Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2008. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Management's Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three months ended March 31, 2009. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2008 in Management's Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2009.

Business Objective and Operating Strategy

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index ("RMS") and the SNL REIT Index ("SNL") for the following periods ending March 31, 2009:

                                           Total Return (1)
                                    Vornado       RMS         SNL
                     One-year      (61.9%)     (61.3%)     (59.7%)
                     Three-years   (61.4%)     (59.0%)     (57.2%)
                     Five-years    (33.1%)     (38.5%)     (35.6%)
                     Ten-years       60.3%       42.2%       49.4%


_________________________

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

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

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

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

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

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

• Investing in fully-integrated operating companies that have a significant real estate component; and

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

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets.

We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC and Northern Virginia areas. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends. See "Risk Factors" in Item 1A of our Annual Report on form 10-K for the year ended December 31, 2008, for additional information regarding these factors.

In the second half of 2007 the residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages, declining home values and increasing inventory nationwide. In 2008, the "credit crisis" spread to the broader commercial credit and financial markets resulting in illiquidity and volatility in the bond and equity markets. These trends have continued in the first quarter of 2009. We are currently in an economic recession which has negatively affected substantially all businesses, including ours. During the past year, real estate transactions have diminished significantly and capitalization rates have risen. The commercial real estate industry may continue to be affected by declining demand for office and retail space due to bankruptcies, layoffs, downsizing, cost cutting as well as general economic conditions, which would result in lower occupancy rates and effective rents and a corresponding decrease in net income, funds from operations and cash flow. In addition, the value of investments in joint ventures, marketable securities, and mezzanine loans may continue to decline, and may result in impairment charges and/or valuation allowances and a corresponding decrease in net income and funds from operations.

The trends discussed above have had an impact on our financial results for the first quarter ended March 31, 2009. As shown in our table of leasing statistics by segment on page 36 of this "Overview," changes in occupancy rates from December 31, 2008 to March 31, 2009 ranged from a decrease of 80 basis points for our New York Office portfolio to an increase of 20 basis points for our Washington, DC Office portfolio. Initial rents on space re-leased during the quarter ended March 31, 2009 exceeded expiring escalated rents, although at spreads significantly below increases achieved during 2008. During the quarter ended March 31, 2009, retail tenant delinquencies have risen and our allowance for doubtful accounts has increased accordingly. At March 31, 2009, the market values of our investment in Lexington Realty Trust (NYSE: LXP) common shares and our marketable securities portfolio were $39,274,000 and $41,362,000, respectively, below their carrying amounts. We have concluded that, as of March 31, 2009, the declines in the value of these investments were not "other-than-temporary." It is not possible for us to quantify the impact of the above trends, which may persist for the remainder of 2009 and beyond, on our future financial results.

Quarter Ended March 31, 2009 Financial Results Summary

Net income attributable to common shareholders for the quarter ended March 31, 2009 was $125,841,000, or $0.79 per diluted share, versus $389,563,000, or $2.38 per diluted share, for the quarter ended March 31, 2008. Net income for the quarter ended March 31, 2009 and 2008 include $173,000 and $6,002,000, respectively, of net gains on sale of real estate. In addition, net income for the quarters ended March 31, 2009 and 2008 also include certain items that affect comparability which are listed in the table below. The aggregate of the net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, decreased net income attributable to common shareholders for the quarter ended March 31, 2009 by $15,689,000, or $0.10 per diluted share and increased net income attributable to common shareholders for the quarter ended March 31, 2008 by $258,314,000, or $1.55 per diluted share.

Funds from operations attributable to common shareholders plus assumed conversions ("FFO") for the quarter ended March 31, 2009 was $268,582,000, or $1.63 per diluted share, compared to $527,880,000, or $3.17 per diluted share, for the prior year's quarter. FFO for the quarters ended March 31, 2009 and 2008 include certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased FFO for the quarter ended March 31, 2009 by $15,971,000, or $0.10 per diluted share and increased FFO for the quarter ended March 31, 2008 by $259,379,000 or $1.56 per diluted share.

                                                           For the Three Months Ended
(Amounts in thousands)                                              March 31,
                                                             2009              2008
Items that affect comparability (income) expense:
Write-off of unamortized costs from the
voluntary surrender of equity awards                     $      32,588     $            -
Alexander's stock appreciation rights                          (11,105 )              205
Net gain on extinguishment of debt                              (5,905 )                -
Reversal of deferred income taxes initially recorded
in connection
with H Street acquisition                                            -           (222,174 )
Net gain on sale of our 47.6% interest in Americold                  -           (112,690 )
Non-cash asset write-downs:
Marketable equity security                                           -              9,073
Real estate development projects:
Partially owned entities                                             -             34,200
Wholly owned entities (including costs of
acquisitions not
consummated)                                                         -              2,283
Derivative positions in marketable equity securities                 -             18,362
Reversal of MPH mezzanine loan loss accrual                          -            (10,300 )
Other, net                                                       1,874              1,663
                                                                17,452           (279,378 )
47.6% share of Americold's FFO (Net loss of $1,076)
- sold on March 31, 2008                                             -             (6,098 )
                                                                17,452           (285,476 )
Noncontrolling interests' share of above adjustments            (1,481 )           26,097
Total items that affect comparability                   $       15,971    $      (259,379 )

