1
 
                                  SCHEDULE 14A
                                 (RULE 14A-101)
 
                    INFORMATION REQUIRED IN PROXY STATEMENT
 
                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [ ]
 
Check the appropriate box:

                                            
[ ]  Preliminary Proxy Statement
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ]  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

                              VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)
 
                              VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)
 
Payment of Filing Fee (Check the appropriate box):
 
[X]  No fee required.
 
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
     (1)  Title of each class of securities to which transaction applies:
 
        ------------------------------------------------------------------------
 
     (2)  Aggregate number of securities to which transaction applies:
 
        ------------------------------------------------------------------------
 
     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):
 
        ------------------------------------------------------------------------
 
     (4)  Proposed maximum aggregate value of transaction:
 
        ------------------------------------------------------------------------
 
     (5)  Total fee paid:
 
        ------------------------------------------------------------------------
 
[ ]  Fee paid previously with preliminary materials.
 
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1)  Amount Previously Paid:
 
        ------------------------------------------------------------------------
 
     (2)  Form, Schedule or Registration Statement No.:
 
        ------------------------------------------------------------------------
 
     (3)  Filing Party:
 
        ------------------------------------------------------------------------
 
     (4)  Date Filed:
 
        ------------------------------------------------------------------------
   2
 
                              VORNADO REALTY TRUST
 
                                   NOTICE OF
                                 ANNUAL MEETING
                                OF SHAREHOLDERS
 
                                      AND
 
                                PROXY STATEMENT
 
                                      1999
   3
 
                              VORNADO REALTY TRUST
                             PARK 80 WEST, PLAZA II
                         SADDLE BROOK, NEW JERSEY 07663
 
                            ------------------------
 
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD JUNE 2, 1999
 
                            ------------------------
 
To our Shareholders:
 
     The Annual Meeting of Shareholders of Vornado Realty Trust, a Maryland real
estate investment trust (the "Company"), will be held at the Marriott Hotel,
Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663, on
Wednesday, June 2, 1999, beginning at 10:00 a.m., local time, for the following
purposes:
 
     (1) The election of two persons to the Board of Trustees of the Company,
         each for a term of three years;
 
     (2) The approval of an amendment to the Company's Omnibus Share Plan; and
 
     (3) The transaction of such other business as may properly come before the
         meeting or any adjournment thereof.
 
     Pursuant to the Bylaws of the Company, the Board of Trustees of the Company
has fixed the close of business on April 7, 1999, as the record date for
determination of shareholders entitled to notice of and to vote at the meeting.
 
     Your attention is called to the attached proxy statement. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING IN PERSON, YOU
MAY REVOKE YOUR PROXY AND VOTE YOUR OWN SHARES.
 
                                           By Order of the Board of Trustees,
 
                                           Larry Portal
                                           Assistant Secretary
   4
 
                              VORNADO REALTY TRUST
                             PARK 80 WEST, PLAZA II
                         SADDLE BROOK, NEW JERSEY 07663
 
                            ------------------------
 
                                PROXY STATEMENT
                         ANNUAL MEETING OF SHAREHOLDERS
 
                            TO BE HELD JUNE 2, 1999
 
                            ------------------------
 
     The enclosed proxy is being solicited by the Board of Trustees (the
"Board") of Vornado Realty Trust, a Maryland real estate investment trust (the
"Company"), for use at the Annual Meeting of Shareholders of the Company to be
held on Wednesday, June 2, 1999 (the "Annual Meeting"). The proxy may be revoked
by the shareholder at any time prior to its exercise at the Annual Meeting by
executing and delivering to the Company at its principal office a written
revocation or later dated proxy or by attending the Annual Meeting and voting in
person. The cost of soliciting proxies will be borne by the Company. MacKenzie
Partners, Inc. has been engaged by the Company to solicit proxies, at a fee not
to exceed $5,000. In addition to solicitation by mail and by telephone calls,
arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to their principals and the
Company may reimburse them for their expenses in so doing.
 
     Only shareholders of record at the close of business on April 7, 1999 are
entitled to notice of and to vote at the Annual Meeting. There were on such date
85,096,765 common shares of beneficial interest, par value $.04 per share (the
"Shares"), of the Company outstanding, each entitled to one vote at the Annual
Meeting.
 
     The principal executive office of the Company is located at Park 80 West,
Plaza II, Saddle Brook, New Jersey 07663. This notice of meeting and proxy
statement and enclosed proxy will be mailed on or about May 10, 1999 to the
Company's shareholders of record as of the close of business on April 7, 1999.
 
                              ELECTION OF TRUSTEES
 
     The Amended and Restated Declaration of Trust of the Company, as amended
(the "Declaration of Trust"), provides that the Board shall be divided into
three classes, as nearly equal in number as possible. One class of trustees is
elected at each annual meeting of shareholders to hold office for a term of
three years and until their successors are duly elected and qualify.
 
     Unless otherwise directed in the proxy, the person named in the enclosed
proxy, or his substitute, will vote such proxy for the election of the two
nominees listed below as trustees for a three year term and until their
respective successors are duly elected and qualify. If any nominee at the time
of election is unavailable to serve, a contingency not presently anticipated, it
is intended that the person named in the proxy, or his substitute, will vote for
an alternate nominee who will be designated by the Board. Proxies may be voted
only for the nominees named or such alternates.
 
     Under the Company's Bylaws, the affirmative vote of a plurality of all the
votes cast at the Annual Meeting, assuming a quorum is present, is sufficient to
elect a trustee. Under Maryland law, proxies marked "withhold authority" will be
counted for the purpose of determining the presence of a quorum but such proxies
and failures to vote will not be counted as votes cast in the election of
trustees and thus will have no effect on the result of the vote.
 
     The following table sets forth the nominees (all of whom are presently
members of the Board) and the other present members of the Board. With respect
to each such person, the table sets forth the age, principal
   5
 
occupation, position presently held with the Company, and the year in which the
person first became a trustee of the Company or a director of its predecessor,
Vornado, Inc.

                                                       PRINCIPAL OCCUPATION
                                                       AND PRESENT POSITION           YEAR TERM    INITIAL
                 NAME                    AGE             WITH THE COMPANY            WILL EXPIRE   ELECTION
                 ----                    ---           --------------------          -----------   --------
                                                                                       
NOMINEES FOR ELECTION TO SERVE AS
TRUSTEES UNTIL THE ANNUAL MEETING IN
2002
 
Stanley Simon(1)(2)(3).................  81    Owner of Stanley Simon and               1999         1960
                                               Associates, management and financial
                                               consultants
 
Ronald Targan..........................  72    A member of the law firm of              1999         1980
                                               Schechner and Targan, P.A.;
                                               President of Malt Products
                                               Corporation of New Jersey, a
                                               producer of malt syrup
PRESENT TRUSTEES ELECTED TO SERVE UNTIL
THE ANNUAL MEETING IN 2000
 
Michael D. Fascitelli(1)...............  42    President of the Company                 2000         1996
 
Steven Roth(1).........................  57    Chairman of the Board and Chief          2000         1979
                                               Executive Officer of the Company;
                                               Managing General Partner of
                                               Interstate Properties ("Interstate")
 
Russell B. Wight, Jr.(1)...............  59    A general partner of Interstate          2000         1979
PRESENT TRUSTEES ELECTED TO SERVE UNTIL
THE ANNUAL MEETING IN 2001
 
David Mandelbaum(2)....................  63    A member of the law firm of              2001         1979
                                               Mandelbaum & Mandelbaum, P.C.; a
                                               general partner of Interstate
 
Richard West(2)(3).....................  61    Dean Emeritus, Leonard N. Stern          2001         1982
                                               School of Business, New York
                                               University

- ---------------
(1) Member of the Executive Committee of the Board of the Company.
 
(2) Member of the Audit Committee of the Board of the Company.
 
(3) Member of the Compensation Committee of the Board of the Company.
 
     Mr. Simon has been the owner of Stanley Simon and Associates since 1958.
 
     Mr. Targan has been President of Malt Products Corporation of New Jersey
since 1962. Since 1964, he has been a member of the law firm of Schechner and
Targan, P.A.
 
