82,343       (21,917)(A)      742,022
                                                                                     14,059 (A)
                                                                                      6,668 (D)
                                                   -----------    -----------   -----------       ----------
 TOTAL ASSETS                                      $ 6,777,343    $ 1,308,297   $   892,791       $8,978,431
                                                   ===========    ===========   ===========       ==========

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Liabilities:
   Notes and Mortgages Payable                     $ 2,477,173     $1,470,057   $    34,527 (E)   $3,981,757
   Revolving Credit Facility                                -          33,000             -           33,000
   Other Liabilities                                   250,140         53,829         2,520 (A)      306,489
                                                   -----------     ----------   -----------       ----------
   Total Liabilities                                 2,727,313      1,556,886        37,047        4,321,246

 Minority Interest of Unitholders
   in the Operating Partnership                      1,479,658              -       607,155 (A)    2,086,813

 Convertible Redeemable Class C Units                        -         59,164       (59,164)(G)            -
 Shareholders' Equity                                2,570,372       (307,753)      307,753 (G)    2,570,372
                                                   -----------     ----------   -----------       ----------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 6,777,343     $1,308,297   $   892,791       $8,978,431
                                                   ===========     ==========   ===========       ==========

                                                   VORNADO REALTY TRUST
                                         PRO FORMA CONSOLIDATED INCOME STATEMENT
                                                  AS OF DECEMBER 31, 2001
(amounts in thousands,
 except per share amounts)

                                                            Historical
                                                   ---------------------------   Pro Forma          Total
                                                     Vornado           CESCR    Adjustments       Pro Forma
                                                   -------------   -----------  ------------      -----------
                                                                                      
 REVENUES:
 Rentals                                              $ 841,999     $ 354,818     $   4,189 (H)   $1,201,006
 Expense Reimbursements                                 133,114         9,890             -          143,004
 Property Management, Leasing and Other                  10,660        17,794             -           28,454
                                                   -------------   -----------  ------------      -----------
 Total Revenues                                         985,773       382,502         4,189        1,372,464
                                                   -------------   -----------  ------------      -----------
 EXPENSES:
 Operating                                              398,969       113,487             -          512,456
 Depreciation and Amortization                          123,862        53,936        25,819 (I)      203,617
 General and Administrative                              72,572        21,559             - (J)       94,131
 Costs of Acquisitions not Consummated                    5,223             -             -            5,223
                                                   -------------   -----------  ------------      -----------
 Total Expenses                                         600,626       188,982        25,819          815,427
                                                   -------------   -----------  ------------      -----------

 Operating Income                                       385,147       193,520       (21,630)         557,037
 Income Applicable to Alexander's                        24,548             -             -           24,548
 Income from Partially-Owned Entities                    80,612           371       (28,653)(K)       52,330
 Interest and Other Investment Income                    54,385         1,604             -           55,989
 Interest and Debt Expense                             (173,076)     (112,695)        4,565 (L)     (281,206)
 Net Gain on Disposition of Assets                        7,425             -             -            7,425
 Minority Interest:
   Perpetual Preferred Unit Distributions               (70,705)            -             -          (70,705)
   Minority Limited Partnership Earnings                (39,138)            -       (34,830)(M)      (73,968)
   Partially-Owned Entities                              (2,520)            -             -           (2,520)
                                                   -------------   -----------  ------------      -----------
 Income before Cumulative Effect of Change in
   Accounting Principle and Extraordinary Item          266,678        82,800       (80,548)         268,930
 Cumulative Effect of Change in
   Accounting Principle                                  (4,110)            -             -           (4,110)
 Extraordinary Item                                       1,170           (87)            -            1,083
                                                   -------------   -----------  ------------      -----------

 Net Income                                             263,738        82,713       (80,548)         265,903
 Preferred Stock Dividends                              (36,505)      (15,080)       15,080 (N)      (36,505)
                                                   -------------   -----------  ------------      -----------

