ALEXANDERS INC (Form: 10-Q, Received: 08/07/2002 11:49:51)

EXHIBIT INDEX ON PAGE 17

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


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


For the quarterly period ended:		June 30, 2002


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


For the transition period from				to

Commission File Number: 1-6064

ALEXANDER’S, INC.

(Exact name of registrant as specified in its charter)


Delaware		51-0100517

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









888 Seventh Avenue, New York, New York		10019

(Address of principal executive offices)		(Zip Code)

(212) 894-7000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

(XBOX) Yes (BOX) No

As of August 1, 2002 there were 5,000,850 common shares outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
LLC OPERATING AGREEMENT OF 731 RESIDENTIAL
LLC OPERATING AGREEMENT OF 731 COMMERCIAL
AMENDED AND RESTATED CREDIT AGREEMENT
CREDIT AGREEMENT BETWEEN ALEXANDER'S AND VORNADO
AMENDED CREDIT AGREEMENT WITH VORNADO
CREDIT AGREEMENT WITH VORNADO EVIDENCING A LOAN
BUILDING LOAN AGREEMENT
PROJECT LOAN AGREEMENT
SUPPLEMENTAL LOAN AGREEMENT
CONSOLIDATED, AMENDED & RESTATED BUILDING LOAN
CONSOLIDATED AMENDED & RESTATED BUILDING LOAN NOTE
GUARANTY OF COMPLETION
GUARANTY OF CARRY OBLIGATIONS
ENVIRONMENTAL INDEMNITY AGREEMENT
REIMBURSTMENT AGREEMENT
AMENDMENT TO REAL ESTATE RETENTION AGREEMENT
59TH. STREET REAL ESTATE RETENTION AGREEMENT
AMENDED AND RESTATED MANAGEMENT & DEVELOMENT AGMT.
59TH. STREET MANAGEMENT & DEVELOPMENT AGREEMENT
KINGS PLAZA MANAGEMENT AGREEMENT
FIRST AMENDMENT TO LEASE

ALEXANDER’S, INC.
AND SUBSIDIARIES
INDEX


			Page Number

PART I.		Financial Information:









	Item 1.	Financial Statements:









		Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001		3









		Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and June 30, 2001		4









		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and June 30, 2001		5









		Notes to Consolidated Financial Statements		6









	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10









	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		14









PART II.		Other Information:









	Item 1.	Legal Proceedings		15









	Item 4.	Submission of Matters to a Vote of Security Holders		15









	Item 5.	Other Information		15









	Item 6.	Exhibits and Reports on Form 8-K		15









Signatures				16









Exhibit Index				17

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALEXANDER’S, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)


			June 30,			December 31,
			2002			2001

ASSETS:




Real estate, at cost:




	Land		$	90,768		$	90,768




	Buildings, leaseholds and leasehold improvements			168,648			168,388




	Capitalized expenses, development costs and construction in progress			218,476			168,736

		Total		477,892			427,892




	Less accumulated depreciation and amortization			(53,669	)		(51,463	)

	Real estate, net			424,223			376,429




Assets held for sale				3,879			3,930




Cash and cash equivalents				99,443			135,258




Restricted cash				6,842			6,596




Accounts receivable, net of allowance for doubtful accounts of $335 in 2002 and $929 in 2001				1,403			1,534




Receivable arising from the straight-lining of rents, net				19,757			18,233




Deferred lease and other property costs				28,660			29,371




Deferred debt expense				5,539			5,840




Other assets				8,329			6,148

TOTAL ASSETS			$	598,075		$	583,339






LIABILITIES AND STOCKHOLDERS’ EQUITY:









Debt (including $119,000 due to Vornado Realty Trust (Vornado) in 2002 and 2001)			$	514,570		$	515,831




Amounts due to Vornado and its affiliate				4,737			4,822




Accounts payable and accrued expenses				21,933			13,940




Other liabilities				9,356			3,665

TOTAL LIABILITIES				550,596			538,258






COMMITMENTS AND CONTINGENCIES









STOCKHOLDERS’ EQUITY:




Preferred stock: no par value; authorized, 3,000,000 shares; issued, none				—			—




Common stock: $1.00 par value per share; authorized, 10,000,000 shares; issued, 5,173,450 shares				5,174			5,174




Additional capital				24,843			24,843




Retained earnings				18,422			16,024

				48,439			46,041




Less treasury shares, 172,600 shares at cost				(960	)		(960	)

Total stockholders’ equity				47,479			45,081






TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	598,075		$	583,339

See notes to consolidated financial statements.

ALEXANDER’S, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)


		For The Three Months						For The Six Months
		Ended June 30,						Ended June 30,

		2002			2001			2002			2001

REVENUES:




	Property rentals	$	12,637		$	10,535		$	25,041		$	21,108




	Expense reimbursements		5,966			6,017			12,284			11,893

Total revenues			18,603			16,552			37,325			33,001





EXPENSES:




	Operating (including management fee to Vornado of $353 and $334 for the three months ended in 2002 and 2001; $719 and $674 for the six months ended in 2002 and 2001)		7,435			7,716			14,306			14,382




	General and administrative (including management fee to Vornado of $540 and $1,080 each for the three and six month ended in 2002 and 2001)		5,169			848			6,034			1,716




	Depreciation and amortization		1,621			1,581			3,232			3,143

Total expenses			14,225			10,145			23,572			19,241





OPERATING INCOME			4,378			6,407			13,753			13,760




Interest and debt expense (including interest on loans from Vornado)			(6,156	)		(4,728	)		(12,734	)		(9,244	)




Interest and other income, net			535			428			1,202			791

	(Loss) income from continuing operations		(1,243	)		2,107			2,221			5,307




Income (loss) from discontinued operations (including extraordinary gain from early extinguishment of debt of $3,534 for the six months ended June 30, 2001)			110			(37	)		177			22,370





NET (LOSS) INCOME		$	(1,133	)	$	2,070		$	2,398		$	27,677





(Loss) income per share (basic and diluted):




	Continuing operations	$	(0.25	)	$	0.42		$	0.44		$	1.06




	Discontinued operations		0.02			(0.01	)		0.04			4.47

	Net (loss) income	$	(0.23	)	$	0.41		$	0.48		$	5.53

See notes to consolidated financial statements.

ALEXANDER’S, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)


		For The Six Months Ended June 30,

		2002			2001

Cash Flows From Operating Activities:




Net income from continuing operations		$	2,221		$	5,307




Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities:




	Depreciation and amortization (including debt issuance costs)		3,682			4,222




	Straight-lining of rental income, net		(1,524	)		(1,685	)




	Stock appreciation rights compensation expense		4,236			—




Change in assets and liabilities:




	Accounts receivable		131			565




	Amounts due to Vornado and its affiliate		(2,725	)		774




	Accounts payable and accrued expenses		(4,465	)		(3,067	)




	Other liabilities		1,455			171




	Other		(2,507	)		(4,225	)

Net cash provided by operating activities of continuing operations			504			2,062






Income from discontinued operations			177			22,370




	Gain on sale of Fordham Road property		—			(19,026	)




	Extraordinary gain from early extinguishment of debt		—			(3,534	)

Net cash provided by (used in) discontinued operations			177			(190	)

Net cash provided by operating activities			681			1,872






Cash Flows From Investing Activities:




Cash flow from continuing operations:




	Additions to real estate		(34,903	)		(19,131	)




	Cash made available for construction financing		—			8,388




	Cash restricted for operating liabilities		(4,479	)		(15,673	)




	Cash made available for operating liabilities		4,233			2,855

Net cash used in continuing operations			(35,149	)		(23,561	)






Cash flow from discontinued operations:




	Proceeds from sale of Fordham Road property		—			23,701

Net cash provided by discontinued operations			—			23,701






Net cash (used in) provided by investing activity			(35,149	)		140






Cash Flows From Financing Activities:




	Issuance of debt		—			232,685




	Debt repayments		(1,261	)		(138,168	)




	Deferred debt expense		(86	)		(5,135	)

Net cash (used in) provided by financing activities			(1,347	)		89,382






Net (decrease) increase in cash and cash equivalents			(35,815	)		91,394




Cash and cash equivalents at beginning of period			135,258			2,272

Cash and cash equivalents at end of period		$	99,443		$	93,666






Supplemental disclosure of cash flow information:




Cash payments for interest (of which $9,562 and $9,954 have been capitalized)		$	23,499		$	18,626

See notes to consolidated financial statements.

ALEXANDER’S, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Balance Sheet as of June 30, 2002, the Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Alexander’s, Inc. and Subsidiaries’ (the “Company”) annual report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the operating results for the full year.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, the Company reclassified its statements of operations to reflect income and expenses for properties which are held for sale as discontinued operations. In addition, the Company reclassified the January 2001 gain on the sale of its Fordham Road property and the extraordinary gain from the early extinguishment of debt from such property to discontinued operations to conform with the current period’s presentation.

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

2. RELATIONSHIP WITH VORNADO REALTY TRUST (“Vornado”)

Vornado owns 33.1% of the Company’s common stock at June 30, 2002.

The Company is managed by and its properties are leased by Vornado pursuant to management, leasing and development agreements with one-year terms expiring in March of each year which are automatically renewable. In conjunction with the closing of the Lexington Avenue construction loan on July 3, 2002 (Note 4), these agreements were bifurcated to cover the Company’s Lexington Avenue property separately. Further, the Lexington Avenue management and development agreements were amended to provide for a term lasting until substantial completion of the property, with automatic renewals, and for the payment of the development fee upon the earlier of January 3, 2006 or the payment in full of the construction loan encumbering the property.

Pursuant to this Construction loan, Vornado has agreed to guarantee among other things, the lien free, timely completion of the construction of the project and funding of project costs in excess of a stated loan budget, if not funded by the Company (the “Completion Guarantee”). The $6,300,000 estimated fee payable by the Company to Vornado for the Completion Guarantee is 1% of construction costs (as defined) and is due at the same time that the development fee is due. In addition, if Vornado should advance any funds under the Completion Guarantee in excess of the $26,000,000 currently available under the secured line of credit, discussed below, interest on those advances is at 15% per annum.

Pursuant to both the pre and post July 3, 2002 management, leasing and development agreements, Vornado is entitled to a development fee based on 6% of construction costs as defined. The development fee for the Lexington Avenue project is estimated to be approximately $26,300,000. Under these agreements the Company incurred fees of $3,507,000 and $1,601,000 in the three months ended June 30, 2002 and 2001, and $6,602,000 and $4,065,000 in the six months periods ended June 30, 2002 and 2001. The Company owes Vornado, $1,073,000 under the leasing agreement which is payable in 2002.

ALEXANDER’S, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2002, the Company is indebted to Vornado in the amount of $119,000,000 comprised of (i) a $95,000,000 secured financing, and (ii) $24,000,000 under a $50,000,000 secured line of credit (which carries a 1% unused commitment fee). On March 15, 2002, the loan and the line of credit were extended to April 15, 2003. The interest rate on these loans was reset from 13.74% to 12.48% using a Treasury index (with a 3% floor) plus the same spread to treasuries as previously existed. The Company incurred interest on its loans from Vornado of $3,820,000 and $4,199,000 in the three months ended June 30, 2002 and 2001, and $7,902,000 and $8,965,000 in the six months ended June 30, 2002 and 2001. At June 30, 2002, $26,000,000 was available under the secured line of credit. On July 3, 2002, in conjunction with the closing of the Lexington Avenue construction loan (Note 4), the maturity of the Vornado debt was extended to the earlier of January 3, 2006 or the date the Lexington Avenue construction loan is repaid in full and the debt was bifurcated among various subsidiaries of the Company (all guaranteed by the Company). In addition amounts which may be due under the Completion Guarantee would be due at the same time.

3. ASSETS HELD FOR SALE

On May 8, 2002 the Company entered into an agreement to sell its Third Avenue property located in the Bronx, New York for $15,000,000 which would result in a gain of approximately $10,800,000. The Company has received a non-refundable deposit of $750,000 from the purchaser. This sale is expected to be completed during the third quarter of this year, however there can be no assurance it will be consummated.

On May 30, 2002 the Company entered into an agreement to sell its subsidiary which owns the building and has the ground lease for its property in Flushing, New York for $18,800,000 which would result in a gain of approximately $15,800,000. The Company has received a non-refundable deposit of $1,300,000 from the purchaser. This sale is expected to be completed during the third quarter of this year, however there can be no assurance it will be consummated.

4. LEXINGTON AVENUE

The development plans at Lexington Avenue consist of a 1.3 million square foot multi-use building. The building will contain 175,000 net rentable square feet of retail (45,000 square feet of which has been leased to Hennes & Mauritz), 880,000 net rentable square feet of office (690,000 square of which has been leased to Bloomberg L.P.) and 230,000 net sallable square feet of residential consisting of condominium units (through a taxable REIT subsidiary). Construction is expected to be completed in 2004. On July 3, 2002 the Company finalized a $490,000,000 loan with HVB Real Estate Capital (Hypo Vereinsbank) to finance the construction of the Lexington Avenue property (the “Construction Loan”). The estimated construction costs in excess of the construction loan of approximately $140,000,000 will be provided by the Company. The Construction Loan has an interest rate of LIBOR plus 2.5% (currently 4.36%) and a term of forty-two months subject to two one-year extensions. The Company received an initial funding of $55,500,000 under the Construction Loan of which $25,000,000 was used to repay the Company’s term loan to a bank in the amount of $10,000,000 and a secured note in the amount of $15,000,000. Of the total construction budget of $630,000,000, $85,000,000 has been spent to date and an additional $185,000,000 has been committed to. Pursuant to this Construction Loan, Vornado has agreed to guarantee among other things, the lien free, timely completion of the construction of the project and funding of project costs in excess of a stated loan budget, if not funded by the Company (the “Completion Guarantee”). The $6,300,000 estimated fee payable by the Company to Vornado for the Completion Guarantee is 1% of construction costs (as defined). In addition, if Vornado should advance any funds under the Completion Guarantee in excess of the $26,000,000 currently available under the secured line of credit, interest on those advances is at 15% per annum. There can be no assurance that the Lexington Avenue project ultimately will be completed, completed on time or completed for the budgeted amount. Further, the Company may need additional financing for the project, which may involve equity, debt, joint ventures and asset sales, and which may involve arrangements with Vornado Realty Trust. If the project is not completed on a timely basis, the Bloomberg L.P. lease may be cancelled and significant penalties may apply.