     Mr. Fascitelli became the President and a Trustee of the Company on
December 2, 1996. From December 1992 to December 1996, Mr. Fascitelli was a
partner at Goldman, Sachs & Co., in charge of its real estate practice and was a
vice president there prior to 1992. He is also a director of Alexander's, Inc.
("Alexander's") and a director and President of Vornado Operating Company
("Vornado Operating").
 
     Mr. Roth has been Chairman of the Board and Chief Executive Officer of the
Company since May 1989 and Chairman of the Executive Committee of the Board of
the Company since April 1980. Since 1968, he has been a general partner of
Interstate and, more recently, he has been Managing General Partner. On March 2,
1995, he became Chief Executive Officer of Alexander's. Mr. Roth is also a
director of Alexander's and Capital Trust, Inc. and Chairman of the Board and
Chief Executive Officer of Vornado Operating.
 
                                        2
   6
 
     Mr. Wight has been a general partner of Interstate since 1968. Mr. Wight is
also a director of Alexander's, Vornado Operating and Insituform Technologies,
Inc.
 
     Mr. Mandelbaum has been a member of Mandelbaum & Mandelbaum, P.C. since
1967. Since 1968, he has been a general partner of Interstate. Mr. Mandelbaum is
also a director of Alexander's.
 
     Mr. West is Dean Emeritus at the Leonard N. Stern School of Business, New
York University. He was a professor there from September 1984 until September
1995. He was also Dean from September 1984 until August 1993. Prior thereto Mr.
West was Dean of the Amos Tuck School of Business Administration at Dartmouth
College. Mr. West is also a director or a trustee of Vornado Operating,
Alexander's, Bowne & Co., Inc. and various investment companies managed by
Merrill Lynch Assets Management, Inc., or Hotchkis & Wiley, both affiliates of
Merrill Lynch & Co.
 
     Interstate is a New Jersey partnership formed in 1968. Messrs. Roth, Wight
and Mandelbaum have at all times been the general partners of Interstate.
Interstate is an owner of shopping centers, and an investor in securities and
partnerships.
 
     The Company is not aware of any family relationships between any trustee or
executive officer of the Company or person nominated or chosen by the Company to
become a trustee or executive officer. Messrs. Roth, Wight and Mandelbaum are
affiliated with each other as general partners of Interstate and in other
businesses. Messrs. Mandelbaum and Targan are affiliated with each other in
businesses and in the practice of law.
 
COMMITTEES OF THE BOARD OF TRUSTEES
 
     The Board has an Executive Committee, an Audit Committee and a Compensation
Committee.
 
  Executive Committee
 
     The Executive Committee possesses and may exercise certain powers of the
Board in the management of the business affairs of the Company, except those
reserved to the Board under Maryland law. The Executive Committee consists of
Messrs. Roth, Fascitelli, Simon and Wight. Mr. Roth is Chairman of the Executive
Committee. The Executive Committee did not meet in 1998.
 
  Audit Committee
 
     The Audit Committee's functions include reviewing annual and quarterly
reports and proxy statements sent to shareholders and filed with the Securities
and Exchange Commission, recommending to the Board the engaging of the
independent auditors, reviewing with the independent auditors the plan and
results of the auditors' engagement and other matters of interest to the Audit
Committee and reviewing with the Company's financial officers and internal
auditors matters of interest to the Audit Committee, including the effectiveness
of the Company's internal controls and the results of its operations. The Audit
Committee, which held four meetings during 1998, consists of three members,
Messrs. West, Mandelbaum and Simon. Mr. West is the Chairman of the Audit
Committee.
 
  Compensation Committee
 
     The Compensation Committee is responsible for establishing the terms of the
compensation of the executive officers and the granting of awards under the 1993
Omnibus Share Plan of Vornado Realty Trust (the "Omnibus Share Plan"). The
Committee, which held six meetings during 1998, consists of two members, Messrs.
Simon and West. Mr. Simon is the Chairman of the Compensation Committee.
 
     The Board held seven meetings during 1998. Each trustee of the Company
attended at least 80% of the combined total of meetings of the Board and all
committees on which he served during that period.
 
                                        3
   7
 
                COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES
                        REPORT ON EXECUTIVE COMPENSATION
 
     The Compensation Committee (the "Committee") of the Board is responsible
for establishing the terms of the compensation of the Company's executive
officers.
 
     Each of the executive officers receives a base salary. The Committee
periodically reviews and adjusts Mr. Roth's base salary. Mr. Roth's current base
salary of $625,000 was established in November 1991. Mr. Fascitelli's base
salary is $600,000 in accordance with the employment agreement entered into on
December 2, 1996. The base salary of Mr. Greenbaum is $425,000 in accordance
with the employment agreement entered into on April 15, 1997. The base salary of
Mr. Macnow is $425,000 in accordance with the employment agreement entered into
as of January 1, 1998. The base salary of Mr. Rowan is $380,500 in accordance
with the employment agreement entered into as of January 1, 1998. The employment
agreements for Messrs. Macnow and Rowan provide for an annual adjustment of
their base salary equal to 125% of the percentage increase in the prior year's
consumer price index. See "Executive Compensation-Employment Contracts".
 
     The factors and criteria which the Committee utilizes in establishing the
compensation of the Company's executive officers (including Mr. Roth) include an
evaluation of the Company's overall financial and business performance, the
officer's overall leadership and management and contributions by the officer to
the Company's acquisitions or investments. The Committee also considers the
compensation provided in the prior year and estimates of compensation to be
provided by similar companies in the current year. The primary objective of the
Committee in establishing the terms of the executive officers' compensation has
been to provide strong financial incentives for the executive officers to
maximize shareholder value. The Committee believes that the best way to
accomplish this objective is to grant substantial share options on a fixed share
basis without adjusting the number of shares granted to offset changes in the
Company's share price.
 
     In January 1998, Mr. Roth was granted options to purchase 1,500,000 Shares,
exercisable at the current market price on the date the option was granted.
 
     The employment agreement of Michael D. Fascitelli, President, provides in
addition to his annual salary, that he receive a deferred payment (the "Deferred
Payment") consisting of $5,000,000 in cash (which has been invested in
marketable securities at the direction of Mr. Fascitelli) and a $20,000,000
convertible obligation payable at the Company's option in 919,540 of its Shares
or the cash equivalent of their appreciated value but not less than $20,000,000.
Accordingly, the Deferred Payment is being held in an irrevocable trust for the
benefit of Mr. Fascitelli. The Deferred Payment obligation to Mr. Fascitelli
vested on December 2, 1997. In January 1998, Mr. Fascitelli was granted options
to purchase 500,000 Shares, exercisable at the current market price on the date
the option was granted. In addition, Mr. Fascitelli's employment agreement
provides that he may receive loans of up to $10 million from the Company during
the term of his employment. As of December 31, 1998, Mr. Fascitelli had borrowed
$7,600,000 from the Company.
 
     The employment agreement of David R. Greenbaum, Chief Executive Officer of
the Mendik Division, provides that Mr. Greenbaum may receive loans of up to $10
million from the Company during the term of his employment agreement. As of
December 31, 1998, Mr. Greenbaum had not borrowed from the Company. In January
1998, Mr. Greenbaum was granted options to purchase 150,000 Shares, exercisable
at the current market price on the date the option was granted.
 
     The employment agreement of Joseph Macnow, Executive Vice President-Finance
and Administration, provides an undertaking to use best efforts annually to
cause the Compensation Committee of the Board to grant Mr. Macnow options to
purchase 75,000 Shares at a purchase price equal to the fair market value of the
Shares on the dates the options are granted. In January 1998, Mr. Macnow was
granted options to purchase 100,000 Shares, exercisable at the current market
price on the date the option was granted.
 
     The employment agreement of Mr. Rowan, Vice President-Retail Real Estate
Division, provides an undertaking to use best efforts annually to cause the
Compensation Committee of the Board to grant Mr. Rowan options to purchase
50,000 Shares at a purchase price equal to the fair market value of the Shares
 
                                        4
   8
 
on the dates the options are granted. In January 1998, Mr. Rowan was granted
options to purchase 50,000 Shares, exercisable at the current market price on
the date the option was granted.
 
     Section 162(m) of the Internal Revenue Code, which was adopted in 1993,
provides that, in general, publicly traded companies may not deduct, in any
taxable year, compensation in excess of $1,000,000 paid to any individual named
in the Summary Compensation Table which is not "performance based", as defined
in Section 162(m). Options granted under the Company's Omnibus Share Plan to
date satisfy the performance based requirements under the final regulations
issued with respect to Section 162(m). The deferred payment to Mr. Fascitelli
does not meet the requirements of Section 162(m) and will thus be subject to the
$1,000,000 limitation when paid.
 