 Net Income Applicable to Common Shares               $ 227,233      $ 67,633     $ (65,468)      $  229,398
                                                   =============   ===========  ============      ===========
 Net Income per Common Share-diluted, based
 on 92,072,607 weighted average shares                   $ 2.47                                       $ 2.49
                                                   =============                                  ===========

                                                                          
 (A) Excess of fair value over net assets acquired:
       Vornado's existing ownership interest                                    $   347,263
       Cost of 66% interest to be acquired:
         Value of units issued                                     $  607,155
         Value of CESCR unit options acquired                           2,520
         CESCR Phantom units acquired for cash                          1,200
         Estimated transaction costs                                   28,800
                                                                   ----------
                                                                                    639,675
                                                                                -----------
                                                                                    986,938
       CESCR historical net deficit acquired                                       (248,589)
                                                                                -----------
                                                                                  1,235,527
       Elimination of deferred rent receivable arising from
         straight-lining of rent escalations                                         24,133
       Elimination of deferred charges                                               21,917
                                                                                -----------
       EXCESS OF FAIR VALUE OVER NET ASSETS ACQUIRED                            $ 1,281,577
                                                                                ===========
       Balance Sheet Allocation:
         Adjustment to real estate                                              $ 1,302,045
         Fair value of management company                                            14,059
                                                                                -----------
         Total Assets                                                             1,316,104
         Adjustment to fair value of CESCR outstanding debt                         (34,527)
                                                                                -----------
         Excess of fair value over net assets acquired                           $1,281,577
                                                                                ===========

 (B) Elimination  of Vornado's  existing  ownership  interest in CESCR which was
     accounted for on the equity method.

(C)  Carryover basis of CESCR  receivable  arising from the  straight-lining  of
     rents relating to the portion of the business already owned by Vornado.

 (D) Carryover  basis of CESCR  deferred  charges  related to the portion of the
     business already owned by Vornado.

 (E) Adjustment to fair value CESCR outstanding debt at December 31, 2001.

 (F) To  record  estimated  transaction  costs  funded  from  Vornado's  working
     capital.

 (G) Elimination of CESCR preferred redeemable and common equity.

 (H) To adjust  rental  income  arising from  straight-line  rent to reflect the
     straight-lining  of leases  containing  rent  step-ups over the lease terms
     from January 1, 2001.

 (I) To adjust  depreciation  and  amortization  for the  acquisition  of CESCR,
     assuming a depreciable  life of 40 years on the real estate and 10 years on
     the intangible asset - management company.

 (J) Management  estimates  that  there  will  be a  reduction  of  general  and
     administrative  expenses as a result of the acquisition of approximately $4
     million  annually.  This  reduction has not been reflected in the pro forma
     financial  statements  as there can be no  assurance  that  Vornado will be
     successful in the realization of these savings.

 (K) To eliminate Vornado's equity in income of CESCR.

 (L) To adjust  interest  expense  for the  amortization  of the  mark-to-market
     adjustment  on CESCR  outstanding  debt using the  effective  interest rate
     method.

 (M) To adjust minority  interest for units issued to CESCR  partners.  Prior to
     the Merger,  Vornado Realty Trust owned approximately 88% of Vornado Realty
     L.P. and was its sole general partner.  As a result of the Merger and as of
     February 1, 2002,  Vornado Realty Trust owns  approximately  79% of Vornado
     Realty L.P. and remains its sole general partner.

 (N) To eliminate  the CESCR  preferred  dividend  paid to Vornado  prior to the
     acquisition.