ALEXANDER’S, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. COMMITMENTS AND CONTINGENCIES

The Company carries comprehensive liability and all risk property insurance (fire, flood, extended coverage and rental loss insurance) with respect to its assets. The Company’s all risk insurance policies in effect before September 11, 2001 included coverage for terrorist acts, except for acts of war. Since September 11, 2001, insurance companies have for the most part excluded terrorists acts from coverage in all risk policies. The Company has obtained $200 million of separate coverage for terrorist acts. In addition, the Company’s builder’s risk policy for the Lexington Avenue Development, which expires on December 1, 2003, includes coverage for terrorist acts up to $428 million. Therefore, the risk of financial loss in excess of these limits in the case of terrorist acts (as defined) is the Company’s, which loss could be material.

The Company’s debt instruments, consisting of mortgage loans secured by its properties (which are generally non-recourse to the Company), contain customary covenants requiring the Company to maintain insurance. The lenders under these instruments may take the position that an exclusion from all risk insurance coverage for losses due to terrorist acts is a breach of these debt instruments that allows the lenders to declare an event of default and accelerate repayment of debt. In addition, if lenders insist on coverage for these risks, it could adversely affect the Company’s ability to finance and/or refinance its properties, including the construction of its Lexington Avenue development property.

In June 1997, the Kings Plaza Regional Shopping Center (the “Center”), commissioned an Environmental Study and Contamination Assessment Site Investigation (the Phase II “Study”) to evaluate and delineate environmental conditions disclosed in a Phase I study. The results of the Study indicate the presence of petroleum and bis (2-ethylhexyl) phthalate contamination in the soil and groundwater. The Company has delineated the contamination and has developed a remediation approach, which is ongoing. The New York State Department of Environmental Conservation (“NYDEC”) has approved a portion of the remediation approach. The Company accrued $2,675,000 in previous years ($1,985,000 has been paid as of June 30, 2002) for its estimated obligation with respect to the clean up of the site, which includes costs of (i) remedial investigation, (ii) feasibility study, (iii) remedial design, (iv) remedial action and (v) professional fees. If the NYDEC insists on a more extensive remediation approach, the Company could incur additional obligations.

The majority of the contamination may have resulted from activities of third parties; however, the sources of the contamination have not been fully identified. Although the Company is pursuing claims against potentially responsible third parties, there can be no assurance that such parties will be identified, or if identified, whether these third parties will be solvent. In addition, the costs associated with pursuing responsible parties may be cost prohibitive. The Company has not recorded an asset as of June 30, 2002 for potential recoveries of environmental remediation costs from other parties.

Other than routine proceedings incidental to their businesses, neither the Company nor any of its subsidiaries is a party to, nor is their property the subject of, any material pending legal proceeding. The Company believes that these legal actions will not be material to the Company’s financial condition or results of operations.

Letters of Credit

Approximately $7,900,000 in standby letters of credit were issued at June 30, 2002.

ALEXANDER’S, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. (LOSS) INCOME PER SHARE

The following table sets forth the computation of basic and diluted income per share:


			For The Three Months						For The Six Months
			Ended June 30,						Ended June 30,

			2002			2001			2002		2001

(amounts in thousands except per share amounts)




Numerator:




	(Loss) income from continuing operations		$	(1,243	)	$	2,107		$	2,221	$	5,307




	Income (loss) from discontinued operations (including extraordinary gain from early extinguishment of debt of $3,534)			110			(37	)		177		22,370

	Net (loss) income			(1,133	)		2,070			2,398		27,677





Denominator:




	Denominator for basic income per share – weighted average shares			5,001			5,001			5,001		5,001




	Effect of dilutive securities:




		Employee stock options		—			—			—		—

	Denominator for diluted income per share – adjusted weighted average shares and assumed conversions			5,001			5,001			5,001		5,001

(LOSS) INCOME PER COMMON SHARE – BASIC AND DILUTED:




	(Loss) income from continuing operations		$	(.25	)	$	.42		$	.44	$	1.06




	Income (loss) from discontinued operations			.02			(.01	)		.04		4.47

	Net (loss) income per common share		$	(.23	)	$	.41		$	.48	$	5.53

7. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction. SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, SFAS No. 44 , Accounting for Intangible Assets of Motor Carriers, and SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS No. 145 requires, among other things, (i) that the modification of a lease that results in a change of the classification of the lease from capital to operating under the provisions of SFAS No. 13 be accounted for as a sale-leaseback transaction and (ii) the reporting of gains or losses from the early extinguishment of debt as extraordinary items only if they met the criteria of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations. The rescission of SFAS No. 4 is effective January 1, 2003. The amendments of SFAS No. 13 are effective for transactions occurring on or after May 15, 2002. The rescissions of SFAS No. 44 and 64 and the amendments of SFAS No. 13 did not have an impact on the Company’s financial statements.

In July 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (effective January 1, 2003). SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company does not believe the adoption of SFAS No. 146 will have a material effect on the Company's financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This quarterly report on Form 10-Q contains certain forward-looking statements regarding our financial condition, results of operations and business. You can find many of these statements by looking for words such as “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions in this quarterly report on Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, the following: (a) national, regional and local economic conditions; (b) the continuing impact of the September 11, 2001 terrorist attacks on our tenants and the national, regional and local economies, including, in particular, the New York City metropolitan areas; (c) local conditions such as an oversupply of space or a reduction in demand for real estate in the area; (d) the financial conditions of tenants; (e) competition from other available space; (f) whether tenants consider a property attractive; (g) whether we are able to pass some or all of any increased operating costs we experience through to our tenants; (h) how well we manage our properties; (i) increased interest expense; (j) decreases in market rental rates; (k) the timing and costs associated with property improvements and rentals; (l) changes in taxation or zoning laws; (m) government regulations; (n) our failure to continue to qualify as a real estate investment trust; (o) availability of financing on acceptable terms; (p) potential liability under environmental or other laws or regulations; (q) general competitive factors; (r) dependence upon Vornado Realty Trust; and (s) possible conflicts of interest with Vornado Realty Trust.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements for the three and six months ended June 30, 2002 and 2001. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of the Company’s significant accounting policies are included in Note 2 – Summary of Significant Accounting Policies to the Company’s annual report on Form 10-K for the year ended December 31, 2001.

Results of Operations

The Company had net loss of $1,133,000 in the quarter ended June 30, 2002, compared to net income of $2,070,000 in the quarter ended June 30, 2001, a decrease of $3,203,000 and net income of $2,398,000 for the six months ended June 30, 2002, compared to net income of $27,677,000 for the six months ended June 30, 2001, a decrease of $25,279,000. The current year’s quarter and six months include non-cash compensation expense of $4,236,000 relating to stock appreciation rights. The prior year’s six months included income from discontinued operations comprised of a gain on the sale of the Fordham Road property of $19,026,000 and an extraordinary gain from the early extinguishment of debt on such property of $3,534,000. Excluding these items, net income for the quarter and six months ended June 30, 2002, would have been higher than net income in the corresponding prior year’s periods by $1,033,000 and $1,517,000, respectively. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, the Company reclassified its statements of operations to reflect income and expenses for properties which are held for sale as discontinued operations. In addition, the Company reclassified the January 2001, gain on the sale of its Fordham Road property and the extraordinary gain from the early extinguishment of debt from such property to discontinued operations to conform with the current period’s presentation.

Property rentals were $12,637,000 in the quarter ended June 30, 2002, compared to $10,535,000 in the prior year’s quarter, an increase of $2,102,000 and $25,041,000 for the six months ended June 30, 2002, compared to $21,108,000 for the six months ended June 30, 2001, an increase of $3,933,000. These increases resulted primarily from (i) commencement, on October 5, 2001, of the ground lease with IKEA at the Paramus property, and (ii) an increase in occupancy at the Kings Plaza Regional Shopping Center.

General and administrative expenses were $5,169,000 in the quarter ended June 30, 2002, compared to $848,000 in the prior year’s quarter, an increase of $4,321,000 and $6,034,000 for the six months ended June 30, 2002, compared to $1,716,000 for the six months ended June 30, 2001 an increase of $4,318,000. These increases resulted primarily from stock appreciation rights compensation expense of $4,236,000 based on the Company’s closing stock price of $76.80 at June 30, 2002.

Interest and debt expense was $6,156,000 in the quarter ended June 30, 2002, compared to $4,728,000 in 2001, an increase of $1,428,000 and $12,734,000 for the six months ended June 30, 2002, compared to $9,244,000 for the six months ended June 30, 2001, an increase of $3,490,000. This resulted primarily from (i) $108,000,000 in additional mortgage borrowings from refinancing the Kings Plaza property on June 1, 2001, and (ii) a $68,000,000 mortgage loan on the Paramus property obtained on October 5, 2001. The increase in interest expense resulting from higher average borrowings was partially offset by a decrease in average interest rates from 9.71% to 8.43%.

Interest and other income was $535,000 in the quarter ended June 30, 2002, compared to $428,000 in the prior year’s quarter, an increase of $107,000 and $1,202,000 for the six months ended June 30, 2002, compared to $791,000 for the six months ended June 30, 2001, an increase of $411,000. These increases resulted primarily from higher invested cash balances attributable to the refinancing of the Kings Plaza and the new mortgage loan on the Paramus property.

Liquidity and Capital Resources

In the aggregate, Alexander’s operating properties do not generate sufficient cash flow to pay all of its expenses. As rents commence from the Lexington Avenue property (currently under development) the Company expects that cash flow will become positive.

The development plans at Lexington Avenue consist of a 1.3 million square foot multi-use building. The building will contain 175,000 net rentable square feet of retail (45,000 square feet of which has been leased to Hennes & Mauritz), 880,000 net rentable square feet of office (690,000 square of which has been leased to Bloomberg L.P.) and 230,000 net sallable square feet of residential consisting of condominium units (through a taxable REIT subsidiary). Construction is expected to be completed in 2004. On July 3, 2002 the Company finalized a $490,000,000 loan with HVB Real Estate Capital (Hypo Vereinsbank) to finance the construction of the Lexington Avenue property (the “Construction Loan”). The estimated construction costs in excess of the construction loan of approximately $140,000,000 will be provided by the Company. The Construction Loan has an interest rate of LIBOR plus 2.5% (currently 4.36%) and a term of forty-two months subject to two one-year extensions. The Company received an initial funding of $55,500,000 under the Construction Loan of which $25,000,000 was used to repay the Company’s term loan to a bank in the amount of $10,000,000 and a secured note in the amount of $15,000,000. Of the total construction budget of $630,000,000, $85,000,000 has been spent to date and an additional $185,000,000 has been committed to. There can be no assurance that the Lexington Avenue project ultimately will be completed, completed on time or completed for the budgeted amount. Further, the Company may need additional financing for the project, which may involve equity, debt, joint ventures and asset sales, and which may involve arrangements with Vornado Realty Trust. If the project is not completed on a timely basis, the Bloomberg L.P. lease may be cancelled and significant penalties may apply. See Vornado “Completion Guarantee” described below.

In conjunction with the closing of the Lexington Avenue construction loan on July 3, 2002, the Lexington Avenue management and development agreement was amended to provide for a term lasting until substantial completion of the property, with automatic renewals, and for the payment of the development fee upon the earlier of January 3, 2006 or the payment in full of the construction loan encumbering the property. Vornado has also agreed to guarantee among other things, the lien free, timely completion of the construction of the project, and funding of project costs in excess of a stated loan budget, if not funded by the Company (the “Completion Guarantee”). The $6,300,000 estimated fee payable by the Company to Vornado is 1% of construction costs (as defined) and is due at the same time that the development fee is due. In addition, if Vornado should advance any funds under the Completion Guarantee in excess of the $26,000,000 currently available under the secured line of credit, interest on those advance is at 15% per annum.

The Company’s debt instruments, consisting of mortgage loans secured by its properties (which are generally non-recourse to the Company), contain customary covenants requiring the Company to maintain insurance. There can be no assurance that the lenders under these instruments will not take the position that an exclusion from all risk insurance coverage for losses due to terrorist acts is a breach of these debt instruments that allows the lenders to declare an event of default and accelerate repayment of debt. In addition, if lenders insist on coverage for these risks, it could adversely affect the Company’s ability to finance and/or refinance its properties, including the construction of its Lexington Avenue development property.

At June 30, 2002, $26,000,000 was available under the secured line of credit with Vornado.

On May 8, 2002 the Company entered into an agreement to sell its Third Avenue property located in the Bronx, New York for $15,000,000 which would result in a gain of approximately $10,800,000. This sale is expected to be completed during the third quarter of this year. The Company has received a non-refundable deposit of $750,000 from the purchaser. This agreement is conditional and there can be no assurance it will be consummated.

The Company estimates that the fair market values of its assets are substantially in excess of their historical cost. The Company continues to evaluate its needs for capital which may be raised through (a) property specific or corporate borrowing, (b) the sale of securities and (c) other asset sales. Although there can be no assurance, the Company believes that these cash sources will be adequate to fund cash requirements until its operations generate adequate cash flow.

Cash Flows

Six Months Ended June 30, 2002

Net cash provided by operating activities of $681,000 was comprised of (i) net income of $2,398,000 (including income from discontinued operations of $177), (ii) non-cash items of $6,394,000, offset by the net change in operating assets and liabilities of $8,111,000. The adjustments for non-cash items are comprised of (i) depreciation and amortization of $3,682,000, (ii) compensation expense of $4,236,000, offset by (iii) the effect of straight-lining of rental income of $1,524,000.

Net cash used in investing activities of $35,149,000 was caused by capital expenditures of $34,903,000. The capital expenditures were primarily related to Lexington Avenue development.

Net cash used in financing activities of $1,347,000, resulted primarily from debt payments of $1,261,000.

Six Months Ended June 30, 2001

Cash provided by operating activities of $1,872,000 was comprised of (i) net income of $27,677,000 (includes income from discontinued operations of $22,370,000), (ii) non-cash items of $2,537,000, offset by (iii) gain on sale of Fordham Road property of $19,026,000, (iv) extraordinary gain from early extinguishment of debt of $3,534,000, and (v) the net change in operating assets and liabilities of $5,782,000. The adjustments for non-cash items are comprised of (i) depreciation and amortization of $4,222,000, offset by (ii) the effect of straight-lining of rental income of $1,685,000.

Net cash provided by investing activities of $140,000 (includes cash provided by discontinued operations of $23,701,000) was comprised of (i) proceeds from the sale of Fordham Road property of $23,701,000, and (ii) the release of restricted cash of $11,243,000 offset by (iii) capital expenditures of $19,131,000 and (iv) an increase in restricted cash of $15,673,000. The capital expenditures were primarily comprised of (i) capitalized interest and other carrying costs of $11,000,000, (ii) renovations to the Kings Plaza Regional Shopping Center of $2,345,000, and (iii) excavation, foundation and predevelopment costs at Lexington Avenue of $4,565,000.

Net cash provided by financing activities of $89,382,000 resulted primarily from an increase in debt of $232,685,000 partially offset by debt payments of $138,168,000.