                                          Stanley Simon
                                          Richard West
 
                                        5
   9
 
                               PERFORMANCE GRAPH
 
     The following performance graph compares the Company's Share price
performance to the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index") and to the published National Association of Real Estate Investment
Trusts ("NAREIT") All Equity Index (excluding Health Care REITS). The graph
assumes that $100 was invested on December 31, 1993 in the Shares, the S&P 500
Index and the NAREIT All Equity Index, and that all dividends were reinvested.
THERE CAN BE NO ASSURANCE THAT THE COMPANY'S STOCK PERFORMANCE WILL CONTINUE
WITH THE SAME OR SIMILAR TRENDS DEPICTED IN THE GRAPH BELOW.
[Comparison of Cumulative 5-Year Return Graph]

                   COMPARISON OF CUMULATIVE FIVE-YEAR RETURN

                                                                                                            NAREIT ALL EQUITY
                                                  VORNADO REALTY TRUST            S&P 500 INDEX                 INDEX(1)
                                                  --------------------            -------------             -----------------
                                                                                               
'1993'                                                     100                         100                         100
'1994'                                                     113                         101                         103
'1995'                                                     125                         139                         118
'1996'                                                     182                         171                         160
'1997'                                                     334                         229                         193
'1998'                                                     248                         294                         159

(1) Excluding Health Care REITs.
 
                                        6
   10
 
                           PRINCIPAL SECURITY HOLDERS
 
     The following table sets forth the beneficial ownership of Shares and units
of limited partnership interest ("Units") in Vornado Realty L.P., a Delaware
limited partnership (the "Operating Partnership"), of (i) each person holding
more than a 5% interest in the Company or the Operating Partnership (other than
the Company), (ii) trustees of the Company, (iii) the executive officers of the
Company named in the Summary Compensation Table set forth below, and (iv) the
trustees and executive officers of the Company as a group. Unless otherwise
noted, the address of all such persons is c/o Vornado Realty Trust, Park 80
West, Plaza II, Saddle Brook, New Jersey 07663.

                                                        NUMBER OF
                                                          SHARES                         PERCENT OF ALL
                                                        AND UNITS      PERCENT OF ALL      SHARES AND
                                                       BENEFICIALLY        SHARES            UNITS
NAME OF BENEFICIAL OWNER                                 OWNED(1)        (1)(2)(3)         (1)(2)(4)
- ------------------------                               ------------    --------------    --------------
                                                                                
NAMED EXECUTIVE OFFICERS AND TRUSTEES
Steven Roth(5)(6)(7).................................   15,035,900          17.6%             15.8%
Russell B. Wight, Jr.(5)(8)..........................   13,492,800          15.9%             14.3%
David Mandelbaum(5)..................................   13,261,998          15.6%             14.0%
Michael D. Fascitelli(7)(9)..........................    2,489,540           2.9%              2.6%
David R. Greenbaum(7)(10)(11)........................    3,452,485           4.0%              3.6%
Joseph Macnow(7).....................................      390,250             *                 *
Richard T. Rowan(7)..................................      252,780             *                 *
Ronald Targan........................................      750,000             *                 *
Stanley Simon........................................       75,000             *                 *
Richard West(12).....................................       21,000             *                 *
All trustees and executive officers as a group (12
  persons)...........................................   23,392,164          26.5%             24.0%
OTHER BENEFICIAL OWNERS
Interstate(5)........................................   12,943,000          15.2%             13.3%
Cohen & Steers Capital Management, Inc.(13)..........    8,855,200          10.4%              9.1%

- ---------------
  *  Less than 1%.
 
 (1) Unless otherwise indicated, each person is the direct owner of and has sole
     investment power with respect to such Shares and Units. Numbers and
     percentages in table are based on 85,096,765 Shares and 9,335,984 Units
     outstanding as of April 7, 1999.
 
 (2) In April 1997, the Company transferred substantially all of its assets to
     the Operating Partnership. As a result, the Company now conducts its
     business through, and substantially all of its interests in properties are
     held by, the Operating Partnership. The Company is the sole general partner
     of, and owned approximately 85% of the common limited partnership interest
     in, the Operating Partnership as of April 7, 1999. At any time after one
     year from the date of issuance (or two years in the case of certain
     holders), holders of Units (other than the Company) will have the right to
     have their Units redeemed in whole or in part by the Operating Partnership
     for cash equal to the fair market value, at the time of redemption, of one
     Share for each Unit redeemed or, at the option of the Company, one Share
     for each Unit tendered, subject to customary antidilution provisions (the
     "Unit Redemption Right"). Holders of Units may be able to sell Shares
     received upon the exercise of their Unit Redemption Right in the public
     market pursuant to registration rights agreements with the Company. The
     Company has filed registration statements with the Securities and Exchange
     Commission to register certain of the Shares issuable upon the exercise of
     the Unit Redemption Right.
 
 (3) Assumes that all Units held by the beneficial owner are redeemed for
     Shares. The total number of Shares or Units outstanding used in calculating
     this percentage assumes that all Shares or Units that each person has the
     right to acquire within 60 days pursuant to the exercise of options or upon
     the exchange of Units for Shares are deemed to be outstanding, but are not
     deemed to be outstanding for the purpose of computing the ownership
     percentage of any other person.
 
                                        7
   11
 
 (4) Assumes that all Units with the right to convert within 60 days upon the
     exchange of units for shares are redeemed for Shares.
 
 (5) Interstate, a partnership of which Messrs. Roth, Wight and Mandelbaum are
     the three general partners, owns 12,943,000 Shares. These Shares are
     included in the total Shares and the percentage of class for Interstate.
     Messrs. Roth, Wight and Mandelbaum share voting power and investment power
     with respect to these Shares.
 
 (6) Includes 82,900 Shares owned by the Daryl and Steven Roth Foundation, over
     which Mr. Roth holds sole voting power and investment power. Does not
     include 36,000 Shares owned by Mr. Roth's wife, as to which Mr. Roth
     disclaims any beneficial interest.
 
 (7) The number of Shares beneficially owned by the following persons includes
     the number of Shares indicated due to the vesting of options: Steven Roth
      -- 510,000; Michael D. Fascitelli -- 1,570,000; David R.
     Greenbaum -- 432,900; Joseph Macnow -- 315,250; Richard Rowan -- 241,310;
     and all trustees and executive officers as a group -- 3,123,860.
 
 (8) Includes 64,800 Shares owned by the Wight Foundation, over which Mr. Wight
     holds sole voting power and investment power.
 
 (9) Includes 919,540 Shares held in a trust for the benefit of Mr. Fascitelli.
 
(10) The address for this beneficial owner is c/o Mendik Realty Company, Inc.,
     330 Madison Avenue, New York, New York 10017.
 
(11) Includes (i) 744,988 Units which are held by The Mendik Partnership, L.P.
     ("TMP") in which Mr. Greenbaum is one of the limited partners and controls
     the company which is the general partner of TMP, (ii) 486,540 Units which
     are held by FW/Mendik REIT, L.L.C., which is comprised of two members
     controlled by Mr. Greenbaum, (iii) 1,767,035 Units which are held by Mendik
     Holdings LLC, of which TMP is a member, and (iv) 3,412 Units held by M
     Westport Associates, a partnership of which Mr. Greenbaum is a partner. Mr.
     Greenbaum disclaims beneficial ownership of all these Units except to the
     extent of his pecuniary interest therein. Does not include 16,909 Units
     which are held by Mr. Greenbaum's wife, as to which Mr. Greenbaum disclaims
     any beneficial interest.
 
(12) Mr. West and his wife own 3,000 of these Shares jointly. Mr. West holds
     18,000 of these Shares in self-directed Keogh accounts.
 
(13) Based on Schedule 13G dated February 8, 1999, Cohen & Steers Capital
     Management, Inc. has the sole power to vote or to direct the vote of
     7,751,500 Shares and has the sole power to dispose or to direct the
     disposition of 8,855,200 Shares. The address of this beneficial owner is
     757 Third Avenue, New York, New York 10017.
 