                              VORNADO REALTY TRUST
                            SUPPLEMENTAL INFORMATION

(amounts in thousands)

                                                 FOR THE YEAR ENDED DECEMBER 31, 2001
                                       ----------------------------------------------------------
                                         HISTORICAL                        PRO FORMA
                                          VORNADO         %                 VORNADO         %
                                       --------------- --------         ---------------- --------
                                                                              
EBITDA BY SEGMENT:
NYC Office                                  $ 295,222      38%                $ 295,222      31%
CESCR                                          84,943      11%                  250,237      26%
                                       --------------- --------         ---------------- --------
Total Office                                  380,165      49%                  545,459      57%
Retail                                        117,651      15%                  117,651      12%
Merchandise Mart                              110,802      14%                  110,802      12%
Temperature Controlled Logistics               78,437      10%                   78,437       8%
Other  (2)                                     96,827      12%                   96,827      11%
                                       --------------- --------         ---------------- --------
Total EBITDA (1) (2)                        $ 783,882     100%                $ 949,176     100%
                                       =============== ========         ================ ========

- -----------------------------------------------------

 (1) EBITDA   represents  income  before  interest,   taxes,   depreciation  and
     amortization,  extraordinary  or  non-recurring  items,  gains or losses on
     sales of depreciable real estate, the effect of straight-lining of property
     rentals for rent escalations and minority  interest.  Management  considers
     EBITDA a  supplemental  measure  for making  decisions  and  assessing  the
     performance  of its  segments.  EBITDA may not be  comparable  to similarly
     titled measures employed by other companies.

(2)  EBITDA for the year ended  December 31, 2001  includes (i) $5,223 for costs
     of  acquisitions  not  consumated,   (ii)  $16,513  for  the  write-off  of
     investments in technology companies,  (iii) the write-off of Vornado Realty
     Trust's  entire net  investment  in the  Russian  Tea Room of $7,374,  (iv)
     $1,250 for donations to the Twin Towers Fund and the NYC Fireman's Fund and
     (v) $15,657 of an  after-tax  net gain on sale of Park  Laurel  condominium
     units.

                              VORNADO REALTY TRUST
                            SUPPLEMENTAL INFORMATION
                             (AMOUNTS IN THOUSANDS)

     Funds from operations for the year ended December 31, 2001, includes (i)
$15,657 of an after tax net gain on sale of Park Laurel condominium units, (ii)
a charge of $5,223 for the write-off of costs associated with acquisitions not
consummated, (iii) a charge of $16,513 resulting from the write-off of all of
Vornado Realty Trust's investments in technology companies, (iv) the write-off
of Vornado Realty Trust's entire net investment in the Russian Tea Room of
$7,374, and (v) $1,250 for donations to the Twin Towers Fund and the NYC
Firemman's Fund. The following table reconciles net income and funds from
operations for the year ended December 31, 2001:

                                                                         FOR THE YEAR ENDED DECEMBER 31, 2001
                                                              ------------------------------------------------------
                                                                       HISTORICAL
                                                              ------------------------     PRO FORMA        TOTAL
 FUNDS FROM OPERATIONS ("FFO") (1)                             VORNADO         CESCR      ADJUSTMENTS     PRO FORMA
                                                              ----------    ----------    -----------   ------------
                                                                                              
 Net Income Applicable to Common Shares                       $ 227,233     $  82,713     $ (80,548)      $ 229,398
 Cumulative Effect of Change in Accounting Principle              4,110             -             -           4,110
 Extraordinary Item                                              (1,170)           87             -          (1,083)
 Depreciation and Amortization of Real Property                 119,568        52,778        24,413         196,759
 Straight-Lining of Property Rentals for Rent Escalations       (24,314)          160        (4,189)        (28,343)
 Leasing Fees in Excess of Income Recognized                      1,954             -             -           1,954
 Appreciation of Securities Held in Officer's Deferred
 Compensation Trust                                               3,023             -             -           3,023
 Net Gain on Sale of Real Estate                                (12,445)            -             -         (12,445)
 Net Gain on Condemnation Proceeding                             (3,050)            -             -          (3,050)
 Proportionate Share of Adjustments to Equity in
 Income of Partially-Owned Entities to Arrive at FFO             58,919             -       (17,999)         40,920