Funds from Operations for the Three and Six Months Ended June 30, 2002 and 2001

Funds used in operations was $857,000 in the quarter ended June 30, 2002, compared to funds from operations of $2,884,000 in the prior year’s quarter, a decrease of $3,741,000. Funds from operations was $2,991,000 in the six months ended June 30, 2002, compared to $6,614,000 in the prior year’s six months, a decrease of $3,623,000. Funds used in operations for the three months ended June 30, 2002 and funds from operations for the six months ended June 30, 2002, included stock appreciation rights compensation expense of $4,236,000 based on the Company’s closing stock price of $76.80 at June 30, 2002. The following table reconciles net (loss) income to funds (used in) from operations:


	For The Three Months						For The Six Months
	Ended June 30,						Ended June 30,

	2002			2001			2002			2001

Net (loss) income	$	(1,133,000	)	$	2,070,000		$	2,398,000		$	27,677,000




Gain on Sale of Fordham Road property		—			—			—			(19,026,000	)




Extraordinary gain from early extinguishment of debt		—			—			—			(3,534,000	)




Depreciation and amortization of real property		1,651,000			1,600,000			3,294,000			3,182,000




Straight-lining of property rentals for rent escalations		(780,000	)		(786,000	)		(1,524,000	)		(1,685,000	)




Leasing fees paid in excess of expense recognized		(595,000	)		—			(1,177,000	)		—

	$	(857,000	)	$	2,884,000		$	2,991,000		$	6,614,000

Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs, which is disclosed in the Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of funds from operations. Funds from operations should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flows as a measure of liquidity. Management considers funds from operations a relevant supplemental measure of operating performance because it provides a basis for comparison among REITs; however, funds from operations may not be comparable to similarly titled measures reported by other REITs since the Company’s method of calculating funds from operations is different from that used by the National Association of Real Estate Investment Trusts (“NAREIT”). Funds from operations, as defined by NAREIT, represents net income before depreciation and amortization, extraordinary items and gains or losses on sales of real estate. Funds from operations as disclosed above has been modified to adjust for the effect of straight-lining of property rentals for rent escalations and leasing fee expenses paid directly to Vornado Realty Trust.

Below are the cash flows provided by (used in) operating, investing and financing activities:


	For The Six Months Ended
	June 30,

	2002			2001

Operating activities	$	681,000		$	1,872,000

Investing activities	$	(35,149,000	)	$	140,000

Financing activities	$	(1,347,000	)	$	89,382,000

Recently Issued Accounting Standards

In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction . SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, SFAS No. 44 , Accounting for Intangible Assets of Motor Carriers, and SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS No. 145 requires, among other things, (i) that the modification of a lease that results in a change of the classification of the lease from capital to operating under the provisions of SFAS No. 13 be accounted for as a sale-leaseback transaction and (ii) the reporting of gains or losses from the early extinguishment of debt as extraordinary items only if they met the criteria of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations. The rescission of SFAS No. 4 is effective January 1, 2003. The amendments of SFAS No. 13 are effective for transactions occurring on or after May 15, 2002. The rescissions of SFAS No. 44 and 64 and the amendments of SFAS No. 13 did not have an impact on the Company’s financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At June 30, 2002, the Company had $144,000,000 of variable rate debt at a weighted average interest rate of 11.17% and $370,570,000 of fixed rate debt bearing interest at a weighted average interest rate of 7.13%. A one percent increase in the base used to determine the interest rate of the variable rate debt would result in a $1,440,000 decrease in the Company’s annual net income ($.29 per basic and diluted share).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

On May 29, 2002, the Company held its annual meeting of stockholders. The stockholders voted, in person or by proxy, for the election of the three nominees to serve on the Board of Directors for a term of three years, or until their respective successors are duly elected and qualified. The three nominees were approved. The results of the voting are shown below:

Election of Directors:


			Votes
Directors	Votes Cast For		Withheld

David Mandelbaum		4,873,284		20,901




Richard West		4,873,234		20,951




Neil Underberg		4,873,384		20,801

Because of the nature of the matters voted upon, there were no abstentions or broker non-votes.

Item 5. Other Information

Effective June 6, 2002, Joseph Macnow has resumed the position of Chief Financial Officer of Alexander’s. Patrick Hogan, the former Chief Financial Officer has assumed other responsibilities at Vornado Realty Trust, the manager of Alexander’s.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation of S-K are filed herewith and are listed in the attached Exhibit Index.

(b) Reports on Form 8-K

During the quarter ended June 30, 2002, the Company did not file any reports on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ALEXANDER’S, INC

		(Registrant)









Date: August 7, 2002		/s/ Joseph Macnow

		Joseph Macnow, Executive Vice-President and Chief Financial Officer

EXHIBIT INDEX

The following is a list of all exhibits filed as part of the Report:


Exhibit
No.			Page


3(i)	—	Certificate of Incorporation, as amended. Incorporated herein by reference from Exhibit 3.0 to the Registrant’s Current Report on Form 8-K dated September 21, 1993.	*

3(ii)	—	By-laws, as amended. Incorporated herein by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000.	*

10(i)(A)(1)	—	Limited Liability Company Operating Agreement of 731 Residential LLC, dated as of July 3, 2002, among 731 Residential Holding LLC. as the sole member Domenic A. Borriello, as an Independent Manager and Kim Lutthang, as an Independent Manager

10(i)(A)(2)	—	Limited Liability Company Operating Agreement of 731 Commercial LLC, dated as of July 3, 2002, among 731 Commercial Holding LLC, as the sole member, Domenic A. Borriello, as an Independent Manager and Kim Lutthang, as an Independent Manager

10(i)(B)(1)	—	Amended and Restated Credit Agreement dated July 3, 2002 between 59 ^th Street Corporation and Vornado Lending, LLC (evidencing $40,000,000 of debt on which 59 ^th Street Corporation became the direct borrower)

10(i)(B)(2)	—	Credit Agreement, dated July 3, 2002, between Alexander’s Inc. and Vornado Lending L.L.C. evidencing a $20,000,000 loan

10(i)(B)(3)	—	Amended and Restated Credit Agreement, dated July 3, 2002, between Alexander’s Inc. and Vornado Lending L.L.C. evidencing a $50,000,000 line of credit facility (of which $24,000,000 has been advanced)

10(i)(B)(4)	—	Credit Agreement, dated July 3, 2002, between Alexander’s Inc. and Vornado Lending L.L.C. evidencing a $35,000,000 loan

10(i)(C)	—	Building Loan Agreement, dated as of July 3, 2002, by and between 731 Commercial LLC and 731 Residential LLC, collectively as Borrower, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(1)	—	Project Loan Agreement, dated as of July 3, 2002, by and between 731 Commercial LLC and 731 Residential LLC, collectively as Borrower, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(2)	—	Supplemental Loan Agreement, dated as of July 3, 2002, by and between 731 Commercial LLC and 731 Residential LLC, collectively as Borrower, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

(10)(i)(C)(3)	—	Consolidated, Amended and Restated Building Loan Mortgage, dated as of July 3, 2002, by and between 731 Commercial LLC and 731 Residential LLC, collectively as Borrower, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

Incorporated by reference


Exhibit
No.			Page


10(i)(C)(4)	—	Consolidated, Amended and Restated Building Loan Note, dated as of July 3, 2002 by and between 731 Commercial LLC and 731 Residential LLC, collectively as Borrower, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(5)	—	Guaranty of Completion, dated as of July 3, 2002, executed by Vornado Realty L.P. for the benefit of Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(6)	—	Guaranty of Carry Obligations, dated as of July 3, 2002, executed by Alexander’s, Inc. for the benefit of Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(7)	—	Environmental Indemnity Agreement, dated as of July 3, 2002, executed by Alexander’s, Inc., 731 Residential LLC and 731 Commercial LLC in favor of Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent for the Lenders

10(i)(C)(8)	—	Reimbursement Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., 731 Commercial LLC, 731 Residential LLC and Vornado Realty, L.P.

10(i)(D)	—	Amended, Restated and Consolidated Mortgage and Security Agreement, dated May 12, 1999, between The Chase Manhattan Bank, as mortgagee, and Alexander’s Rego Shopping Center Inc., as mortgagor. Incorporated herein by reference from Exhibit 10(i)(E) to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.	*

10(i)(E)(1)	—	Real Estate Retention Agreement dated as of July 20, 1992, between Vornado Realty Trust and Keen Realty Consultants, Inc., each as special real estate consultants, and the Company. Incorporated herein by reference from Exhibit 10(i)(O) to the Registrant’s Form 10-K for the fiscal year ended July 25, 1992.	*

10(i)(E)(2)	—	Extension Agreement to the Real Estate Retention Agreement, dated as of February 6, 1995, between the Company and Vornado Realty Trust. Incorporated herein by reference from Exhibit 10(i)(G)(2) to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994.	*

10(i)(E)(3)	—	Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty, L.P.

10(i)(E)(4)	—	59 ^th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty, L.P., 731 Residential LLC and 731 Commercial LLC

10(i)(F)(1)	—	Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp.

10(i)(F)(2)	—	59 ^th Street Management and Development Agreement, dated as of July 3, 2002, by and between 731 Commercial LLC and Vornado Management Corp.

10(i)(F)(3)	—	Kings Plaza Management Agreement, dated as of May 31, 2001, by and between Alexander’s Kings Plaza LLC and Vornado Management Corp.

Incorporated by reference


Exhibit
No.			Page


10(ii)(A)(3)	—	Agreement of Lease for Rego Park, Queens, New York, between Alexander’s, Inc. and Sears Roebuck & Co. Incorporated herein by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994.	*

10(ii)(A)(4)	—	Lease for Roosevelt Avenue, Flushing, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit (ii)(E)(7) to the Registrant’s Form 10-K for the fiscal year ended July 25, 1992.	*

10(ii)(A)(4)	—	First Amendment to Sublease for Roosevelt Avenue, Flushing, New York, dated as of February 22, 1995 between the Company, as sublandlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(A)(8)(b) to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994.	*

10(ii)(A)(5)	—	Lease Agreement, dated March 1, 1993 by and between the Company and Alex Third Avenue Acquisition Associates. Incorporated by reference from Exhibit 10(ii)(F) to the Registrant’s Form 10-K for the fiscal year ended July 31, 1993.	*

10(ii)(A)(6)	—	Agreement of Lease for Rego Park, Queens, New York, between the Company and Marshalls of Richfield, MN., Inc., dated as of March 1, 1995. Incorporated herein by reference from Exhibit 10(ii)(A)(12)(a) to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994.	*

10(ii)(A)(7)	—	Guaranty, dated March 1, 1995, of the Lease described in Exhibit 10(ii)(A)(6)(a) above by the Company. Incorporated herein by reference from Exhibit 10(ii)(A)(12)(b) to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994.	*

10(iii)(B)	—	Employment Agreement, dated February 9, 1995, between the Company and Stephen Mann. Incorporated herein by reference from Exhibit 10(iii)(B) to the Registrant’s Form 10-K for the fiscal year ended December 31, 1994.	*

10(iv)(A)	—	Registrant’s Omnibus Stock Plan, as amended, dated May 28, 1997. Incorporated herein by reference from Exhibit 10 to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 1997.	*

10(v)(A)(1)	—	Amended and Restated Consolidated Mortgage and Security Agreement dated as of May 31, 2001 among Alexander’s Kings Plaza L.L.C. as mortgagor, Alexander’s of King L.L.C., as mortgagor and Kings Parking L.L.C., as mortgagor, collectively borrower, to Morgan Guaranty Trust Company of New York, as mortgagee. Incorporated herein by reference from Exhibit 10(v) A1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.	*

10(v)(A)(2)	—	Amended, Restated and Consolidated Promissory Note, dated as of May 31, 2001 by and between Alexander’s Kings Plaza L.L.C., Alexander’s of Kings L.L.C. and Kings Parking L.L.C., collectively borrower, and Morgan Guaranty Trust Company of New York, lender. Incorporated herein by reference from Exhibit 10(v) A2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.	*

Incorporated by reference


Exhibit
No.			Page


10(v)(A)(3)	—	Cash Management Agreement dated as of May 31, 2001 by and between Alexander’s Kings Plaza L.L.C., Alexander’s of Kings L.L.C. and Kings Parking L.L.C., collectively borrower, and Morgan Guaranty Trust Company of New York, lender. Incorporated herein by reference from Exhibit 10(v) A3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.	*

10(v)(A)(4)	—	Note modification and Severance Agreement dated as of November 26, 2001, between Alexander’s Kings Plaza L.L.C., Alexander’s of Kings L.L.C. and Kings Parking L.L.C., collectively borrower and JP Morgan Chase Bank of New York, lender. Incorporated herein by reference from Exhibit 10(v)(A)(4) to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001.	*

10(v)(B)(1)	—	Agreement of Lease dated as of April 30, 2001 between Seven Thirty One Limited Partnership, landlord, and Bloomberg L.P., tenant. Incorporated herein by reference from Exhibit 10(v) B to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.	*

10(v)(B)(2)	—	First Amendment of Lease, dated as of April 19, 2002, between Seven Thirty One Limited Partnership, landlord and Bloomberg L.P., tenant

10(v)(C)(1)	—	Loan Agreement dated as of October 2, 2001 by and between ALX of Paramus LLC, as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(1) to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001.	*

10(v)(C)(2)	—	Mortgage, Security Agreement and Fixture Financing Statement dated as of October 2, 2001 by and between ALX of Paramus LLC, as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(2) to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001.	*

10(v)(C)(3)	—	Environmental undertaking letter dated as of October 2, 2001 by and between ALX of Paramus LLC, as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(3) to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001.	*

10(v)(C)(4)	—	Lease dated as of October 2, 2001 by and between ALX of Paramus LLC, as Landlord, and IKEA Property, Inc. as Tenant. Incorporated herein by reference from Exhibit 10(v)(C)(4) to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001.	*

Incorporated by reference

Exhibit 10(i)A(1)

LIMITED LIABILITY COMPANY AGREEMENT
FOR
731 RESIDENTIAL LLC,
A DELAWARE LIMITED LIABILITY COMPANY
(RESIDENTIAL PARCEL)

This Limited Liability Company Agreement ("AGREEMENT") of 731 RESIDENTIAL LLC, a Delaware limited liability company (the "COMPANY") is made as of and is effective the 3rd day of July, 2002, by 731 Residential Holding LLC, a Delaware limited liability company, as the sole member ("MEMBER"), Domenic A. Borriello (in his capacity as the initial "INDEPENDENT MANAGER 1"), and Kim E. Lutthans (in her capacity as the initial "INDEPENDENT MANAGER 2").