On January 1, 2009, we adopted FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"). FSP 14-1 was required to be applied retrospectively. Accordingly, net income for the quarter ended March 31, 2008 has been adjusted to include $8,400,000 of additional interest expense, net of amounts attributable to noncontrolling interests. In addition, in accordance with FASB Statement No. 128, Earnings Per Share ("SFAS 128), we have included 2,762,000 additional common shares resulting from the March 12, 2009 common share dividend, in the computation of income per share retroactively to the quarter ended March 31, 2008.

During the quarter ended March 31, 2009, we did not recognize income on certain assets with an aggregate carrying amount of approximately $900 million during the quarter ended March 31, 2009, because they were out of service for redevelopment, although we capitalized $4,716,000 of interest costs in connection with the development of these assets. Assets under development include all or portions of the Bergen Town Center, 220 20th Street, 1229-1231 25th Street ("West End 25"), and certain investments in partially owned entities.

The percentage increase (decrease) in the same store Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") of our operating segments for the quarter ended March 31, 2009 over the quarter ended March 31, 2008 and the trailing quarter ended December 31, 2008 are summarized below.

                                       New York    Washington, DC            Merchandise
Quarter Ended:                          Office         Office       Retail      Mart
March 31, 2009 vs. March 31, 2008        2.1%           4.7%         5.5%      (5.0%)
March 31, 2009 vs. December 31, 2008   (4.9%)(1)        0.6%         5.9%    (14.3%) (2)


_________________________

(1) Reflects a seasonal increase in utility costs and additional amortization of an acquired below market lease in the prior year's quarter resulting from AXA Equitable Life Insurance's ("AXA") lease modification at 1290 Avenue of the Americas. Excluding the effect of these items, same store operations decreased by 0.9%.

(2) Results primarily from the seasonality of operations.

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

On April 7, 2009, we completed a $75,000,000 financing of 4 Union Square South, Manhattan, a 203,000 square foot, fully-leased retail property. This interest-only loan has a rate of LIBOR plus 3.25% (3.78% as of April 22, 2009) and matures in April 2012, with two one-year extension options. The property was previously unencumbered.

On April 22, 2009, we sold 17,250,000 common shares, including underwriters' over-allotment, in an underwritten public offering pursuant to an effective registration statement at an initial public offering price of $43.00 per share. We received net proceeds of approximately $709,700,000, after the underwriters' discount and offering expenses and contributed the net proceeds to the Operating Partnership in exchange for 17,250,000 Class A units of the Operating Partnership.

On April 30, 2009, the Operating Partnership commenced a cash tender offer for any and all of its senior unsecured notes dues 2009, 2010 and 2011. Upon the terms and subject to the conditions of the tender offer, we are offering to purchase the senior unsecured notes due 2009 at par, plus accrued and unpaid interest and the senior unsecured notes due 2010 and 2011 at a purchase price of $970 per $1,000 in principal, plus accrued and unpaid interest. The tender offer expires on May 7, 2009.

The following table sets forth certain information for the properties we own directly or indirectly, including leasing activity. The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Tenant improvements and leasing commissions are presented below based on square feet leased during the period, on a per square foot and per square foot per annum basis based on weighted average lease terms and as a percentage of initial rent per square foot.

(Square feet in thousands)
                                         New York     Washington, DC                 Merchandise Mart
                                          Office          Office         Retail     Office     Showroom
Square feet (in service)                   16,138             17,963     22,224      2,438        6,337
Number of properties                           28                 82        176          8            8
Occupancy rate                               95.9 %             95.2 %     92.0 %     95.1 %       90.1 %

Leasing Activity:
Quarter Ended March 31, 2009:
Square feet                                   161                539        247          -          118
Initial rent (1)                       $    53.24   $          39.37   $  16.93   $      -   $    30.82
Weighted average lease terms (years)          5.6                3.8        5.8          -          4.5
Rent per square foot - relet space:
Square feet                                   153                498        232          -          118
Initial rent - cash basis (1)          $    52.41   $          39.47   $  14.35   $      -   $    30.82
Prior escalated rent - cash basis      $    48.08   $          37.74   $  13.42   $      -   $    32.00
Percentage increase:
Cash basis                                    9.0 %              4.6 %      6.9 %        -         (3.7 %)
GAAP basis                                    8.3 %              9.0 %     10.6 %        -          2.1 %
Rent per square foot - vacant space
Square feet                                     8                 41         15          -            -
Initial rent (1)                       $    68.96   $          38.16   $  58.04   $      -   $        -

Tenant improvements and leasing
commissions:
Per square foot                        $    18.83   $          14.02   $   2.62   $      -   $     5.21
Per square foot per annum              $     3.36   $           3.69   $    .45   $      -   $     1.16
Percentage of initial rent                    6.3 %              9.2 %      2.7 %        -          3.8 %