                                        8
   12
 
                             EXECUTIVE COMPENSATION
 
     The following table summarizes the compensation paid to or accrued during
the past three fiscal years for each of the five highest paid executive officers
of the Company whose total compensation aggregated $100,000 or more in 1998
("Covered Executives").
 
                           SUMMARY COMPENSATION TABLE

                                                                             LONG TERM
                                   ANNUAL COMPENSATION                      COMPENSATION     ALL OTHER
                               ----------------------------                    AWARDS       COMPENSATION
NAME AND PRINCIPAL POSITION    YEAR   SALARY($)    BONUS($)   OTHER($)(1)     OPTIONS          ($)(2)
- ---------------------------    ----   ---------    --------   -----------   ------------    ------------
                                                                          
Steven Roth..................  1998    625,000           0           0       1,500,000(3)      64,583
  Chairman and Chief           1997    625,000           0           0               0         61,397
  Executive Officer            1996    625,000           0           0               0         61,856
Michael D. Fascitelli........  1998    600,000           0           0         500,000(3)       4,215
  President                    1997    600,000           0           0               0          3,049
                               1996     34,616(4)        0           0       3,500,000(5)           0
David R. Greenbaum...........  1998    425,000     100,000           0         150,000(3)       7,500
  Chief Executive Officer      1997    212,500(6)  100,000           0         570,000(3)      11,305
  of the Mendik Division
Joseph Macnow................  1998    425,000     100,000      64,895         100,000(3)      72,351
  Executive Vice               1997    380,500     100,000      60,589          75,000(7)      22,666
  President -- Finance         1996    365,500           0           0          75,000(7)      21,968
  and Administration
Richard Rowan................  1998    380,500           0      71,961          50,000(3)      25,394
  Vice President -- Retail     1997    380,500           0      67,186          75,000(7)      21,973
  Real Estate Division         1996    365,500           0           0          75,000(7)      21,066

- ---------------
(1) Represents the forgiveness by the Company of one-fifth of the loan amount
    (together with interest) due from each of Messrs. Macnow and Rowan. The
    loans were issued in connection with Messrs. Macnow and Rowan's option
    exercises in prior years. The Company has agreed that on each January 1st
    (commencing January 1, 1997) it will forgive one-fifth of the amounts due
    from Messrs. Macnow and Rowan, provided they remain employees of the
    Company.
 
(2) Represents annual amounts of (i) employer paid contributions to the
    Company's 401(k) retirement plan and (ii) Company paid whole life insurance
    premiums. Employer contributions to the Company's 401(k) retirement plan
    become vested 100% after the completion of five years of eligible service.
    The whole life insurance policies provide coverage in an amount equal to the
    excess of the amount covered under the Company's non-discriminatory group
    term life insurance benefit for all full time employees (i.e., two times
    salary) over the benefit cap imposed by the term insurance carrier.
 
(3) Options are exercisable 34% twelve months after grant, and 33% after each of
    the following two twelve-month periods.
 
(4) Mr. Fascitelli's employment with the Company commenced on December 2, 1996.
 
(5) Options are exercisable 20% twelve months after grant, and 20% after each of
    the following four twelve-month periods.
 
(6) Mr. Greenbaum's employment with the Company commenced on April 15, 1997.
 
(7) Options are exercisable 25% nine months after grant, and 25% after each of
    the following three six-month periods.
 
                                        9
   13
 
     The following table lists all grants of share options and share
appreciation rights to the Covered Executives made in 1998 and their potential
realizable values, assuming annualized rates of share price appreciation of 5%
and 10% over the term of the grant. All of such grants were made in 1998. The
Company has not, to date, granted any share appreciation rights.
 
                             OPTION GRANTS IN 1998

                                      INDIVIDUAL GRANTS
                           ----------------------------------------                POTENTIAL REALIZABLE VALUE AT
                           NUMBER OF                                                  ASSUMED ANNUAL RATES OF
                             SHARES       % OF TOTAL      EXERCISE                  SHARE PRICE APPRECIATION FOR
                           UNDERLYING   OPTIONS GRANTED    OR BASE                         OPTION TERM(2)
                            OPTIONS     TO EMPLOYEES IN   PRICE PER   EXPIRATION   ------------------------------
NAME                        GRANTED       FISCAL YEAR     SHARE(1)       DATE           5%              10%
- ----                       ----------   ---------------   ---------   ----------   -------------   --------------
                                                                                 
Steven Roth..............  1,500,000          44%         $45.3125     1/12/08      $42,745,182     $108,324,683
Michael D. Fascitelli....    500,000          15%         $45.3125     1/12/08      $14,248,394     $ 36,108,228
David R. Greenbaum.......    150,000           4%         $45.3125     1/12/08      $ 4,274,518     $ 10,832,468
Joseph Macnow............    100,000           3%         $45.3125     1/12/08      $ 2,849,679     $  7,221,646
Richard Rowan............     50,000           1%         $45.3125     1/12/08      $ 1,424,839     $  3,610,823

- ---------------
(1) The exercise or base price per Share is equal to the current market price on
    the date the option was granted.
 
(2) Potential Realizable Value is based on the assumed annual growth rates for
    the market value of the Shares shown over their ten-year term. For example,
    a 5% growth rate, compounded annually, results in a stock price of $73.81
    per Share and a 10% growth rate, compounded annually, results in a stock
    price of $117.53 per Share. These Potential Realizable Values are listed to
    comply with the regulations of the Securities and Exchange Commission, and
    the Company cannot predict whether these values will be achieved. Actual
    gains, if any, on share option exercises are dependent on the future
    performance of the Shares.
 
     The following table summarizes all exercises of options during 1998, and
the options held at December 31, 1998, by the Covered Executives.
 
         AGGREGATED OPTION EXERCISES IN 1998 AND YEAR END OPTION VALUES

                                                     NUMBER OF UNEXERCISED     VALUE OF UNEXERCISED
                            SHARES                    OPTIONS AT 12/31/98     IN-THE-MONEY OPTIONS AT
                          ACQUIRED ON     VALUE          EXERCISABLE/          12/31/98 EXERCISABLE/
NAME                       EXERCISE      REALIZED        UNEXERCISABLE             UNEXERCISABLE
- ----                      -----------    --------    ---------------------    -----------------------
                                                                  
Steven Roth.............        --       $     --                       0/1,500,000 $                    0/0
Michael D. Fascitelli...        --             --               1,400,000/2,600,000             14,043,750/21,065,625
David R. Greenbaum......        --             --                 193,800/526,200                611,681/1,187,381
Joseph Macnow...........        --             --                 281,250/118,750              3,956,836/135,352
Richard Rowan...........     5,470        124,955                 224,310/68,750              3,034,288/135,352

EMPLOYEE RETIREMENT PLAN
 
     Effective December 31, 1997, the Company froze the employee retirement plan
which provided retirement benefits to full-time employees of the Company.
Benefits under the plan will continue to vest upon the completion of five years
of service for all eligible employees. However, employees will not earn any
additional benefits after December 31, 1997. In addition, no new participants
will be eligible to enter the frozen plan. Annual retirement benefits are equal
to 1% of the participant's base salary for each year of service. However, the
portion of retirement benefits payable for service prior to plan participation
is equal to 1% of the participant's base salary as of December 31 of the year
before the participant began to participate in the plan for each year of the
participant's past service.
 
                                       10
   14
 
     The amounts shown below are the estimated annual benefits (payable in the
form of a life annuity) for each of the Covered Executives payable upon normal
retirement at age 65. The estimated annual benefit payable at age 65 to Mr. Roth
is $45,003; to Mr. Rowan, $28,427; and to Mr. Macnow, $29,002.
 
EMPLOYMENT CONTRACTS
 
  Michael D. Fascitelli
 
     Mr. Fascitelli has a five-year employment contract which provides for an
annual salary of $600,000. In addition to his annual salary, he received a
deferred payment (the "Deferred Payment") consisting of $5,000,000 in cash
(which has been invested in marketable securities at the direction of Mr.
Fascitelli) and a $20,000,000 convertible obligation payable at the Company's
option in 919,540 Shares or the cash equivalent of their appreciated value but
not less than $20,000,000. Accordingly, the Deferred Payment is being held in an
irrevocable trust for the benefit of Mr. Fascitelli. The Deferred Payment
obligation to Mr. Fascitelli vested on December 2, 1997. In January 1998 Mr.
Fascitelli was granted options to purchase 500,000 Shares, exercisable at the
current market price on the date the option was granted. Mr. Fascitelli may also
receive loans of up to $10 million from the Company during the term of the
employment agreement. As of December 31, 1998, Mr. Fascitelli had borrowed
$7,600,000 from the Company. He has also been given the use of a company
automobile.
 