RECITALS

A. A Certificate (as hereinafter defined) for the Company was executed and delivered on May 31, 2002 and filed on June 3, 2002 with the Secretary of State of the State of Delaware, thereby forming the Company as a limited liability company pursuant to the provisions of the Act (as hereinafter defined).

B. The Member, Special Member 1 and Special Member 2 wish to operate the Company in accordance with the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein (the receipt and sufficiency of which are acknowledged by each party hereto), the parties hereto, intending to be legally bound, do hereby agree as follows:

1. DEFINITIONS.

When used in this Agreement, the following terms shall have the meanings set forth below (terms used in this Agreement that are not defined in this Article 1 shall have the meanings set forth elsewhere in this Agreement or in Section 18-101 of the Act):

1.1 "ACT" shall mean the Delaware Limited Liability Company Act (6 Del. C. Section 18-101, et. seq.), as the same may be amended from time to time.

1.2 "AFFILIATE" shall mean a Person or Persons directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person or Persons in question. The term "control", as used in the immediately preceding sentence, shall mean, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, more than 20% of the voting rights attributable to the shares of the controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled Person.

1.3 "AGREEMENT" shall mean this Limited Liability Company Agreement for 731 Residential LLC, as originally executed and as amended from time to time.

1.4 "ALEXANDER'S" shall mean Alexander's, Inc., a Delaware corporation.

1.5 "ALEXANDER'S REIMBURSEMENT AGREEMENT" shall have the meaning provided in the Loan Agreement.

1.6 "BANKRUPTCY ACTION" shall have the meaning set forth in Section 2.6(d) hereof.

1.7 "BOARD OF MANAGERS" shall have the meaning set forth in Section 5.5 hereof.

1.8 "CAPITAL CONTRIBUTION" shall mean the total of cash and other assets contributed to the Company by the Member.

1.9 "CERTIFICATE" shall mean the Certificate of Formation of the Company, executed and delivered on May 31, 2002 and filed with the Secretary of State of the State of Delaware on June 3, 2002 (which is hereby ratified and approved in all respects), as amended from time to time.

1.10 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions of succeeding law, and to the extent applicable, the Regulations.

1.11 "COMMERCIAL SPE" shall mean 731 Commercial LLC, a Delaware limited liability company.

1.12 "COMPANY" shall mean 731 Residential LLC, a Delaware limited liability company.

1.13 "DISTRIBUTABLE CASH" shall mean the amount of cash which the Principal Manager deems available for distribution, taking into account all Company debts, liabilities, and obligations then due (including, without limitation, the Loan) and amounts necessary to place into reserves for customary and usual claims with respect to the Company's business.

1.14 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the calendar year.

1.15 "GUARANTIES" shall have the meaning provided in the Loan Agreement.

1.16 "INDEPENDENT MANAGER" shall have the meaning given to that term in
Section 2.6(c) hereof.

1.17 "INDEPENDENT MANAGER 1" shall mean the person from time to time appointed by the Member as an Independent Manager who shall be designated by the Member as "Independent Manager 1".

1.18 "INDEPENDENT MANAGER 2" shall mean the person from time to time appointed by the Member as an Independent Manager who shall be designated by the Member as "Independent Manager 2".

1.19 "LENDER" shall mean Bayerische Hypo- und Vereinsbank AG and other co-lenders that hold an interest in the Loan to Company together with any of their successors and assigns, each during such time as it is the holder of such interest.

1.20 "LOAN" shall mean the loan in the original principal amount of $490,000,000 made by Lender to Company and Commercial SPE or any loan made for the purposes of refinancing such loan or any portion thereof.

1.21 "LOAN AGREEMENT" shall mean the loan agreements between Lender, Company and Commercial SPE pursuant to which the Loan is made.

1.22 "LOAN DOCUMENTS" shall mean any and all documentation in connection with the Loan, as amended from time to time, and any other agreement to be entered into in connection with such documents and any financing documents in replacement thereof to be entered into by the Company and Commercial SPE in connection with the acquisition and ownership of the Property, including, without limitation, the documents listed on Schedule 1.22 attached hereto and incorporated herein.

1.23 "MEMBER" shall mean 731 Residential Holding LLC, a Delaware limited liability company, in its capacity as a member of the Company, or any other Person that succeeds Member in that capacity. A "Special Member" is not a "Member" as that term is used in this Agreement.

1.24 "MEMBERSHIP INTEREST" shall mean all of the Member's right, title and interest in, to and against the Company, including rights to Distributable Cash of the Company, and all other rights of the Member to participate in the business, affairs and management of the Company, including without limitation, the right to vote on or grant consent or approval with respect to matters coming before the Company.

1.25 "NET PROFITS" and "NET LOSSES" shall mean the net profits and net losses of the Company for a period (or from a transaction) as determined in accordance with generally accepted accounting principles, consistently applied.

1.26 "PERCENTAGE INTEREST" shall mean the limited liability interest in the Company expressed as a percentage of the total limited liability interests outstanding. The Percentage Interest of the Member is 100.00%.

1.27 "PERMITTED INDEBTEDNESS" shall mean the Loan and the other indebtedness of the Company that is permitted under the Loan Documents.

1.28 "PERSON" shall mean any individual, sole proprietorship, corporation, general partnership, limited partnership, limited liability company or partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal,

state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

1.29 "PRINCIPAL MANAGER" shall mean Member, who is appointed as a manager within the meaning of the Act, except to the extent that the Board of Managers is provided with management responsibility pursuant to Section 5.3.

1.30 "PROPERTY" shall mean that certain real property (together with improvements, fixtures, and other appurtenances thereto) commonly known as the residential parcel at 731 Lexington Avenue, in the City of New York, County of New York, State of New York, as more specifically set forth on Schedule 1.30 attached hereto and incorporated herein.

1.31 "REGULATIONS" shall, unless the context clearly indicates otherwise, mean the regulations currently in force as final or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code.

1.32 "SPECIAL MEMBER 1" shall mean the Independent Manager 1 in his capacity as Special Member.

1.33 "SPECIAL MEMBER 2" shall mean the Independent Manager 2 in his capacity as Special Member.

1.34 "VORNADO" shall mean Vornado Realty L.P., a Delaware limited partnership.

1.35 "VORNADO REIMBURSEMENT AGREEMENT" shall have the meaning provided in the Loan Agreement.

1.36 "VACANCY" shall have the meaning set forth in Section 5.6 hereof.

2. ORGANIZATIONAL MATTERS.

2.1 FORMATION AND CONTINUATION. Larry Portal, is hereby designated as an "authorized person" within the meaning of the Act, and has executed, delivered and filed the Certificate of the Company with the Secretary of State of the State of Delaware and the qualification to do business in the State of New York. Upon the filing of the Certificate of the Company with the Secretary of State of the State of Delaware and the qualification to do business in the State of New York, his powers as an "authorized person" ceased, and the Member thereupon became the designated "authorized person" within the meaning of the Act. The Member shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in any jurisdiction (other than the State of New York) in which the Company may wish to conduct business.

2.2 NAME. The name of the Company shall be "731 RESIDENTIAL LLC". The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that Member deems appropriate or advisable. The Principal Manager shall qualify the Company to do business in the State of New York and shall file any qualification instruments and fictitious name certificates and similar filings, and any amendments

thereto, as necessary to qualify the Company to conduct business in the State of New York or which Principal Manager otherwise considers appropriate or advisable in accordance with Section 5 of this Agreement. Notwithstanding the foregoing, for so long as any obligation to Lender under the Loan remains outstanding the Company shall maintain the name "731 RESIDENTIAL LLC".

2.3 TERM. The term of the Company and this Agreement shall commence from the date of filing of the Certificate with the Secretary of State of the State of Delaware as aforesaid and shall continue until the dissolution of the Company pursuant to Section 9.1 hereof.

2.4 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE. The Company shall continuously maintain a registered office and registered agent in the State of Delaware as required by the Act. The registered office and registered agent of the Company in Delaware are c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. In addition, the Company shall maintain its principal office at c/o Alexander's, Inc., 888 Seventh Avenue, New York, New York 10019, or at such other place as Principal Manager may determine. The registered office, registered agent and principal office of the Company may be changed at any time and from time to time by Principal Manager.

2.5 ADDRESS OF MEMBER. The address of Member as the sole Member as of the date of this Agreement is c/o Alexander's, Inc., 888 Seventh Avenue, New York, New York 10019, Attention: Chief Executive Officer. Any successor Member who is admitted shall notify the Member and the Company of its address upon admission to the Company as a Member. The Member may change its address at any time by notice given to the Company.

2.6 PURPOSE OF COMPANY.

(a) The purpose of the Company is limited solely to owning, holding, managing, developing, leasing, operating and disposing of the Property, entering into the Loan Documents, refinancing the Property in connection with a permitted repayment or refinancing of the Loan, and transacting any and all lawful business that is incident, necessary and appropriate to accomplish the foregoing.

(b) Notwithstanding any other provision of this Agreement to the contrary (but subject to Section 2.6(d)), the Company shall not do any of the following, so long as any obligation of the Company to the Lender under Loan is outstanding:

(1) the Company will not engage in any business or activity other than as expressly set forth under the heading "Purpose of Company" in
Section 2.6(a) of this Agreement.

(2) the Company will not acquire or own any material assets other than (i) the Property, and (ii) such incidental personal property as may be necessary for the ownership, construction, management and operation of the Property.

(3) the Company will maintain books, financial records and bank accounts (including checking and other bank accounts and custodian and other securities safekeeping accounts) that are separate and distinct from the books, financial records and bank accounts of any other person or entity; provided that it may have a joint bank account with Commercial SPE as co-borrower under the Loan.

(4) the Company will maintain books, financial records and bank accounts in a manner so that it will not be difficult or costly to segregate, ascertain and otherwise identify the assets and liabilities of the Company.

(5) the Company will not commingle any of its assets, funds, liabilities or business functions with the assets, funds, liabilities or business functions of any other person or entity (other than (i) Commercial SPE
(a) as co-borrower under the Loan and (b) as co-obligor to Alexander's, Inc. under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and Commercial SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(6) the Company will observe all appropriate limited liability company procedures and formalities.

(7) the Company will pay its own liabilities, losses and expenses only out of its own funds (except to the extent otherwise permitted or provided for under (i) the Loan Documents, (ii) the Vornado Reimbursement Agreement for reimbursement of payments under the Guaranties and (iii) Alexander's Reimbursement Agreement for reimbursement of payments under the Guaranties).

(8) subject to clause (9) below, the Company will maintain separate annual financial statements prepared in accordance with generally accepted accounting principles, consistently applied, showing its assets and liabilities separate and distinct from those of any other person or entity.

(9) in the event the financial statements of the Company are consolidated with the financial statements of any other entity, then in addition to maintaining separate financial statements as required above, the Company will cause to be included in such consolidated financial statements a note stating that "the Company is a separate entity that has separate assets and liabilities as shown on the Company's separate financial statement".

(10) the Company will pay or bear the cost of the preparation of its financial statements, and have such financial statements audited by a certified public accounting firm that is not affiliated with the Company or its affiliates.

(11) the Company will not guarantee or become obligated for the debts or obligations of any other entity or person (other than
(i) Commercial SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and

Commercial SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(12) the Company will not hold out its credit as being available to satisfy the debts or obligations of any other person or entity (other than (i) Commercial SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and Commercial SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(13) the Company will hold itself out as an entity separate and distinct from any other person or entity (including its affiliates).

(14) the Company will correct any known misrepresentation or misunderstanding regarding its separate identity.

(15) the Company will use separate stationery, business cards, purchase orders, invoices, checks and the like bearing its own name to the extent it will use such items.

(16) the Company will maintain a sufficient number of employees or outside consultants in light of its contemplated business operations and pay their salaries out of its own funds (and the funds of Commercial SPE as co-borrower under the Loan).

(17) the Company will compensate all consultants, independent contractors, employees and agents from its own funds (or those of Commercial SPE as co-borrower under the Loan) for services provided to it by such consultants, independent contractors, employees and agents.

(18) the Company will, to the extent that the Company and any of its affiliates occupy any premises in the same location, allocate fairly, appropriately and nonarbitrarily any rent and overhead expenses among and between such entities with the result that each entity bears its fair share of all such rent and expenses.

(19) the Company will, to the extent that the Company and any of its affiliates share the same officers and other employees, allocate fairly, appropriately and nonarbitrarily any salaries and expenses to the extent actually incurred by such parties related to providing benefits to such officers and other employees between or among such entities, with the result that each such entity will bear its fair share of the salary and benefit costs associated with all such common or shared officers or other employees.

(20) the Company will, to the extent that the Company and any of its affiliates jointly contract or do business with vendors or service providers or share overhead expenses, allocate fairly, appropriately and nonarbitrarily any costs and expenses incurred in so doing between or among such entities, with the result that each such entity bears its fair share of all such costs and expenses.

(21) the Company will, to the extent the Company contracts or does business with vendors or service providers where the goods or services are wholly or partially for the benefit of its affiliates, allocate fairly, appropriately and nonarbitrarily any costs incurred in so doing to the entity for whose benefit such goods or services are provided, with the result that each such entity bears its fair share of all such costs.

(22) the Company will not make any loans to any person or entity or buy or hold any indebtedness issued by any other person or entity (except for cash and investment-grade securities and each of the permitted investments and exceptions expressly permitted by the Loan Documents).

(23) the Company will conduct its own business solely in its own name, through its duly authorized officers or agents.

(24) the Company will hold all of its assets in its own name (except for assets held jointly with Commercial SPE as co-borrower under the Loan).

(25) the Company will maintain an arm's-length like relationship with its affiliates and enter into transactions with affiliates only on terms at least as favorable to the Company as could be obtained at arm's length.

(26) the Company will not pledge its assets to secure the liabilities of any other person or entity (other than Commercial SPE as co-borrower under the Loan).

(27) the Company will not identify itself as a division or department of any other entity.

(28) the Company intends to maintain adequate capital in light of its contemplated business operations.

(29) the Company will conduct transactions between the Company and third parties in the name of the Company and as an entity separate and independent from its affiliates.

(30) the Company will cause representatives, employees and agents of the Company to hold themselves out to third parties as being representatives, employees or agents, as the case may be, of the Company.

(31) the Company will cause transactions and agreements between the Company, on the one hand, and any one or more of its affiliates, on the other hand (including transactions and agreements pursuant to which the assets or property of one is used or to be used by the other), to be entered into in the names of the entities that are parties to the transaction or agreement and to be formally documented in writing.

(32) the Company will cause the pricing and other material terms of all transactions and agreements described in the immediately preceding clause (29) above to be established by written agreement (by formula or otherwise) at the inception of the particular

transaction or agreement on terms at least as favorable to the Company as could be obtained at arm's length.