 Minority Interest in Excess of Preferential Distributions      (16,810)            -       (20,128)        (36,938)
                                                              ----------    ----------    ----------    ------------
                                                                357,018       135,738       (98,451)        394,305
 Series A Preferred Stock Dividends                              19,505             -             -          19,505
                                                              ----------    ----------    ----------    ------------
 FFO (1)                                                        376,523       135,738       (98,451)        413,810

 Adjustments to arrive at Operating Partnership FFO:
 Addback of Minority Interest Reflected as Equity
 in the Operating Partnership                                    52,514             -        69,990         122,504
                                                              ----------    ----------    ----------    ------------
 Operating Partnership FFO (2)                                $ 429,037     $ 135,738     $ (28,461)      $ 536,314
                                                              ==========    ==========    ==========    ============

 CASH FLOW PROVIDED BY (USED IN):
 Operating Activities                                         $ 387,685     $ 145,459     $  28,653       $ 561,797
 Investing Activities                                           (79,722)      (86,846)      (21,048)       (187,616)
 Financing Activities                                          (179,368)      (64,468)            -        (243,836)

 Expenditures to Maintain the Assets, including
 Tenant Improvements                                          $  41,093     $  26,765     $       -       $  67,858
 Leasing Commissions                                             19,536         3,359             -          22,895
                                                              ----------    ----------    ----------    ------------
 TOTAL RECURRING CAPITAL EXPENDITURES                         $  60,629     $  30,124     $       -       $  90,753
                                                              ==========    ==========    ==========    ============

- --------------------------------------------------------------------------------
 (1) Funds from operations does not represent cash generated from operating
     activities in accordance with accounting principles generally accepted in
     the United States of America and is not necessarily indicative of cash
     available to fund cash needs which is disclosed in the Consolidated
     Statements of Cash Flows in Vornado Realty Trust's Form 10-Q. There are no
     material legal or functional restrictions on the use of funds from
     operations. Funds from operations should not be considered as an
     alternative to net income as an indicator of Vornado Realty Trust's
     operating performance or as an alternative to cash flows as a measure of
     liquidity. Management considers funds from operations a supplemental
     measure of operating performance and along with cash flow from operating
     activities, financing activities and investing activites, it provides
     investors with an indication of the ability of Vornado Realty Trust to
     incur and service debt, to make capital expenditures and to fund other cash
     needs. Funds from operations may not be comparable to similarly titled
     measures reported by other REITs since a number of REITs, including Vornado
     Realty Trust, calculate funds from operations in a manner different from
     that used by NAREIT. Funds from operations, as defined by NAREIT,
     represents net income applicable to common shares before depreciation and
     amortization, extraordinary items and gains and losses on sales of real
     estate. Funds from operations as disclosed above has been modified from
     this definition to adjust primarily for the effect of straight-lining of
     property rentals for rent escalations and leasing fee income.

 (2) The number of shares that should be used for determining diluted funds from
     operations per share and Vornado Realty L.P. ("OP") funds from operations
     per share is as follows:

                                                                        For the Year Ended December 31, 2001
                                                              ------------------------------------------------------
                                                                       Historical
                                                              ------------------------     Pro Forma        Total
 Funds From Operations ("FFO") (1)                             Vornado         CESCR      Adjustments     Pro Forma
                                                              ----------    ----------    -----------   ------------

 Shares used for determining diluted FFO per share               99,719           -               -          99,719
 Convertible OP units:
 Non-VNO Class A Units                                            6,140           -          15,613          21,753
 Class D Units                                                        -           -               -               -
 B-1                                                                822           -               -             822
 B-2                                                                411           -               -             411
 C-1                                                                855           -               -             855
 E-1                                                              5,680           -               -           5,680
                                                              ----------     -------      -----------     ----------
 Shares used for determining OP diluted FFO per share           113,627           -          15,613         129,240
                                                              ==========     =======      ===========     ==========