     The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include a change in Mr. Fascitelli's responsibilities, change in control of the
Company, relocation of the Company or the failure of the Company to comply with
the terms of the agreement) payment of his base salary shall continue for three
years, offset in the second and third years for compensation received from
another employer, and benefits to him and his family shall continue for three
years. The agreement further provides that if his employment is terminated by
him without good reason or by the Company for cause (as defined in the agreement
to include conviction of, or plea of guilty or nolo contendere to, a felony,
failure to perform his duties or willful misconduct) payment of salary will
cease.
 
  David R. Greenbaum
 
     Mr. Greenbaum has an employment agreement with an initial term through
April 30, 2000 (subject to extension) pursuant to which he serves as Chief
Executive Officer of the Mendik Division of the Company. The employment
agreement provides for annual base compensation in the amount of $425,000. In
January 1998 Mr. Greenbaum was granted options to purchase 150,000 Shares,
exercisable at the current market price on the date of grant. Mr. Greenbaum also
may receive loans of up to $10 million from the Company during the term of the
employment agreement. As of December 31, 1998, Mr. Greenbaum had not borrowed
from the Company.
 
     The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include, among other things, a change in Mr. Greenbaum's responsibilities,
change in control of the Company, relocation of the Mendik Division's principal
executive offices or the failure of the Company to comply with the terms of the
agreement), Mr. Greenbaum will receive (a) a lump sum payment of three times the
sum of (i) his annual base compensation plus (ii) the average of the annual
bonuses earned by him in the two fiscal years ending immediately prior to his
termination and (b) continued provision of benefits to him and his family for
three years. The agreement further provides that if his employment is terminated
by him without good reason or by the Company for cause (as defined in the
agreement to include conviction of, or plea of guilty or nolo contendere to, a
felony, failure to perform his duties or willful misconduct) payment of salary
will cease.
 
  Joseph Macnow
 
     Mr. Macnow has an employment agreement with a term through December 31,
2000 pursuant to which Mr. Macnow serves as Executive Vice President -- Finance
and Administration. The employment agreement provides for annual base
compensation in the amount of $425,000, subject to increases in the second and
third
 
                                       11
   15
 
years by a factor equal to 125% of the percentage increase in the prior year's
consumer price index; use of a company automobile; and an undertaking by the
Company to use best efforts to cause the Compensation Committee of the Board to
grant Mr. Macnow options to purchase 75,000 Shares during each of the three
years at a purchase price equal to the fair market value of the stock on the
dates the options are granted. In January 1998, Mr. Macnow was granted options
to purchase 100,000 Shares exercisable at the current market price on the date
the option was granted.
 
     The agreement also provides that if Mr. Macnow's employment is terminated
by the Company without cause or by him for good reason (as defined in the
agreement to include, among other things, a change in his responsibilities,
change in control of the Company, relocation of Vornado's principal executive
offices or the failure of the Company to comply with the terms of the
agreement), he will receive: (a) a lump sum payment of three times the sum of
(i) his annual base compensation plus (ii) the average of the annual bonuses
earned by him in the two fiscal years ending immediately prior to his
termination; (b) immediate vesting in any stock options granted to him by the
Board; and (c) continued provision of benefits to him and his family for three
years. The agreement further provides that if Mr. Macnow's employment is
terminated by him without good reason or by the Company for cause (as defined in
the agreement to include conviction of, or plea of guilty or nolo contendere to,
a felony, failure to perform his duties or willful misconduct) payment of salary
will cease.
 
  Richard Rowan
 
     Mr. Rowan has an employment agreement expiring December 31, 2000 with the
Company. The agreement provides to Mr. Rowan an initial annual salary of
$380,500, subject to increases in the second and third years by a factor equal
to 125% of the percentage increase in the prior year's consumer price index; use
of a company automobile; and an undertaking by the Company to use best efforts
to cause the Compensation Committee of the Board to grant Mr. Rowan options to
purchase 50,000 Shares during each of the three years at a purchase price equal
to the fair market value of the stock on the dates the options are granted. In
January 1998, Mr. Rowan was granted options to purchase 50,000 Shares
exercisable at the current market price on the date the option was granted.
 
     The agreement also provides that, if the Company should terminate Mr.
Rowan's employment other than for just cause, payment of salary shall continue
until the earlier of two years after the date of termination or the employee's
becoming self-employed or employed with another company. The agreement further
provides that if Mr. Rowan should terminate employment for just cause (defined
as change of the employee's responsibility, change in control of the Company or
relocation of the Company), such employee will be paid 2.99 times his annual
salary and his unvested stock options will vest.
 
COMPENSATION OF TRUSTEES
 
     The Company compensated Messrs. Wight, Mandelbaum and Targan at a rate of
$15,000 per year through September 1998 and at a rate of $25,000 per year
thereafter for serving as trustees plus $750 for each meeting of the Board or of
any committee of the Board which the trustee attends. The Company compensated
Stanley Simon and Associates, of which Stanley Simon is the owner, at a rate of
$30,000 per year through September 1998 and at a rate of $50,000 per year
thereafter and Richard West at a rate of $40,000 per year through September 1998
and at a rate of $50,000 per year thereafter in addition to $750 for each
meeting. Messrs. Roth and Fascitelli received no compensation as trustees.
 
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
 
     The Company has a Compensation Committee, consisting of Messrs. Simon and
West, which grants awards under the Company's Omnibus Share Plan and makes all
other executive compensation determinations. Messrs. Roth and Fascitelli are the
only officers or employees of the Company or any of its subsidiaries who are
members of the Board. There are no interlocking relationships involving the
Company's Board which require disclosure under the executive compensation rules
of the Securities and Exchange Commission.
 
                                       12
   16
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  Formation of the Operating Partnership and Transactions Involving the Mendik
Group
 
     In April 1997, the Company transferred substantially all of its assets to
the Operating Partnership. As a result, the Company now conducts its business
through, and substantially all of its interests in properties are held by, the
Operating Partnership. The Company is the sole general partner of, and owned an
approximate 85% common limited partnership interest in, the Operating
Partnership as of April 7, 1999.
 
     Simultaneously with the formation of the Operating Partnership, the Company
consummated the acquisition of interests in all or a portion of seven Manhattan
office buildings (the "Mendik Properties") and the management company held by
Bernard H. Mendik, formerly Co-Chairman of the Board of the Company, and David
R. Greenbaum, Chief Executive Officer of the Mendik Division of the Company, and
certain entities controlled by them (the "Mendik Group") and certain of its
affiliates (the "Mendik Transaction").
 
     The consideration for the Mendik Transaction was approximately $656
million, including $264 million in cash, $177 million in Units and $215 million
in indebtedness.
 
     Pursuant to the Mendik Transaction, Mendik Management Company Inc. ("MMC")
was formed. The Operating Partnership received 100% of MMC's nonvoting common
stock which entitles it to 95% of the net operating cash flow distributed by MMC
to its shareholders. Michael Fascitelli, President and Trustee of the Company,
and David Greenbaum own the voting common stock of MMC. MMC will allocate
expenses to the Operating Partnership to the extent that MMC employees perform
services on behalf of the Operating Partnership.
 
     The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties. The Company has entered
into contracts with the Mendik Group to provide such services in the Company's
Manhattan office buildings. Although the terms and conditions of the contracts
pursuant to which these services are provided were not negotiated at arm's
length, the Company believes, based upon comparable fees charged to other real
estate companies, that the terms and conditions of such contracts are fair to
the Company. The Company was charged fees in connection with these contracts of
$25,686,000 for the year ended December 31, 1998, a portion of which is expected
to be reimbursed to the Company by its tenants.
 