(33) the Company will not acquire or assume the obligations of its affiliates (other than (i) Commercial SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and Commercial SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(34) the Company will not form, hold, or acquire any subsidiary or own any other equity interest in any other Person except as expressly permitted in the Loan Documents.

(35) the Company will file any required tax returns and will make any required payments under applicable tax law.

(c) The Company shall at all times cause there to be at least two (2) duly appointed members of the Board of Managers who are independent managers (each an "INDEPENDENT MANAGER") who shall not have been or be at the time of such individual's appointment, or at any time while serving as an Independent Manager of the Company, and may not have been at any time during the preceding five (5) years preceding his or her appointment (A) a member (with the exception of serving as Special Member of the Company or Commercial SPE), shareholder, partner, director, manager (with the exception of serving as Independent Manager of the Company or Commercial SPE), officer or employee of Company, or of Member or any Affiliate of any of them; (B) a customer of, creditor of, or supplier or service provider (including professionals) to, Company or its Member or any of Company's or Member's members, shareholders, partners, or subsidiaries, or any Affiliate of any of them, if the revenues therefrom to such director account for any of such director's gross annual revenues; (C) a Person controlling any of the foregoing; (D) any other Person receiving a material portion of his or her compensation or other financial remuneration from, or who is otherwise financially dependent on, an officer, director or employee of Company or Member, or any of their Affiliates or an officer's, director's or employee's family member by blood or marriage or a business entity owned or controlled by any of the foregoing; or (E) a spouse, parent, sibling or child of any Person described by (A), (B), (C) or (D) above. A natural person who satisfies the foregoing definition other than subparagraph (B) shall not be disqualified from serving as an Independent Manager of the Company if such individual is an independent manager provided by a nationally-recognized company that provides professional independent managers and that also provides other corporate services in the ordinary course of its business. A natural person who otherwise satisfies the foregoing except for serving as an independent manager of a "special purpose" Affiliate that does not own a direct or indirect interest in the Company or Residential SPE shall not be disqualified from serving as an Independent Manager of the Company if such individual is at the time of initial appointment, or at any time while serving as a Independent Manager of the Company, an Independent Manager of a "special purpose entity" affiliated with the Company (other than any entity that owns a direct or indirect equity interest in the Company or Commercial SPE) if such individual is an independent manager provided by a nationally-

recognized company that provides professional independent managers. For purposes of this paragraph, a "special purpose entity" is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve the Company's separateness that are substantially similar to those of the Company and provide, inter alia, that it: (a) is organized for the limited purpose of owning and operating one or more properties or is a member of an entity which is organized for the limited purpose of owning and operating one or more properties; (b) has restrictions on its ability to incur indebtedness, dissolve, liquidate, consolidate, merge and/or sell assets; (c) may not file voluntarily a bankruptcy petition on its own behalf or on behalf of such entity without the consent of the Independent Manager and (d) shall conduct itself and cause such entity to conduct itself in accordance with certain "separateness covenants", including, but not limited to, the maintenance of its and such entity's books, records, bank accounts and assets separate from those of any other person or entity. The initial Independent Managers shall be Domenic
A. Borriello, initially designated as "Independent Manager 1", and Kim E. Lutthans, initially designated as "Independent Manager 2". As used in this
Section 2.6 (c), the term "CONTROLLED" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities, by contract or otherwise.

(d) Notwithstanding any other provision of this Agreement (other than Section 2.6(f) below) or the Certificate or of law that otherwise so empowers Company, Company shall not take any of the following actions (w) without the consent of the Member, (x) without the vote or written consent of both members of the Board of Managers which are Independent Managers, (y) if one or more of the other members of the Board of Managers vote against or disapprove such actions, and (z) if the obligation of the Company to Lender under the Loan is outstanding, without the written consent of Lender: (i) to the fullest extent permitted by law, the dissolution, winding up, liquidation, consolidation, conversion to another form of business association or state of formation, or change in the legal structure of Company including, but not limited to, permitting the transfer of the limited liability company interests of any Member in whole or in part (if such transfer is restricted by the Loan Documents and, in such instance, a transfer may be made only in accordance with the Loan Documents), the merger of Company or the sale, transfer or other disposition of all or substantially all of the properties and assets of Company; (ii) the engagement by Company in any business other than the ownership, management, development, leasing, financing, maintenance and operation of the Property; or
(iii) the amendment or modification of Sections 2.2, 2.3, 2.6, 4.2, 4.3, 4.8, 5.1, 5.2, 5.5, 5.6, 7, 8.1, 8.4, 8.5, 9.1, 9.6, 10, 11.10 and 11.13 or the defined terms referenced therein. Notwithstanding another provision of this Agreement or the Certificate or of law that otherwise so empowers Company, Company shall not take any of the following actions (w) without the consent of the Member, (x) without the vote or written consent of both members of the Board of Managers which are Independent Managers and (y) if one or more of the other members of the Board of Managers vote against or disapprove such actions: (A) the filing, or consent to the filing, of a bankruptcy, insolvency or reorganization case or proceeding; instituting any proceedings under any applicable insolvency law or otherwise seek any relief under the laws relating to the relief from debts or the protection of debtors generally; seeking or consenting to appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the Borrower or a substantial portion of its properties; making any assignment for the benefit of the Borrower's creditors; taking any action in furtherance of any of the foregoing

(collectively, "Bankruptcy Action") or (B) the amendment or modification of any provision of this Agreement (subject to the prior sentence of this Section 2.6(d)) or the Certificate; and any purported action of Company which violates this sentence shall be void ab initio and of no force or effect.

(e) The Company shall have no liabilities, contingent or otherwise, other than the Permitted Indebtedness.

(f) Notwithstanding any other provision of this Agreement or the Certificate or of law that otherwise so empowers Company, in the event that Commercial SPE shall take, or become subject to, a Bankruptcy Action, then, upon receiving written notice from Lender, all of the members of the Board of Managers (including both Independent Managers) shall take a vote on the commencement of a Bankruptcy Action with respect to the Company and shall vote, to the fullest extent permitted by law, as specifically directed and instructed by the Lender for so long as the obligation of the Company to Lender under the Loan is outstanding. If so directed by the Lender, the Company shall seek procedural consolidation of the bankruptcy proceedings of the Company and Commercial SPE.

(g) THE COMPANY ACKNOWLEDGES AND AGREES THAT THE LENDER WOULD NOT HAVE AGREED TO MAKE THE LOAN BUT FOR THE INCLUSION OF THE BANKRUPTCY CONTROL PROVISIONS SET FORTH IN SECTION 2.6(f) HEREIN. THE BANKRUPTCY CONTROL PROVISIONS CONTAINED IN THIS AGREEMENT ARE DESIGNED TO REFLECT THE AGREEMENT AND UNDERSTANDING OF THE TRANSACTION PARTIES WITH THE LENDER THAT THE LOAN TO THE COMPANY AND RESIDENTIAL SPE AS CO-BORROWERS IS A SINGLE TRANSACTION SECURED BY THE ENTIRE PROPERTY AND LENDER MADE THE LOAN IN RELIANCE ON ITS ABILITY TO REALIZE UPON THE BENEFIT OF SUCH AGREEMENT AND UNDERSTANDING.

3. CAPITAL CONTRIBUTIONS.

3.1 INITIAL CAPITAL CONTRIBUTION. Member has contributed the Property to the Company pursuant to that certain bargain and sale deed without covenant against grantor's acts dated July 3, 2002 (subject to all exceptions thereof) executed by Member in favor of Company.

3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Member may, but shall not be obligated to, contribute additional capital to the Company in such amounts and at such times as Member shall determine in its sole and absolute discretion.

3.3 NO INTEREST. Member shall not be entitled to receive interest on any Capital Contributions.

3.4 CAPITAL ACCOUNT. The Company shall establish and maintain a capital account for Member to which it shall credit the amount of its Capital Contributions and Net Profits of the Company from time to time and to which it shall charge such Member's share of distributions

and Net Losses. The initial capital account of Member shall be equal to the fair market value of the Property.

4. MEMBER.

4.1 LIMITED LIABILITY. Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and neither the Member nor the Special Members shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member of the Company.

4.2 ADMISSION OF ADDITIONAL MEMBERS. Except as contemplated by Section 4.8, no additional members shall be admitted to the Company, it being the intent of Member that the Company shall at all times be a single member limited liability company. Without the need for the consent of any Person, upon a transfer of the limited liability company interest in accordance with this Agreement, the transferee shall be deemed admitted as a Member of the Company upon the effective date of such transfer.

4.3 RESIGNATIONS. Member shall not resign as the member of the Company.

4.4 TRANSACTION WITH THE COMPANY. Subject to any limitations set forth in this Agreement, including without limitation, Section 2.6 hereof, Member may lend money to, act as a surety, guarantor or endorser for, guarantee or assume one or more obligations of, provide collateral for, and transact other business with the Company. Subject to this Agreement and applicable law, Member has the same rights and obligations with respect to any transaction with Company as a Person who is not a member or manager.

4.5 REMUNERATION TO MEMBER. Except as otherwise authorized in or pursuant to this Agreement, Member is not entitled to remuneration for acting on Company business.

4.6 VOTING RIGHTS. Except as expressly modified in this Agreement, Member shall have the voting, approval and consent rights provided in the Act.

4.7 MEETINGS OF THE MEMBER. No annual or regular meeting of Member is required.

4.8 SPECIAL MEMBER.

(a) Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Section 4.2 (a "MEMBER CESSATION EVENT")), Independent Manager 1 shall, without any action of any Person and simultaneously with the Member's ceasing to be a member of the Company, automatically be admitted to the Company as a member of the Company (in such capacity, a "SPECIAL MEMBER") and shall continue the Company without dissolution. If, however, at the time of a Member Cessation Event, Independent Manager 1 has died or is otherwise no longer able to step into the role of Special Member, then, in such event, Independent Manager 2 shall concurrently with the Member Cessation Event, and without any action of any Person and

simultaneously with the Member Cessation Event, automatically be admitted to the Company as Special Member and shall continue the Company without dissolution. It is the intent of these provisions that the Company never have more than one Special Member at any particular point in time.

(b) No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as Independent Manager pursuant to Section 2.6(c); provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member appointed by the personal representative (as defined in the Act) of the last remaining Member who ceased to be a member of the Company. The Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets. Pursuant to
Section 18-301 of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provisions of the Act, the Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each person acting as an Independent Manager pursuant to Section 2.6(c) shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each person acting as an Independent Manager pursuant to Section 2.6(c) shall not be a member of the Company.

5. MANAGEMENT AND CONTROL OF THE COMPANY; LIMITED LIABILITY.

5.1 MANAGEMENT OF THE COMPANY BY PRINCIPAL MANAGER. The business, property and affairs of the Company shall be managed and all powers of the Company shall be exercised by or under the direction of Principal Manager except only for the powers granted to the Board of Managers under this Article 5. Principal Manager shall, on behalf of and in the name of the Company, and in addition to the general management obligations for the operation of the Company and the obligations of Principal Manager provided for elsewhere in this Agreement or by law, cause the Company to perform the obligations and otherwise comply with the requirements set forth in Section 2.6 of this Agreement. Principal Manager shall conduct the affairs of the Company in the best interest of the Company and Member, including the safekeeping and use of all Company funds for the benefit of the Company and Member.

5.2 POWERS WITH RESPECT TO MANAGEMENT OF THE COMPANY. Subject to the limitations set forth in Section 2.6 and in Section 5.3 or expressly provided elsewhere in this Agreement, Principal Manager shall have all necessary powers to manage and carry out the management of the Company and the power to sign contracts and obligations on behalf of the Company, including without limitation, the power to exercise on behalf and in the name of the Company all of the powers of a manager described in the Act. Notwithstanding any other provision of this Agreement, the Company, the Principal Manager, or the Member, on behalf of

the Company, may enter into and perform the Loan Documents, the Alexander's Reimbursement Agreement, the Reimbursement Documents (as defined in the Alexander's Reimbursement Agreement) in connection with the Alexander's Reimbursement Agreement, the Vornado Reimbursement Agreement and the Reimbursement Documents (as defined in the Vornado Reimbursement Agreement) in connection with the Vornado Reimbursement Agreement, without any further act, vote or approval. The Principal Manager is hereby authorized to enter into the Loan Documents, the Alexander's Reimbursement Agreement, the Reimbursement Documents in connection with the Alexander's Reimbursement Agreement, the Vornado Reimbursement Agreement and the Reimbursement Documents in connection with the Vornado Reimbursement Agreement on behalf of the Company. The foregoing authorization shall not be deemed a restriction on the power of the Principal Manager to enter into other agreements on behalf of the Company.

5.3 BOARD OF MANAGERS POWERS. Subject to the terms of the Act and as otherwise provided under this Section 5, the Company shall be managed by the Board of Managers to the extent, and only to the extent, of the matters described in Sections 2.6(d) and 2.6(f) hereof, and in accordance with Sections 2.6(d) and 2.6(f) hereof. Each member of the Board of Managers is hereby designated as a manager within the meaning of the Act but shall have only the rights and powers as are set forth in this Section 5.3 and shall not otherwise have the authority, acting alone or together, to bind the Company.

5.4 NUMBER OF MANAGERS. The authorized number of Persons constituting the Board of Managers shall initially be five (5). Subject to Section 5.5(a), the Member may change the number of Persons constituting the Board of Managers at any time.

5.5 ELECTION OF PERSONS TO BOARD OF MANAGERS.

(a) Subject to the requirement that at least two (2) of the members of the Board of Managers shall be Independent Managers, as defined in
Section 2.6(c) hereof, Member may determine at any time in its sole and absolute discretion the number of members of the Board of Managers and whom to appoint as members of the Board of Managers. Subject to the provisions of the prior sentence, any member of the Board of Managers (including, without limitation, any Independent Manager) may be removed or expelled, with or without cause, at any time by Member, with or without notice.

(b) The following named persons shall be, and they hereby are, appointed as the initial members of the Board of Managers of the Company ("BOARD OF MANAGERS"), their terms of office to commence upon the acceptance of their appointment and to continue until the earlier of their resignation or removal by the Member or their respective successor(s) shall have been duly appointed and such successor(s) have accepted their appointment in accordance with this Article 5:

Steven Roth
Michael Fascitelli
Russell B. Wight, Jr.

Domenic A. Borriello (Independent Manager 1) Kim E. Lutthans (Independent Manager 2)

5.6 VACANCIES ON BOARD OF MANAGERS. A vacancy ("VACANCY") on the Board of Managers shall be deemed to exist (i) if an appointed member of the Board of Managers dies or resigns, (ii) if an appointed member of the Board of Managers is convicted of a felony or any other crime punishable by imprisonment or declared of unsound mind by an order of court, in which case, without further action by any Person, such Person shall cease to be a member of the Board of Managers, or (iii) if, subject to the requirements of Section 2.6(c) hereof, an appointed member is removed or expelled, with or without cause, at any time by Member. A Vacancy on the Board of Managers shall be filled in accordance with the appointment procedure set forth in Section 5.5 hereof by Member.