As of December 31, 2008:
Square feet                                16,108             17,666     21,861      2,424        6,332
Number of properties                           28                 82        176          8            8
Occupancy rate                               96.7 %             95.0 %     92.1 %     96.5 %       92.2 %

As of March 31, 2008:
Square feet                                16,025             17,392     21,820      2,390        6,169
Number of properties                           28                 82        176          8            8
Occupancy rate                               97.6 %             93.4 %     94.2 %     92.6 %       93.5 %

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

On January 1, 2009, we adopted FSP 14-1, which was required to be applied retrospectively. The adoption of FSP 14-1 affected the accounting for our convertible and exchangeable senior debentures by requiring the initial proceeds from their sale to be allocated between a liability component and an equity component in a manner that results in interest expense on the debt component at our nonconvertible debt borrowing rate on the date of issue. The initial debt components of our $1.4 billion Convertible Senior Debentures, $1 billion Convertible Senior Debentures and $500 million Exchangeable Senior Debentures were $1,241,286,000, $926,361,000 and $457,699,000, respectively, based on the fair value of similar nonconvertible instruments issued. The aggregate initial debt discount of $212,395,000 after original issuance costs allocated to the equity component was recorded in "additional capital" as a cumulative effect of change in accounting principle in our consolidated statement of shareholders' equity. We are amortizing the discount using the effective interest method over the period the debt is expected to remain outstanding (i.e., the earliest date the holders may require us to repurchase the debentures), as additional interest expense. Accordingly, interest expense for the quarter ended March 31, 2008 has been adjusted to include $9,300,000 of amortization in the aggregate, or $8,400,000, net of amounts attributable to noncontrolling interests. Amortization for periods prior to December 31, 2007 (not presented herein) aggregating $35,552,000 have been reflected as a cumulative effect of change in accounting principle in "earnings in excess of (less than) distributions" on our consolidated statement of changes in equity. Below is a summary of the financial statement effects of implementing FSP 14-1 and related disclosures.

                   $1.4 Billion Convertible          $1 Billion            $500 Million
                      Senior Debentures              Convertible           Exchangeable
                                                  Senior Debentures     Senior Debentures
(Amounts in
thousands,                          December     March       December    March    December
except per       March 31, 2009     31, 2008    31, 2009     31, 2008     31,     31, 2008
share amounts)                                                           2009
Balance Sheet:
Principal
amount of
liability
component      $      1,382,700   $ 1,382,700 $  989,800   $  989,800 $ 499,982 $  499,982
Unamortized
discount                (98,878 )    (106,415 )  (40,748 )    (44,342 ) (20,209 )  (21,726 )
Carrying
amount of
liability
component      $      1,283,822   $ 1,276,285 $  949,052   $  945,458 $ 479,773 $  478,256

Carrying
amount of
equity
component      $        130,714   $   130,714 $   53,640   $   53,640 $  32,301 $   32,301

                          March 31,                  March 31,              March 31,
Income
Statement:            2009            2008        2009         2008      2009       2008
Coupon                    9,852         9,975      8,970        9,063
interest       $                  $           $            $          $   4,844 $    4,844
Discount
amortization -            1,351         1,400                                          411
original issue                                       981        1,012       359
Discount
amortization -
FSP 14-1
implementation            6,180         5,823      2,609        2,427     1,159      1,028
               $         17,383   $    17,198 $   12,560   $   12,502 $   6,362 $    6,283

Effective                  5.45          5.45       5.32         5.32      5.32       5.32
interest rate                   %             %          %            %         %          %

Maturity date
(period
through which            4/1/12                 11/15/11                4/15/12
discount is
being
amortized)

Conversion
price per                159.04                   150.22
share, as
adjusted       $                              $                       $   88.20

Number of
shares on
which the
aggregate
consideration
to be
delivered upon
conversion is
determined                    - (1)                    - (1)              5,669

(1) In accordance with FSP 14-1, we are required to disclose the conversion price and the number of shares on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value.) Our convertible senior debentures require the entire principal amount to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares. Based on the March 31, 2009 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date. The number of common shares on which the aggregate consideration to be delivered upon conversion is 8,694 and 6,589 common shares, respectively.

In December 2007, the FASB issued Statement No. 141R, Business Combinations ("SFAS 141R"). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R became effective for all transactions entered into on or after January 1, 2009. The adoption of SFAS 141R on January 1, 2009 did not have any effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS 160. SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent's ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 became effective on January 1, 2009. The adoption of SFAS 160 on January 1, 2009, resulted in (i) the reclassification of minority interests in consolidated subsidiaries to noncontrolling interests in consolidated subsidiaries, a component of permanent equity on our consolidated balance sheets, (ii) the reclassification of minority interest expense to net income attributable to noncontrolling interests, on our consolidated statements of income, and (iii) additional disclosures, including a consolidated statement of changes in equity in quarterly reporting periods.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities - an Amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133, and the impact of derivative instruments and related hedged items on an entity's financial position, . . .