  Transactions Involving Vornado Operating
 
     General.  Vornado Operating Company, ("Vornado Operating") was incorporated
on October 30, 1997, as a wholly owned subsidiary of the Company. In order to
maintain its status as a REIT for federal income tax purposes, the Company is
required to focus principally on investment in real estate assets. Accordingly,
the Company is prevented from owning certain assets and conducting certain
activities that would be inconsistent with its status as a REIT. Vornado
Operating was formed to own assets that Vornado could not itself own and conduct
activities that Vornado could not itself conduct. Vornado Operating is intended
to function principally as an operating company, in contrast to the Company's
principal focus on investment in real estate assets. Vornado Operating is able
to do so because it is taxable as a regular "C" corporation rather than a REIT.
 
     Vornado Operating will seek to become the operator of businesses conducted
at properties it leases from the Company, as contemplated by the Intercompany
Agreement between the Company and Vornado Operating (the "Intercompany
Agreement"), referred to below. Vornado Operating expects to rely exclusively on
the Company to identify business opportunities and currently expects that those
opportunities will relate in some manner to the Company and its real estate
investments rather than to unrelated businesses.
 
     The Distribution.  On October 16, 1998, the Operating Partnership made a
distribution (the "Distribution") of one share of common stock, par value $.01
per share (the "Common Stock"), of Vornado Operating for 20 units of limited
partnership interest of the Operating Partnership (including units owned by the
Company) held of record as of the close of business on October 9, 1998 and
Vornado Realty Trust in turn made a distribution of the Common Stock it received
to the holders of its common shares of beneficial interest. While no Common
Stock was distributed in respect of the Company's $3.25 Series A Convertible
 
                                       13
   17
 
Preferred Shares, the Company adjusted the Conversion Price to take into account
the Distribution. Vornado Operating's Common Stock is listed on the American
Stock Exchange under the symbol "VOO".
 
     Capital Contribution and Revolving Credit Agreement.  The Company initially
capitalized Vornado Operating with an equity contribution of $25,000,000 of
cash. As part of its formation, Vornado Operating was granted a $75,000,000
unsecured five-year revolving credit facility from Vornado (the "Revolving
Credit Agreement"). Borrowings under the Revolving Credit Agreement bear
interest at a floating rate per annum equal to LIBOR plus 3%. Commencing January
1, 1999, Vornado Operating pays the Company a commitment fee equal to 1% per
annum on the average daily unused portion of the facility. Amounts may be
borrowed under the Revolving Credit Agreement, repaid and reborrowed from time
to time on a revolving basis (so long as the principal amount outstanding at any
time does not exceed $75,000,000). Only interest and commitment fees are payable
under the Revolving Credit Agreement until it expires. The Revolving Credit
Agreement prohibits Vornado Operating from incurring indebtedness to third
parties (other than certain purchase money debt and certain other exceptions)
and prohibits Vornado Operating from paying dividends. Debt under the Revolving
Credit Agreement is recourse to Vornado Operating.
 
     Intercompany Agreement.  The Company and Vornado Operating have entered
into the Intercompany Agreement pursuant to which, among other things, (a) the
Company will under certain circumstances offer Vornado Operating an opportunity
to become the lessee of certain real property owned now or in the future by the
Company (under mutually satisfactory lease terms) and (b) Vornado Operating will
not make any real estate investment or other REIT-Qualified Investment unless it
first offers the Company the opportunity to make such investment and the Company
has rejected that opportunity.
 
     Under the Intercompany Agreement, the Company has agreed to provide Vornado
Operating with certain administrative, corporate, accounting, financial,
insurance, legal, tax, data processing, human resources and operational
services. For these services, Vornado Operating will compensate the Company in
an amount determined in good faith by the Company as the amount an unaffiliated
third party would charge Vornado Operating for comparable services and will
reimburse the Company for certain costs incurred and paid to third parties on
behalf of Vornado Operating. For the period from October 16, 1998 (commencement
date) to December 31, 1998, approximately $50,000 of compensation for such
services was charged pursuant to the Intercompany Agreement.
 
     Vornado Operating and the Company each have the right to terminate the
Intercompany Agreement if the other party is in material default of the
Intercompany Agreement or upon 90 days written notice to the other party at any
time after December 31, 2003. In addition, the Company has the right to
terminate the Intercompany Agreement upon a change in control of Vornado
Operating.
 
     Vornado Operating's Management.  Messrs. Roth, Fascitelli, West and Wight
are directors of Vornado Operating. Mr. Roth is also Chairman of the Board and
Chief Executive Officer of Vornado Operating, Mr. Fascitelli is also President
of Vornado Operating, and certain other members of the Company's senior
management hold corresponding positions with Vornado Operating.
 
     The Cold Storage Companies.  On October 31, 1997, partnerships (the
"Vornado/Crescent Partnerships") in which affiliates of the Company have a 60%
interest and affiliates of Crescent Real Estate Equities Company have a 40%
interest acquired each of AmeriCold Corporation ("Americold") and URS Logistics,
Inc. ("URS"). In June 1998, the Vornado/Crescent Partnerships acquired the
assets of Freezer Services, Inc. and in July 1998 acquired the Carmar Group
(Americold, URS, Freezer Services, Inc. and the Carmar Group, collectively, the
"Cold Storage Companies").
 
     On March 12, 1999, the Vornado/Crescent Partnerships sold all of the
non-real estate assets of the Cold Storage Companies encompassing the operations
of the cold storage business for approximately $48,000,000 to a new partnership
owned 60% by Vornado Operating Company and 40% by Crescent Operating Inc. The
new partnership leases the underlying cold storage warehouses used in this
business from the Vornado/Crescent Partnerships which continue to own the real
estate. The leases have a 15 year term with two-five year renewal options and
provide for the payment of fixed base rent and percentage rent based on customer
revenues. The new partnership is required to pay for all costs arising from the
operation, maintenance and repair of the
 
                                       14
   18
 
properties as well as property capital expenditures in excess of $5,000,000
annually. Fixed base rent and percentage rent for the initial lease year is
projected to be approximately $151 million. The new partnership has the right to
defer a portion of the rent for up to three years beginning on March 12, 1999 to
the extent that available cash, as defined in the leases, is insufficient to pay
such rent.
 
     Disposition and Acquisition of Interest in CESCR.  On December 31, 1998,
the Company sold approximately 1.7% of the outstanding partnership units of
CESCR (a Delaware limited partnership that owns interests in and manages
approximately 10,700,000 square feet of office properties in Crystal City,
Arlington, Virginia, a suburb of Washington, D.C., and manages an additional
14,600,000 square feet of office and other commercial properties in the
Washington, D.C. area) to Vornado Operating Company for an aggregate purchase
price of approximately $12,900,000, or $34 per unit (which is the price at which
CESCR issued partnership units in October 1998 in connection with a significant
"roll-up" transaction). The purchase price was funded out of Vornado Operating's
working capital. After giving effect to this purchase, the Company owned
approximately 9.6% of CESCR as of December 31, 1998. In connection with this
purchase, the Company granted to Vornado Operating an option to require the
Company to repurchase all of the CESCR units at the price at which Vornado
Operating purchased the CESCR units, plus a cumulative return on such amount at
a rate of 10% per annum. The option was exercised on March 4, 1999. Accordingly,
the Company reacquired the CESCR units from Vornado Operating for $13,200,000.
 
  Transactions Involving Interstate and Alexander's
 
     As of December 31, 1998, Interstate and its partners owned approximately
18.1% of the Shares of the Company and 27.1% of Alexander's common stock.
Interstate is a general partnership in which Steven Roth, David Mandelbaum and
Russell B. Wight, Jr. are the three general partners. Mr. Roth is the Chairman
of the Board and Chief Executive Officer of the Company, the Managing General
Partner of Interstate, the Chairman of the Board and Chief Executive Officer of
Vornado Operating and the Chief Executive Officer and a director of Alexander's.
Mr. Mandelbaum and Mr. Wight are Trustees of the Company, and Mr. Wight is a
director of Vornado Operating. The agreement with the Company and Interstate not
to own in excess of two-thirds of Alexander's common stock or to enter into
certain other transactions with Alexander's expired in March 1998.
 
     The Company currently manages and leases the real estate assets of
Interstate pursuant to a management agreement for which the Company receives a
quarterly fee equal to 4% of base rent and percentage rent and certain other
commissions. The management agreement has a term of one year and is
automatically renewable unless terminated by either of the parties on sixty
days' notice at the end of the term. Although the management agreement was not
negotiated at arm's length, the Company believes, based upon comparable fees
charged by other real estate companies, that its terms are fair to the Company.
For the year ended December 31, 1998, $1,365,000 of management fees were earned
by the Company pursuant to the management agreement.
 