5.7 BOARD OF MANAGERS MEETINGS. It shall be unnecessary for the Board of Managers to meet unless meeting to address and vote on the matters described under Sections 2.6(d) and 2.6(f) hereof. All Board of Managers meetings shall be held at the principal office of the Company. Such Board of Managers meetings shall be held on four (4) days' notice by mail or 48 hours' notice delivered personally or by telephone, including voice messaging system or other technology designed to record and communicate messages, facsimile, electronic mail, or other electronic means. Notices hereunder shall be communicated to each member of the Board of Managers at the address, telephone number or electronic mail address shown on the Company's records. Notwithstanding anything to the contrary contained herein, any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting, if (x) both of the members of the Board of Managers which are Independent Managers consent thereto in writing to such action and (y) the other members of the Board of Managers do not raise any written objection thereto within five (5) days of being notified thereof in writing, and the consent or consents are filed with the minutes of proceedings of the Board of Managers.

5.8 QUORUM. It shall be necessary for all of the appointed members of the Board of Managers to be present in order to constitute a quorum for the transaction of business, and all of the appointed members of the Board of Managers must be present at any meeting of the Board of Managers in order for any act or decision made by the appointed members of the Board of Managers to be regarded as the official act of the Board of Managers. Even though a quorum is initially present, if the number of members of the Board of Managers present at a meeting is reduced to less than a quorum, no further business, except adjournment may be transacted at the meeting until a quorum is present. Members of the Board of Managers may participate in a meeting of the Board of Managers by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by conference telephone or similar communications equipment, the meeting shall be deemed to be held at the principal office of the Company.

5.9 PERFORMANCE OF DUTIES; LIABILITY OF PRINCIPAL MANAGER AND BOARD OF MANAGERS. None of the Principal Manager, the Member or any member of the Board of Managers shall be liable to Company for any loss or damage sustained by Company, unless the

loss or damage shall have been the result of an act performed, or omitted to be performed, in bad faith or with gross negligence or willful misconduct by Principal Manager, the Member or by such member of the Board of Managers, as the case may be. To the extent that, at law or in equity, the Principal Manager, the Member or any member of the Board of Managers has duties (including fiduciary duties) and liabilities relating thereto to the Company or to the Member, the Principal Manager, the Member and any member of the Board of Managers acting under this Agreement shall not be liable to the Company or to the Member for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of the Principal Manager, the Member or any member of the Board of Managers otherwise existing at law or in equity, are agreed by the parties hereto to replace, to the fullest extent permitted by law, such other duties and liabilities of the Principal Manager, the Member and any member of the Board of Managers.

5.10 LIMITED LIABILITY. Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and none of the Principal Manager, the Member or any member of the Board of Managers shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a manager or member of the Company or a member of the Board of Managers.

6. ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS.

6.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES. Net Profits and Net Losses shall be allocated to the Member.

6.2 DISTRIBUTIONS OF THE COMPANY. Distributable Cash shall be distributed to the Member upon demand of the Member but not less frequently than monthly. All such distributions shall be made only to the Person who, according to the books and records of the Company, is the holder of record of the Membership Interest in respect of which such distributions are made on the actual date of distribution. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution which would violate the Act or other applicable law. Except as required by the Act, neither the Company nor Member shall incur any liability for making distributions in accordance with Section 2.6 and this Section 6.2.

6.3 FORM OF DISTRIBUTION. Member has no right to demand and receive any distribution from the Company in any form other than money. Except upon a dissolution and winding-up of the Company, Member may not be compelled to accept from the Company a distribution of any asset in kind.

6.4 RETURN OF DISTRIBUTIONS. Except as required by law or this Agreement, Member shall not be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by Member or paid by Member for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to Member.

7. TRANSFER OF INTERESTS. Subject to Section 2.6, Member shall not be entitled to directly or indirectly transfer, assign, convey, sell, encumber or in any way alienate all or any part of its Membership Interest (a "TRANSFER"), except to the extent such Transfer is otherwise permitted under the Loan Documents to the extent obligations thereunder to Lender are outstanding. To the fullest extent permitted by law, transfers in violation of this Article 7 shall be null and void ab initio.

8. ACCOUNTING, RECORDS, REPORTING BY MEMBERS.

8.1 BOOKS AND RECORDS. The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with generally accepted accounting principles or such other commonly accepted accounting methods, consistently applied, as may be selected by Principal Manager from time to time. The books and records of the Company shall reflect all the Company transactions and shall be appropriate and adequate for the Company's business. The Company shall maintain at its principal office all of the following:

(1) MEMBERS. A record of the full name and last known business address of the Member, together with the capital account, Capital Contributions, and Percentage Interest of such Member;

(2) CERTIFICATE. A copy of the Certificate and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Certificate or any amendments thereto have been executed;

(3) TAX RETURNS. Copies of the Company's federal, state, and local income tax or information returns and reports, if any;

(4) AGREEMENT. A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed;

(5) FINANCIAL STATEMENTS. Copies of the financial statements of the Company, if any, for the six (6) most recent Fiscal Years (but if for less than six (6) years, then for the number of Fiscal Years the Company has been in existence); and

(6) BOOKS AND RECORDS. The Company's books and records as they relate to the affairs of the Company (including, without limitation, accounting records, leases, contracts and other agreements, and minutes of meetings of the Board of Managers) for at least the current and past six (6) Fiscal Years (but if for less than six (6) years, then for the number of Fiscal Years the Company has been in existence).

8.2 DELIVERY TO MEMBER AND INSPECTION. Member has the right to inspect and copy during normal business hours any of the Company records described in Sections 8.1(1) through (6).

8.3 ANNUAL STATEMENTS. Principal Manager shall cause to be prepared at least annually, at Company expense, information necessary for the preparation of Member's federal and state income tax returns. Within ninety (90) days after the end of each Fiscal Year or earlier to otherwise comply if necessary with the Loan Documents, such information as is necessary to complete federal and state income tax or information returns shall be made available to Member, and a copy of the Company's federal, state, and local income tax or information returns, if any, for that year.

8.4 FILINGS. Principal Manager, at Company expense, shall cause the income tax and information returns, if any, for the Company to be prepared and timely filed with the appropriate authorities. For tax purposes, the Company shall be treated as a disregarded entity. Principal Manager, at Company expense, shall also cause to be prepared and timely filed, with appropriate federal and state regulatory and administrative bodies, amendments to or restatements of the Certificate and all reports required to be filed by the Company with those entities under the Act or other then current applicable laws, rules, and regulations.

8.5 BANK ACCOUNTS. Subject to the requirements under Section 2.6 of this Agreement, Principal Manager shall maintain the funds of the Company in one or more separate bank accounts.

8.6 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS. All decisions as to accounting matters, except as otherwise specifically set forth herein, shall be made by Principal Manager. Principal Manager may rely upon the advice of its accountants as to whether such decisions are in accordance with generally accepted accounting principles or other accounting methods appropriate for the Company and authorized hereby.

8.7 TAX MATTERS FOR THE COMPANY HANDLED BY MEMBER. Principal Manager shall from time to time cause the Company to make such tax elections, if any, as it deems to be in the best interests of the Company and Member. Member shall be the "TAX MATTERS PARTNER" as defined in Code Section 6231, shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend the Company funds for professional services and costs associated therewith. Member shall oversee the Company tax affairs in the overall best interests of the Company and Member.

9. DISSOLUTION AND WINDING-UP.

9.1 DISSOLUTION. Subject to Section 2.6, the Company shall be dissolved, its assets shall be disposed of, and its affairs wound up on the first to occur of the following:

(a) Upon the entry of a decree of judicial dissolution under the Act; or

(b) At any time there is no member of the Company, unless the Company is otherwise continued in accordance with the Act or this Agreement. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such member is

hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company in the Company.

The filing of a petition in bankruptcy, the filing of a petition or answer seeking reorganization, arrangement, composition, liquidation, readjustment, dissolution or similar relief under any statute, law or regulation, or the occurrence of any other event or circumstance involving or relating to Member or a Special Member contemplated by or described in Section 18-304 of the Act, shall not, under any circumstances, cause Member or Special Member, as the case may be, to cease being a member of the Company and shall not cause the dissolution of the Company.

9.2 WINDING-UP. Upon the dissolution of the Company, the Company shall continue solely for the purpose of winding-up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. Principal Manager shall be responsible for overseeing the winding-up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and if sold (as promptly as is consistent with obtaining the fair market value thereof) shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.3 hereof.

9.3 ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION. Upon dissolution, the assets of the Company shall be liquidated, and the proceeds from such liquidation shall be allocated and distributed in the following order of priority:

(a) First, to the satisfaction of creditors of the Company, including Member or Principal Manager if a creditor (to the extent otherwise permitted by law and the Loan Documents), in satisfaction of the liabilities of the Company (whether by payment or the making of reasonable provision for payment thereof);

(b) Second, to the satisfaction of all debts, liabilities and other obligations owed to Member and not paid pursuant to clause (a) above (whether by payment or the making of reasonable provision for payment thereof); and

9.4 NO DEFICIT RESTORATION. If, upon liquidation, Member has a deficit balance in its capital account, after taking into account all capital account adjustments for the Company Fiscal Year during which liquidation occurs, Member shall have no obligation to contribute cash to the capital of the Company to restore such deficit balance.

9.5 CERTIFICATE OF CANCELLATION. Principal Manager, as an authorized person, shall cause to be filed in the office of, and on a form prescribed by, the Secretary of State of the State

of Delaware, a certificate of cancellation of the Certificate upon completion of the winding-up of the affairs of the Company.

9.6 NO ACTION FOR DISSOLUTION. To the fullest extent permitted by law, neither Member nor the Board of Managers shall take any voluntary action that directly or indirectly causes a dissolution of the Company. Member acknowledges that irreparable damage would be done to the goodwill and reputation of the Company if Member should bring an action in court to dissolve the Company under circumstances where dissolution is not required by Section 9.1. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Membership Interests. Accordingly, to the fullest extent permitted by law, Member hereby waives and renounces its right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution of the Company (including, but not limited to, any right which Member may have under Section 18-802 of the Act).

10. INDEMNIFICATION. The Company shall defend, indemnify and save harmless Member (including in its capacity as Principal Manager), and each member of the Board of Managers from and against all claims, losses, damages, cost, expense, demands, liabilities, obligations, liens, encumbrances, rights of action or attorneys' fees ("CLAIMS") sustained by reason of any act performed, or omitted to be performed, in good faith and without gross negligence or willful misconduct, within the scope of its authority expressly conferred by this Agreement, to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit. Such indemnity shall not be construed to limit or diminish the coverage of Member or such members of the Board of Managers under any insurance obtained by the Company. Payment shall not be a condition precedent to any indemnification provided in this Agreement. Notwithstanding the foregoing provisions, no payment may be made under this indemnity during the period in which there is an "Event of Default" under the Loan Agreement.

11. MISCELLANEOUS.

11.1 COMPLETE AGREEMENT. This Agreement constitutes the complete and exclusive statement of agreement of Member with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements or statements by Member. No representation, statement, condition or warranty not contained in this Agreement will be binding on Member or has any force or effect whatsoever.

11.2 BINDING EFFECT. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of Member, and its respective successors and assigns.

11.3 PARTIES IN INTEREST. Except for the Lender, its successors or assigns as holders of the Loan or as expressly provided in the Act or in this Agreement, nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any Person other than Member and its successors and assigns nor shall anything in this Agreement relieve or discharge the obligation or liability of any third Person to Company or any party to this

Agreement, nor shall any provision hereof give any third Person any right of subrogation or action over or against Company or any party to this Agreement.

11.4 PRONOUNS; STATUTORY REFERENCES. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. Any reference to the Code, the Regulations, the Act, or other statutes or laws will include all amendments, modifications, or replacements of the specific sections and provisions concerned.

11.5 HEADINGS. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

11.6 REFERENCES TO THIS AGREEMENT. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated.

11.7 SEVERABILITY. If any provision of this Agreement or the application of such provision to any Person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to Persons or circumstances other than those to which it is held invalid shall not be affected thereby.

11.8 ADDITIONAL DOCUMENTS AND ACTS. Member agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and the transactions contemplated hereby.

11.9 NOTICES. Unless otherwise specified in this Agreement, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed or sent or delivered at the addresses specified below. All such notices and communications shall be given by hand or facsimile transmission; provided that, in the event that facsimile transmission facilities are not operational, such notices and communications may be given by mail, but the sender shall use reasonable efforts to confirm facsimile transmission facilities shall become operational. All such notices and communications shall be effective when delivered by hand, or, in the case of mail, upon the earlier of receipt and confirmation by facsimile transmission as provided below, or, in the case of facsimile transmission, when sent as addressed as set forth herein and confirmation of delivery is received. The addresses of the Company and Member shall be as set forth in Section 2.5, provided that each party to this Agreement may, from time to time, change its notice address, by giving notice to the Company and the other parties herein in the manner provided in this Section.

11.10 AMENDMENTS. Subject to Section 2.6, all amendments to this Agreement will be in writing and signed by the Member and approved by the Board of Managers; provided that no amendment to this Agreement will be made to the extent prohibited by the Loan Documents if obligations of the Company and its Affiliates to the Lenders thereof are outstanding or if it would give rise to a breach or default thereunder.

11.11 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

11.12 REMEDIES CUMULATIVE. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any Person may be lawfully entitled.

11.13 CHOICE OF LAW. This Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles).

11.14 BINDING AGREEMENT. Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member and is enforceable against the Member by the Independent Managers, in accordance with its terms. In addition, the Independent Managers shall be intended beneficiaries of this Agreement.

IN WITNESS WHEREOF, Member and the Independent Managers have executed this Agreement, effective as of the date first written above.

731 RESIDENTIAL HOLDING LLC
a Delaware limited liability company

By: Alexander's, Inc., member

By: /s/ Brian Kurtz
    ---------------------------
    Name:  Brian Kurtz
         ----------------------
    Title:  Assistant Secretary
         ----------------------

INDEPENDENT MANAGERS:

/s/ Domenic A. Borriello
---------------------------
Name:  Domenic A. Borriello


/s/ Kim Lutthans
---------------------------
Name:  Kim E. Lutthans

SCHEDULE 1.22

1. Gap Note (the "Gap Note") made by the Company and Commercial SPE to Lender in the principal amount of $500,000;

2. Consolidated, Amended and Restated Building Loan Note (the "Building Loan Note") made by the Company and Commercial SPE to each Lender in the aggregate principal amount of $55,500,000;

3. Building Loan Agreement (the "Building Loan Agreement") made by and between the Company, Commercial SPE and Lender with respect to the Building Loan (as defined in the Building Loan Agreement);

4. Gap Mortgage (the "Gap Mortgage") given by the Company and Commercial SPE to Lender as security for the Gap Note and covering the Property;

5. Consolidated, Amended and Restated Building Loan Mortgage, Assignment of Leases and Rents and Security Agreement (the "Building Loan Mortgage") given by the Company and Commercial SPE to Lender as security for the Building Loan Note and covering the Property;

6. Assignment of Leases and Rents made by the Company and Commercial SPE in favor of Lender as further security for the Building Loan Note;

7. Project Loan Agreement made by and between the Company, Commercial SPE and Lender with respect to the Project Loan (as defined in the Building Loan Agreement);

8. Supplemental Loan Agreement made by and between the Company, Commercial SPE and Lender with respect to the Supplemental Loan (as defined in the Building Loan Agreement);

9. Environmental Indemnity Agreement made by the Company, Commercial SPE and Alexander's, Inc. for the benefit of Lender;

10. UCC-1 Fixture Financing Statements delivered by the Company and Commercial SPE, as debtor, to Lender, as secured party relating to the Building Loan Mortgage;

11. UCC-1 Financing Statements delivered by the Company and Commercial SPE, as debtor, to Lender, as secured party relating to the Building Loan Mortgage;

12. Subordination of Property Management and Development Agreement and Fees by and among the Company, Commercial SPE, Lender and Vornado Management Corp.;

13. Cash Collateral Agreement between the Company, Commercial SPE and Lender;

14. Assignment of Contracts, Licenses and Permits made by the Company and Commercial SPE in favor of Lender; and

15. Loan Fee Letter from the Company and Commercial SPE to Lender.

SCHEDULE 1.30

ALL THAT CERTAIN volume of space, situate, lying and being in the Borough of Manhattan, County, City and State of New York, bounded and described as follows:

ALL that portion of the below described parcel lying between a lower horizontal plane drawn at elevation 512'-2" above the datum level used by the Topographical Bureau, Borough of Manhattan, which is 2'-9" above National Geodetic Survey Vertical Datum of 1929, mean sea level, Sandy Hook, New Jersey and an upper horizontal plane drawn at 809'-2" above such datum level bounded and described as follows:

BEGINNING at a point distant 48'-8" north of the northerly line of East 58th Street and 30'-9" east of the easterly line of Lexington Avenue;

RUNNING THENCE northerly, parallel with the easterly line of Lexington Avenue, 12'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 5'-10";

THENCE northerly, parallel with the easterly line of Lexington Ave, 78'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 5'-10";

THENCE northerly, parallel with the easterly line of Lexington Avenue, 12'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 103'-6";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 7'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 35'-0";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 88'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 35'-0";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 7'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 103'-6" to the point or place of BEGINNING.

Exhibit 10(i)A(2)

LIMITED LIABILITY COMPANY AGREEMENT
FOR
731 COMMERCIAL LLC,
A DELAWARE LIMITED LIABILITY COMPANY
(COMMERCIAL PARCEL)

This Limited Liability Company Agreement ("AGREEMENT") of 731 COMMERCIAL LLC, a Delaware limited liability company (the "COMPANY") is made as of and is effective the 3rd day of July, 2002, by 731 Commercial Holding LLC, a Delaware limited liability company, as the sole member ("Member"), Domenic A. Borriello (in his capacity as the initial "INDEPENDENT MANAGER 1"), and Kim E. Lutthans (in her capacity as the initial "INDEPENDENT MANAGER 2").

RECITALS

B. The Member, Special Member 1 and Special Member 2 wish to operate the Company in accordance with the terms and conditions set forth herein.

AGREEMENT

1. DEFINITIONS.

1.1 "ACT" shall mean the Delaware Limited Liability Company Act (6 Del. C.
Section 18-101, et. seq.), as the same may be amended from time to time.

1.3 "AGREEMENT" shall mean this Limited Liability Company Agreement for 731 Commercial LLC, as originally executed and as amended from time to time.

1.4 "ALEXANDER'S" shall mean Alexander's, Inc., a Delaware corporation.

1.5 "ALEXANDER'S REIMBURSEMENT AGREEMENT" shall have the meaning provided in the Loan Agreement.

1.6 "BANKRUPTCY ACTION" shall have the meaning set forth in Section 2.6(d) hereof.

1.7 "BOARD OF MANAGERS" shall have the meaning set forth in Section 5.5 hereof.

1.8 "CAPITAL CONTRIBUTION" shall mean the total of cash and other assets contributed to the Company by the Member.

1.10 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions of succeeding law, and to the extent applicable, the Regulations.

1.11 "COMPANY" shall mean 731 Commercial LLC, a Delaware limited liability company.

1.12 "DISTRIBUTABLE CASH" shall mean the amount of cash which the Principal Manager deems available for distribution, taking into account all Company debts, liabilities, and obligations then due (including, without limitation, the Loan) and amounts necessary to place into reserves for customary and usual claims with respect to the Company's business.

1.13 "FISCAL YEAR" shall mean the Company's fiscal year, which shall be the calendar year.

1.14 "GUARANTIES" shall have the meaning provided in the Loan Agreement.

1.15 "INDEPENDENT MANAGER" shall have the meaning given to that term in
Section 2.6(c) hereof.

1.16 "INDEPENDENT MANAGER 1" shall mean the person from time to time appointed by the Member as an Independent Manager who shall be designated by the Member as "Independent Manager 1".

1.17 "INDEPENDENT MANAGER 2" shall mean the person from time to time appointed by the Member as an Independent Manager who shall be designated by the Member as "Independent Manager 2".

1.18 "LENDER" shall mean Bayerische Hypo- und Vereinsbank AG and other co-lenders that hold an interest in the Loan to Company together with any of their successors and assigns, each during such time as it is the holder of such interest.

1.19 "LOAN" shall mean the loan in the original principal amount of $490,000,000 made by Lender to Company and Residential SPE or any loan made for the purposes of refinancing such loan or any portion thereof.

1.20 "LOAN AGREEMENT" shall mean the loan agreements between Lender, Company and Residential SPE pursuant to which the Loan is made.

1.21 "LOAN DOCUMENTS" shall mean any and all documentation in connection with the Loan, as amended from time to time, and any other agreement to be entered into in connection with such documents and any financing documents in replacement thereof to be entered into by the Company and Residential SPE in connection with the acquisition and ownership of the Property, including, without limitation, the documents listed on Schedule 1.21 attached hereto and incorporated herein.

1.22 "MEMBER" shall mean 731 Commercial Holding LLC, a Delaware limited liability company, in its capacity as a member of the Company, or any other Person that succeeds Member in that capacity. A "Special Member" is not a "Member" as that term is used in this Agreement.

1.23 "MEMBERSHIP INTEREST" shall mean all of the Member's right, title and interest in, to and against the Company, including rights to Distributable Cash of the Company, and all other rights of the Member to participate in the business, affairs and management of the Company, including without limitation, the right to vote on or grant consent or approval with respect to matters coming before the Company.

1.24 "NET PROFITS" and "NET LOSSES" shall mean the net profits and net losses of the Company for a period (or from a transaction) as determined in accordance with generally accepted accounting principles, consistently applied.

1.25 "PERCENTAGE INTEREST" shall mean the limited liability interest in the Company expressed as a percentage of the total limited liability interests outstanding. The Percentage Interest of the Member is 100.00%.

1.26 "PERMITTED INDEBTEDNESS" shall mean the Loan and the other indebtedness of the Company that is permitted under the Loan Documents.

1.27 "PERSON" shall mean any individual, sole proprietorship, corporation, general partnership, limited partnership, limited liability company or partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

1.28 "PRINCIPAL MANAGER" shall mean Member, who is appointed as a manager within the meaning of the Act, except to the extent that the Board of Managers is provided with management responsibility pursuant to Section 5.3.

1.29 "PROPERTY" shall mean that certain real property (together with improvements, fixtures, and other appurtenances thereto) commonly known as the commercial parcel at 731 Lexington Avenue, in the City of New York, County of New York, State of New York, as more specifically set forth on Schedule 1.29 attached hereto and incorporated herein.

1.30 "REGULATIONS" shall, unless the context clearly indicates otherwise, mean the regulations currently in force as final or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code.

1.31 "RESIDENTIAL SPE" shall mean 731 Residential LLC, a Delaware limited liability company.

1.32 "SPECIAL MEMBER 1" shall mean the Independent Manager 1 in his capacity as Special Member.

1.33 "SPECIAL MEMBER 2" shall mean the Independent Manager 2 in his capacity as Special Member.

1.34 "VORNADO" shall mean Vornado Realty L.P., a Delaware limited partnership.

1.35 "VORNADO REIMBURSEMENT AGREEMENT" shall have the meaning provided in the Loan Agreement.

1.36 "VACANCY" shall have the meaning set forth in Section 5.6 hereof.

2. ORGANIZATIONAL MATTERS.

2.2 NAME. The name of the Company shall be "731 COMMERCIAL LLC". The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that Member deems appropriate or advisable. The Principal Manager shall qualify the Company to do business in the State of New York and shall file any qualification instruments and fictitious name certificates and similar filings, and any amendments

2.6 PURPOSE OF COMPANY.

(1) the Company will not engage in any business or activity other than as expressly set forth under the heading "Purpose of Company" in
Section 2.6(a) of this Agreement.

(5) the Company will not commingle any of its assets, funds, liabilities or business functions with the assets, funds, liabilities or business functions of any other person or entity (other than (i) Residential SPE
(a) as co-borrower under the Loan and (b) as co-obligor to Alexander's, Inc. under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and Residential SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(6) the Company will observe all appropriate limited liability company procedures and formalities.

(11) the Company will not guarantee or become obligated for the debts or obligations of any other entity or person (other than (i) Residential SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties, (ii) Alexander's and

Residential SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties and (iii) lease takeover obligations).

(12) the Company will not hold out its credit as being available to satisfy the debts or obligations of any other person or entity (other than (i) Residential SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties, (ii) Alexander's and Residential SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties and (iii) lease takeover obligations).

(13) the Company will hold itself out as an entity separate and distinct from any other person or entity (including its affiliates).

(14) the Company will correct any known misrepresentation or misunderstanding regarding its separate identity.

(15) the Company will use separate stationery, business cards, purchase orders, invoices, checks and the like bearing its own name to the extent it will use such items.

(17) the Company will compensate all consultants, independent contractors, employees and agents from its own funds (or those of Residential SPE as co-borrower under the Loan) for services provided to it by such consultants, independent contractors, employees and agents.

(23) the Company will conduct its own business solely in its own name, through its duly authorized officers or agents.

(24) the Company will hold all of its assets in its own name (except for assets held jointly with Residential SPE as co-borrower under the Loan).

(26) the Company will not pledge its assets to secure the liabilities of any other person or entity (other than Residential SPE as co-borrower under the Loan).

(27) the Company will not identify itself as a division or department of any other entity.

(28) the Company intends to maintain adequate capital in light of its contemplated business operations.

(29) the Company will conduct transactions between the Company and third parties in the name of the Company and as an entity separate and independent from its affiliates.

transaction or agreement on terms at least as favorable to the Company as could be obtained at arm's length.

(33) the Company will not acquire or assume the obligations of its affiliates (other than (i) Residential SPE (a) as co-borrower under the Loan and (b) as co-obligor to Alexander's under the Alexander's Reimbursement Agreement for the reimbursement of payments under the Guaranties and (ii) Alexander's and Residential SPE as co-obligors to Vornado under the Vornado Reimbursement Agreement for the reimbursement of payments under the Guaranties).

(34) the Company will not form, hold, or acquire any subsidiary or own any other equity interest in any other Person except as expressly permitted in the Loan Documents.

(35) the Company will file any required tax returns and will make any required payments under applicable tax law.

(c) The Company shall at all times cause there to be at least two
(2) duly appointed members of the Board of Managers who are independent managers (each an "INDEPENDENT MANAGER") who shall not have been or be at the time of such individual's appointment, or at any time while serving as an Independent Manager of the Company, and may not have been at any time during the preceding five (5) years preceding his or her appointment (A) a member (with the exception of serving as Special Member of the Company or Residential SPE), shareholder, partner, director, manager (with the exception of serving as Independent Manager of the Company or Residential SPE), officer or employee of Company, or of Member or any Affiliate of any of them; (B) a customer of, creditor of, or supplier or service provider (including professionals) to, Company or its Member or any of Company's or Member's members, shareholders, partners, or subsidiaries, or any Affiliate of any of them, if the revenues therefrom to such director account for any of such director's gross annual revenues; (C) a Person controlling any of the foregoing; (D) any other Person receiving a material portion of his or her compensation or other financial remuneration from, or who is otherwise financially dependent on, an officer, director or employee of Company or Member, or any of their Affiliates or an officer's, director's or employee's family member by blood or marriage or a business entity owned or controlled by any of the foregoing; or (E) a spouse, parent, sibling or child of any Person described by (A), (B), (C) or (D) above. A natural person who satisfies the foregoing definition other than subparagraph (B) shall not be disqualified from serving as an Independent Manager of the Company if such individual is an independent manager provided by a nationally-recognized company that provides professional independent managers and that also provides other corporate services in the ordinary course of its business. A natural person who otherwise satisfies the foregoing except for serving as an independent manager of a "special purpose" Affiliate that does not own a direct or indirect interest in the Company or Residential SPE shall not be disqualified from serving as an Independent Manager of the Company if such individual is at the time of initial appointment, or at any time while serving as an Independent Manager of the Company, an Independent Manager of a "special purpose entity" affiliated with the Company (other than any entity that owns a direct or indirect equity interest in the Company or Residential SPE) if such individual is an independent manager provided by a nationally-recognized company

that provides professional independent managers. For purposes of this paragraph, a "special purpose entity" is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve the Company's separateness that are substantially similar to those of the Company and provide, inter alia, that it: (a) is organized for the limited purpose of owning and operating one or more properties or is a member of an entity which is organized for the limited purpose of owning and operating one or more properties; (b) has restrictions on its ability to incur indebtedness, dissolve, liquidate, consolidate, merge and/or sell assets; (c) may not file voluntarily a bankruptcy petition on its own behalf or on behalf of such entity without the consent of the Independent Manager and (d) shall conduct itself and cause such entity to conduct itself in accordance with certain "separateness covenants", including, but not limited to, the maintenance of its and such entity's books, records, bank accounts and assets separate from those of any other person or entity. The initial Independent Managers shall be Domenic A. Borriello, initially designated as "Independent Manager 1", and Kim E. Lutthans, initially designated as "Independent Manager 2". As used in this Section 2.6(c), the term "CONTROLLED" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities, by contract or otherwise.