     The Company owns 29.3% of the outstanding shares of common stock of
Alexander's. In March 1995, the Company lent Alexander's $45 million. The loan,
which was originally scheduled to mature in March 1998, has been renewed for two
additional one year periods and currently matures in March 2000 and the interest
rate was reset in March 1999 from 13.87% per annum to 14.18% per annum.
 
     Alexander's is managed by and its properties are leased by the Company,
pursuant to agreements with a one-year term which automatically renew.
 
     The annual management fee payable to the Company by Alexander's is equal to
the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Mall
($87,459 for the period from November 1, 1998 to December 31, 1998), plus (iii)
6% of development costs with minimum guaranteed fees of $750,000 per annum.
 
     The leasing agreement provides for the Company to generally receive a fee
of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten years of
a lease term, 2% of lease rent for the eleventh through the twentieth years of a
lease term and 1% of lease rent for the twenty-first through thirtieth years of
a lease term.
 
                                       15
   19
 
Subject to the payment of rents by Alexander's tenants, the Company is due
$5,145,000 at December 31, 1998. Such amount is receivable annually in an amount
not to exceed $2,500,000 until the present value of such installments
(calculated at a discount rate of 9% per annum) equals the amount that would
have been paid had it been paid on September 21, 1993, or at the time the
transactions which gave rise to the commissions occurred, if later.
 
     On July 6, 1995, the Company assigned its management agreement with
Alexander's to Vornado Management Corp. ("VMC"), a New Jersey corporation. In
exchange, the Company received 100% of the nonvoting stock of VMC, which
entitles it to 95% of net operating cash flow distributed by VMC to its
shareholders. Steven Roth and Richard West, trustees of the Company, own all of
the voting stock of VMC. VMC is responsible for its pro rata share of
compensation and fringe benefits of common employees and 30% of other common
expenses.
 
  Certain Other Transactions
 
     During 1998, the Company paid $88,000 for legal services, in connection
with certiorari proceedings at its shopping centers, to the firm of Mandelbaum &
Mandelbaum, P.C., of which David Mandelbaum is a member. All or substantially
all of this amount is expected to be reimbursed to the Company by its tenants.
In addition, during 1998, the Company paid $99,219 for legal services to the
firm of Schechner and Targan, P.A., of which Ronald Targan is a member.
 
     During 1998, the Company paid $150,000 to Stanley Simon for his services in
connection with the Company's purchase of the Merchandise Mart group of
properties.
 
     At December 31, 1998, the loans due from Mr. Roth, Mr. Rowan and Mr. Macnow
in connection with their stock option exercises were $13,930,000 ($4,897,000 of
which is shown as a reduction in shareholders' equity), $144,000 and $130,000,
respectively. The loans bear interest at a rate equal to the broker call rate
(6.5% at December 31, 1998) but not less than the minimum applicable federal
rate provided under the Internal Revenue Code. Interest on the loan to Mr. Roth
is payable quarterly. Mr. Roth's loan, which was due in December 1997, was
extended for five years until December 2002. The Company has agreed on each
January 1st (commencing January 1, 1997) to forgive one-fifth of the amounts due
from Mr. Rowan and Mr. Macnow, provided that they remain employees of the
Company.
 
     During 1998, the Company made loans to Mr. Fascitelli aggregating
$7,600,000 in accordance with the terms of his employment contract. The loans
have a five-year term and bear interest, payable quarterly, at a weighted
average rate of 5.16% (based on the mid-term applicable federal rate provided
under the Internal Revenue Code).
 
     In connection with the Company's acquisition of (i) a 60% interest in three
partnerships which own the Cold Storage Companies, (ii) a 40% interest in Hotel
Pennsylvania, (iii) a 100% interest in a company that manages the trade shows
held at the Merchandise Mart and the Apparel Center in Chicago and the
Washington Design Center and the Washington Office Center in Washington, D.C.,
(iv) a retail cooperative, and (v) the YMCA Development, preferred stock
affiliates were formed. The Operating Partnership received 100% of the nonvoting
common stock of these preferred stock affiliates which entitles it to 98% of the
net operating cash flow distributed by the preferred stock affiliates to their
shareholders. Steven Roth, Chairman of the Board and Chief Executive Officer of
the Company, Michael D. Fascitelli, President and a Trustee of the Company, and
Joseph Macnow, Executive Vice President -- Finance and Administration of the
Company, purchased and own all of the voting common stock of these preferred
stock affiliates which entitles them to the remaining 2% of the net operating
cash flow distributed by these preferred stock affiliates.
 
     In September 1997, the Company purchased, at a discount, a mortgage on a
460,000 square foot office building at 20 Broad Street in Manhattan for
$27,000,000. In August 1998, the Company acquired a 60% interest in the
leasehold from the Mendik Group for approximately $600,000 of Operating
Partnership Units.
 
                                       16
   20
 
The Mendik Group may also receive a future earn-out, capped at $4,400,000 in
additional units, based on leasing activity through December 31, 2004.
 
                         APPROVAL OF PROPOSAL TO AMEND
                        THE COMPANY'S OMNIBUS SHARE PLAN
 
     The Board of Trustees is asking the shareholders to approve an amendment to
the 1993 Omnibus Share Plan of Vornado Realty Trust (the "Omnibus Share Plan" or
the "Plan") which would authorize the allocation of an additional 7,000,000
Shares to be reserved for issuance and sale under the Plan. The Omnibus Share
Plan was first approved by the shareholders of the Company on May 6, 1993. Of
the 14,500,000 shares authorized under the Plan, 4,103,382 Shares were available
for issuance as of December 31, 1998 and 919,392 Shares were available for
issuance as of April 7, 1999. The fair market value of the Shares of the Company
on April 13, 1999 was $34.8125 per share.
 
     The purpose of the Omnibus Share Plan is to promote the financial interests
of the Company by encouraging its employees and the employees of its
subsidiaries to acquire an ownership position in the Company, enhancing its
ability to attract and retain employees of outstanding ability and providing
such employees with a way to acquire or increase their proprietary interest in
the Company's success. The Trustees and the Compensation Committee of the Board
of Trustees have determined that it is in the best interest of the Company and
the shareholders to add an additional 7,000,000 Shares to the Plan to further
promote the Plan's objectives.
 
     For additional information regarding options granted to executive officers,
see "Executive Compensation" above.
 
TERMS OF THE OMNIBUS SHARE PLAN
 
     Under the Omnibus Share Plan, employees of the Company may be granted
awards of stock options, stock appreciation rights, performance shares and
restricted stock. The Omnibus Share Plan is administered by the Compensation
Committee of the Board of Trustees which is authorized to select employees of
the Company and its subsidiaries to receive awards, determine the type of awards
to be made, determine the number of common shares or share units subject to any
award and the other terms and conditions of such awards. All employees of the
Company and its subsidiaries who have demonstrated significant management
potential or who have the capacity for contributing in a substantial measure to
the successful performance of the Company, as determined by the Compensation
Committee, are eligible to receive awards under the Plan. As such criteria are
subjective in nature, the Company cannot accurately estimate the number of
persons who may be included in such class from time to time. Each officer of the
Company can be granted awards under the Omnibus Share Plan.
 
     Except as determined by the Committee with respect to the transferability
of stock options by a participant to such participant's immediate family members
(or trusts, partnerships or limited liability companies established for such
immediate family members), the awards are not assignable or transferable except
by will or the laws of descent and distribution and no right or interest of any
participant may be subject to any lien, obligation or liability of the holder.
 
  Stock Options
 
     Stock options entitle the holder to purchase the Company's shares at a per
share price determined by the Compensation Committee which in no event may be
less than the fair market value of the shares on the date of grant. Options may
be either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code or "nonqualified" stock options. Stock options are
exercisable for such period as is determined by the Compensation Committee, but
in no event may options be exercisable after 10 years from the date of grant.
The option price for shares purchased upon the exercise of an option must be
paid in full at the time of exercise and may be paid in cash, by tender of
common shares, by such other consideration as the
 
                                       17
   21
 
Compensation Committee deems appropriate or by a combination of cash, common
shares and such other consideration.
 
     Upon the grant or exercise of an incentive stock option, no income will be
recognized by the optionee for Federal income tax purposes, and the Company will
not be entitled to any deduction. If the shares acquired upon exercise are not
disposed of within the one-year period beginning on the date of the transfer of
the shares to the optionee, nor within the two-year period beginning on the date
of the grant of the option, any gain or loss realized by the optionee upon the
disposition of such shares will be taxed as long-term capital gain or loss. In
such event, no deduction will be allowed to the Company. If such shares are
disposed of within the one-year or two-year periods referred to above, the
excess of the fair market value of the shares on the date of exercise (or, if
less, the fair market value on the date of disposition) over the exercise price
will be taxable as ordinary income to the optionee at the time of disposition,
and the Company will be entitled to a corresponding deduction. The amount by
which the fair market value of the shares at the time of exercise of an
incentive stock option exceeds the option price will constitute an item of tax
preference which could subject the optionee to the alternative minimum tax.
Whether the optionee will be subject to such tax depends on the facts and
circumstances applicable to the individual.
 
     Upon the grant of a non-qualified option, no income will be realized by the
optionee, and the Company will not be entitled to any deduction. Upon the
exercise of such an option, the amount by which the fair market value of the
shares at the time of exercise exceeds the exercise price will be taxed as
ordinary income to the optionee and the Company will be entitled to a
corresponding deduction.
 
  Stock Appreciation Rights
 
     Stock appreciation rights entitle the holder to receive from the Company an
amount equal to the amount by which the fair market value of a share on the date
of exercise exceeds the grant price. Stock appreciation rights may be granted in
tandem with a stock option, in addition to a stock option or may be freestanding
and unrelated to a stock option and may not be exercised earlier than six months
after grant except in the event of the holder's death or disability. The
Compensation Committee is authorized to determine whether a stock appreciation
right will be settled in cash, shares or a combination thereof.
 
  Performance Shares
 
     Performance share awards consist of a grant of actual shares or share units
having a value equal to an identical number of the Company's shares in amounts
determined by the Compensation Committee at the time of grant. Performance share
awards consisting of actual shares entitle the holder to receive shares in an
amount based upon performance conditions of the Company over a performance
period as determined by the Compensation Committee at the time of grant. Such
performance share awards may provide the holder with dividends and voting rights
prior to vesting. Performance share awards consisting of share units entitle the
holder to receive the value of such units in cash, shares or a combination
thereof based upon performance conditions and over a performance period as
determined by the Compensation Committee at the time of grant. Such performance
share awards may provide the holder with dividend equivalents prior to vesting.
 
  Restricted Stock
 
     Restricted stock awards consist of a grant of actual shares or share units
having a value equal to an identical number of shares of the Company. Restricted
stock awards consisting of actual shares entitle the holder to receive shares of
the Company. Such restricted stock awards may provide the holder with dividends
and voting rights prior to vesting. Restricted stock awards consisting of share
units entitle the holder to receive the value of such units in cash, shares or a
combination thereof as determined by the Compensation Committee. Such restricted
stock awards may provide the holder with dividend equivalents prior to vesting.
The employment conditions and the length of the period for vesting of restricted
stock awards are established by the Compensation Committee at time of grant.
 
     THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
AMEND THE COMPANY'S OMNIBUS SHARE PLAN. Proxies will be so voted unless
specified
                                       18
   22
 
otherwise in their proxies. The affirmative vote of holders of the majority of
the outstanding common shares present, or represented, and entitled to vote is
required for approval of this proposal. Consequently, abstentions will have the
same effect as votes against the proposal and broker non-votes will not be
counted as shares entitled to vote on the matter and will have no effect on the
result of the vote.
 
                      INFORMATION RESPECTING THE COMPANY'S
                              INDEPENDENT AUDITORS
 
     The Board has retained Deloitte & Touche LLP to act as independent auditors
for the fiscal year ending December 31, 1999. The firm of Deloitte & Touche LLP
was engaged as independent auditors for the 1998 fiscal year, and
representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
 
                 ADDITIONAL MATTERS TO COME BEFORE THE MEETING
 
     The Board does not intend to present any other matter, nor does it have any
information that any other matter will be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting, it is the
intention of the person named in the enclosed proxy to vote said proxy in
accordance with his discretion on such matters.
 
                   ADVANCE NOTICE FOR SHAREHOLDER NOMINATIONS
                         AND PROPOSALS OF NEW BUSINESS
 
     The Bylaws of the Company provide that in order for a shareholder to
nominate a candidate for election as a trustee at an annual meeting of
shareholders or propose business for consideration at such meeting, notice must
generally be given in writing to the Secretary of the Company at the principal
executive offices of the Company no more than 90 days nor less than 60 days
prior to the first anniversary of the preceding year's annual meeting.
Accordingly, failure by a shareholder to act in compliance with the notice
provisions will mean that the shareholder will not be able to nominate trustees
or propose new business.
 
     Shareholders interested in presenting a proposal for consideration at the
Company's annual meeting of shareholders in 2000 may do so by following the
procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934
and the Company's Bylaws. Shareholder proposals for the 2000 Annual Meeting of
Shareholders of the Company must be received at the principal executive office
of the Company, Park 80 West, Plaza II, Saddle Brook, New Jersey 07663,
Attention: Secretary, not later than April 3, 2000, for inclusion in the 2000
proxy statement and form of proxy.
 
                                          By Order of the Board of Trustees,
 
                                          Larry Portal
                                          Assistant Secretary
 
May 10, 1999
 
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE.
 
                                       19
   23
 
                              VORNADO REALTY TRUST
 
             PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
   24
 
                              VORNADO REALTY TRUST
 
                                     PROXY
 
    The undersigned shareholder, revoking all prior proxies, hereby appoints
Steven Roth proxy, with full power of substitution, to attend, and to cast all
votes which the undersigned shareholder is entitled to cast at the Annual
Meeting of Shareholders of Vornado Realty Trust, a Maryland real estate
investment trust (the "Company"), to be held at the Marriott Hotel, Interstate
80 and the Garden State Parkway, Saddle Brook, New Jersey 07663 on Wednesday,
June 2, 1999 at 10:00 A.M., local time, upon any and all business as may
properly come before the meeting and all postponements or adjournments thereof.
Said proxy is authorized to vote as directed on the reverse side hereof upon the
proposals which are more fully set forth in the Proxy Statement and otherwise in
his discretion upon such other business as may properly come before the meeting
and all postponements or adjournments thereof, all as more fully set forth in
the Notice of Meeting and Proxy Statement, receipt of which is hereby
acknowledged.
 
    THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE COMPANY. WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF TRUSTEES, "FOR" THE AMENDMENT TO
THE COMPANY'S OMNIBUS SHARE PLAN AND OTHERWISE IN THE DISCRETION OF THE PROXY.
 
                (Continued and to be Executed, on Reverse side)
   25
 
                          (Continued from other side)

  
1.   ELECTION OF TRUSTEES:
     The Board of Trustees recommends a Vote "FOR" Election of
     the nominees for Trustees listed below.
     [ ]  FOR all nominees listed below
     Nominees:  Stanley Simon
     Ronald Targan
     (each for a term ending at the Annual Meeting of
     Shareholders in 2002)
     [ ]  WITHHOLD AUTHORITY to vote for all nominees
     To withhold authority to vote for any individual nominee,
     write that nominee's name in the space provided below.
     ------------------------------------------------------------
     APPROVAL OF THE AMENDMENT TO THE COMPANY'S OMNIBUS SHARE
2.   PLAN:
     The Board of Trustees recommends a Vote "FOR" approval of
     the Amendment to the Company's Omnibus Share Plan
     FOR [ ]               AGAINST [ ]               ABSTAIN [
     ]

                                                [ ]  Address Change and/or
                                                Comments
                                                Please date and sign as your
                                                name or names appear hereon.
                                                Each joint owner must sign.
                                                (Officers, Executors,
                                                Administrators, Trustees, etc.,
                                                will kindly so indicate when
                                                signing.)
 
                                                Dated
 
       ------------------------------------------------------------------------,
                                                1999
 
                                                --------------------------------
                                                  Signature(s) of Shareholder(s)
 
                                                VOTES MUST BE INDICATED (X) IN
                                                BLACK OR BLUE INK. [X]
 
    PLEASE VOTE, DATE AND SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.