(e) The Company shall have no liabilities, contingent or otherwise, other than the Permitted Indebtedness.

(f) Notwithstanding any other provision of this Agreement or the Certificate or of law that otherwise so empowers Company, in the event that Residential SPE shall take, or become subject to, a Bankruptcy Action, then, upon receiving written notice from Lender, all of the members of the Board of Managers (including both Independent Managers) shall take a vote on the commencement of a Bankruptcy Action with respect to the Company and shall vote, to the fullest extent permitted by law, as specifically directed and instructed by the Lender for so long as the obligation of the Company to Lender under the Loan is outstanding. If so directed by the Lender, the Company shall seek procedural consolidation of the bankruptcy proceedings of the Company and Residential SPE.

3. CAPITAL CONTRIBUTIONS.

3.1 INITIAL CAPITAL CONTRIBUTION. Member has contributed the Property to the Company pursuant to that certain bargain and sale deed without covenant against grantor's acts dated July 3rd, 2002 (subject to all exceptions thereof) executed by Member in favor of Company.

3.3 NO INTEREST. Member shall not be entitled to receive interest on any Capital Contributions.

and Net Losses. The initial capital account of Member shall be equal to the fair market value of the Property.

4. MEMBER.

4.3 RESIGNATIONS. Member shall not resign as the member of the Company.

4.5 REMUNERATION TO MEMBER. Except as otherwise authorized in or pursuant to this Agreement, Member is not entitled to remuneration for acting on Company business.

4.6 VOTING RIGHTS. Except as expressly modified in this Agreement, Member shall have the voting, approval and consent rights provided in the Act.

4.7 MEETINGS OF THE MEMBER. No annual or regular meeting of Member is required.

4.8 SPECIAL MEMBER.

(b) No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as Independent Manager pursuant to Section 2.6(c); provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member appointed by the personal representative (as defined in the Act) of the last remaining Member who ceased to be a member of the Company. The Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets. Pursuant to Section 18-301 of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provisions of the Act, the Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each person acting as an Independent Manager pursuant to Section 2.6(c) shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each person acting as an Independent Manager pursuant to Section 2.6(c) shall not be a member of the Company.

5. MANAGEMENT AND CONTROL OF THE COMPANY; LIMITED LIABILITY.

5.3 BOARD OF MANAGERS POWERS. Subject to the terms of the Act and as otherwise provided under this Section 5, the Company shall be managed by the Board of Managers to the extent, and only to the extent, of the matters described in Sections 2.6(d) and 2.6(f) hereof and in accordance with Sections 2.6(d) and 2.6(f) hereof. Each member of the Board of Managers is hereby designated as a manager within the meaning of the Act but shall have only the rights and powers as are set forth in this Section 5.3 and shall not otherwise have the authority, acting alone or together, to bind the Company.

5.5 ELECTION OF PERSONS TO BOARD OF MANAGERS.

(a) Subject to the requirement that at least two (2) of the members of the Board of Managers shall be Independent Managers, as defined in Section 2.6(c) hereof, Member may determine at any time in its sole and absolute discretion the number of members of the Board of Managers and whom to appoint as members of the Board of Managers. Subject to the provisions of the prior sentence, any member of the Board of Managers (including, without limitation, any Independent Manager) may be removed or expelled, with or without cause, at any time by Member, with or without notice.

Steven Roth
Michael Fascitelli
Russell B. Wight, Jr.

Domenic A. Borriello (Independent Manager 1) Kim E. Lutthans (Independent Manager 2)

6. ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS.

6.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES. Net Profits and Net Losses shall be allocated to the Member.

7. TRANSFER OF INTERESTS. Subject to Section 2.6, Member shall not be entitled to directly or indirectly transfer, assign, convey, sell, encumber or in any way alienate all or any part of its Membership Interest (a "Transfer"), except to the extent such Transfer is otherwise permitted under the Loan Documents to the extent obligations thereunder to Lender are outstanding. To the fullest extent permitted by law, transfers in violation of this Article 7 shall be null and void ab initio.

8. ACCOUNTING, RECORDS, REPORTING BY MEMBERS.

(1) MEMBERS. A record of the full name and last known business address of the Member, together with the capital account, Capital Contributions, and Percentage Interest of such Member;

(3) TAX RETURNS. Copies of the Company's federal, state, and local income tax or information returns and reports, if any;

8.2 DELIVERY TO MEMBER AND INSPECTION. Member has the right to inspect and copy during normal business hours any of the Company records described in Sections 8.1(1) through (6).

8.5 BANK ACCOUNTS. Subject to the requirements under Section 2.6 of this Agreement, Principal Manager shall maintain the funds of the Company in one or more separate bank accounts.

9. DISSOLUTION AND WINDING-UP.

9.1 DISSOLUTION. Subject to Section 2.6, the Company shall be dissolved, its assets shall be disposed of, and its affairs wound up on the first to occur of the following:

(a) Upon the entry of a decree of judicial dissolution under the Act; or

9.5 CERTIFICATE OF CANCELLATION. Principal Manager, as an authorized person, shall cause to be filed in the office of, and on a form prescribed by, the Secretary of State of the State

of Delaware, a certificate of cancellation of the Certificate upon completion of the winding-up of the affairs of the Company.

11. MISCELLANEOUS.

Agreement, nor shall any provision hereof give any third Person any right of subrogation or action over or against Company or any party to this Agreement.

11.5 HEADINGS. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

11.11 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

11.12 REMEDIES CUMULATIVE. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any Person may be lawfully entitled.

11.13 CHOICE OF LAW. This Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles).

IN WITNESS WHEREOF, Member and the Independent Managers have executed this Agreement, effective as of the date first written above.

731 COMMERCIAL HOLDING LLC
a Delaware limited liability company

By: Alexander's, Inc., member

By:  /s/ Brian Kurtz
     ---------------------------------
     Name:   Brian Kurtz
             -------------------------
     Title:  Assistant Secretary
             -------------------------

INDEPENDENT MANAGERS:

/s/ Domenic A. Borriello
----------------------------------
Name:  Domenic A. Borriello


/s/ Kim E. Lutthans
----------------------------------
Name:  Kim E. Lutthans

SCHEDULE 1.21

1. Gap Note (the "Gap Note") made by the Company and Residential SPE to Lender in the principal amount of $500,000;

2. Consolidated, Amended and Restated Building Loan Note (the "Building Loan Note") made by the Company and Residential SPE to each Lender in the aggregate principal amount of $55,500,000;

3. Building Loan Agreement (the "Building Loan Agreement") made by and between the Company, Residential SPE and Lender with respect to the Building Loan (as defined in the Building Loan Agreement);

4. Gap Mortgage (the "Gap Mortgage") given by the Company and Residential SPE to Lender as security for the Gap Note and covering the Property;

5. Consolidated, Amended and Restated Building Loan Mortgage, Assignment of Leases and Rents and Security Agreement (the "Building Loan Mortgage") given by the Company and Residential SPE to Lender as security for the Building Loan Note and covering the Property;

6. Assignment of Leases and Rents made by the Company and Residential SPE in favor of Lender as further security for the Building Loan Note;

7. Project Loan Agreement made by and between the Company, Residential SPE and Lender with respect to the Project Loan (as defined in the Building Loan Agreement);

8. Supplemental Loan Agreement made by and between the Company, Residential SPE and Lender with respect to the Supplemental Loan (as defined in the Building Loan Agreement);

9. Environmental Indemnity Agreement made by the Company, Residential SPE and Alexander's, Inc. for the benefit of Lender;

10. UCC-1 Fixture Financing Statements delivered by the Company and Residential SPE, as debtor, to Lender, as secured party relating to the Building Loan Mortgage;

11. UCC-1 Financing Statements delivered by the Company and Residential SPE, as debtor, to Lender, as secured party relating to the Building Loan Mortgage;

12. Subordination of Property Management and Development Agreement and Fees by and among the Company, Residential SPE, Lender and Vornado Management Corp.;

13. Cash Collateral Agreement between the Company, Residential SPE and Lender;

14. Assignment of Contracts, Licenses and Permits made by the Company and Residential SPE in favor of Lender; and

15. Loan Fee Letter from the Company and Residential SPE to Lender.

SCHEDULE 1.29

ALL THAT CERTAIN plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Manhattan, County, City and State of New York, bounded and described as follows:

BEGINNING at the corner formed by the intersection of the northerly line of East 58th Street with the easterly line of Lexington Avenue;

RUNNING thence northerly, along the easterly line of Lexington Avenue, 200'-10" to the corner formed by the intersection of the southerly line of East 59th Street with the easterly line of Lexington Avenue;

THENCE easterly, along the southerly line of East 59th Street, 420'-0" to the corner formed by the intersection of the southerly line of East 59th Street with the westerly line of Third Avenue;

THENCE southerly, along the westerly line of Third Avenue, 200'-10" to the corner formed by the intersection of the northerly line of East 58th Street with the westerly line of Third Avenue;

THENCE westerly, along the northerly line of East 58th Street, 420'-0" to the point or place of BEGINNING.

LESS AND EXCEPT:

All that portion of the below described parcel lying between a lower horizontal plane drawn at elevation 512'-2" above the datum level used by the Topographical Bureau, Borough of Manhattan, which is 2'-9" above National Geodetic Survey Vertical Datum of 1929, mean sea level, Sandy Hook, New Jersey and an upper horizontal plane drawn at 809'-2" above such datum level bounded and described as follows:

BEGINNING at a point distant 48'-8" north of the northerly line of East 58th Street and 30'-9" east of easterly line of Lexington Avenue;

RUNNING thence northerly, parallel with the easterly line of Lexington Avenue, 12'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 5'-10";

THENCE northerly, parallel with the easterly line of Lexington Ave., 78'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 5'-10";

THENCE northerly, parallel with the easterly line of Lexington Avenue, 12'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 103'-6";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 7'-6";

THENCE easterly, parallel with the northerly line of East 58th Street, 35"-0";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 88'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 35-0";

THENCE southerly, parallel with the easterly line of Lexington Avenue, 7'-6";

THENCE westerly, parallel with the northerly line of East 58th Street, 103'-6" to the point or place of BEGINNING.

Exhibit 10(i)B(1)

AMENDED AND RESTATED
CREDIT AGREEMENT

dated as of July 3, 2002

among

59TH STREET CORPORATION
as Borrower

and

VORNADO LENDING L.L.C.,
(formerly known as Vornado Lending Corp.)

as Lender

TABLE OF CONTENTS

                                                                           Page
                                                                           ----
ARTICLE I.     DEFINITIONS AND ACCOUNTING TERMS.......................       1

      SECTION 1.01.    Certain Defined Terms..........................       1

      SECTION 1.02.    Computation of Time Periods....................       9

      SECTION 1.03.    Accounting Terms...............................       9

ARTICLE II.    AMOUNTS AND TERMS OF THE ADVANCES......................       9

      SECTION 2.01.    Intentionally Omitted..........................       9

      SECTION 2.02.    Repayment......................................       9

      SECTION 2.03.    Prepayments....................................       9

      SECTION 2.04.    Interest.......................................       9

      SECTION 2.05.    Increased Costs................................      10

      SECTION 2.06.    Payments and Computations......................      10

      SECTION 2.07.    Taxes..........................................      11

      SECTION 2.08.    Payment of Certain Costs and Expenses..........      12

      SECTION 2.09.    Use of Proceeds................................      13

ARTICLE III.   CONDITIONS OF LENDING..................................      13

      SECTION 3.01.    Intentionally Omitted..........................      13

ARTICLE IV.    REPRESENTATIONS AND WARRANTIES.........................      13

      SECTION 4.01.    Representations and Warranties of the Borrower.      13

ARTICLE V.     COVENANTS..............................................      16

      SECTION 5.01.    Affirmative Covenants of the Borrower..........      16

      SECTION 5.02.    Negative Covenants.............................      19

      SECTION 5.03.    Reporting Requirements.........................      22

      SECTION 5.04.    Covenants of the Lender........................      23

ARTICLE VI.    SPECIAL PROVISIONS.....................................      24

      SECTION 6.01.    Condemnation and Casualty......................      24

      SECTION 6.02.    Payment of REIT Dividends......................      25

ARTICLE VII.   EVENTS OF DEFAULT......................................      25

      SECTION 7.01.    Events of Default..............................      25

ARTICLE VIII.  MISCELLANEOUS..........................................      27

      SECTION 8.01.    Amendments, Etc................................      27

SECTION 8.02.    Notices, Etc...................................      28

SECTION 8.03.    No Waiver; Remedies............................      29

SECTION 8.04.    Costs, Expenses................................      29

SECTION 8.05.    Merger.........................................      30

SECTION 8.06.    Binding Effect.................................      30

SECTION 8.07.    Lender's Discretion............................      30

SECTION 8.08.    Participations.................................      30

SECTION 8.09.    Governing Law..................................      31

SECTION 8.10.    Execution in Counterparts......................      31

SECTION 8.11.    Waiver of Jury Trial...........................      31

SECTION 8.12.    Jurisdiction...................................      31

SECTION 8.13.    Continuing Enforcement.........................      32

Schedule I        -     Properties
Schedule II             Conflicts under Loan Documents
Schedule III            Required Authorizations
Schedule IV             Disclosed Litigation
Schedule V(a)           Environmental Non-Compliance
Schedule V(b)           Environmental Reports
Schedule VI             Defaults under Material Agreements
Schedule VII            Non-compliance with Laws

Exhibit A         -     Form of Note
Exhibit B-1       -     Form of Guaranty
Exhibit B-2       -     Form of Guaranty
Exhibit C         -     Form of Non-Disturbance Agreement
Exhibit D         -     Form of Mortgage
Exhibit E         -     Form of Assignment of Collateral Account and Security
                        Agreement
Exhibit F         -     Form of Deposit Account Control Agreement
Exhibit G         -     Form of Pledge Agreement

AMENDED AND RESTATED CREDIT AGREEMENT ("CREDIT AGREEMENT") dated as of July 3, 2002 by and between 59th Street Corporation, a Delaware corporation ("59th Street Corp." or the "Borrower"), as borrower, and Vornado Lending L.L.C., a New Jersey limited liability company (the "Lender"), as lender.

(1) WHEREAS, Alexander's Inc., a Delaware corporation ("ALEXANDER'S") and Lender entered into that certain Credit Agreement, dated as of October 20, 1999 (as heretofore amended, the "ORIGINAL CREDIT AGREEMENT"), pursuant to which Lender advanced to Alexander's the amount of Fifty Million and 00/100 Dollars ($50,000,000.00);

(2) WHEREAS, Alexander's has requested that Lender release Alexander's from its obligations as borrower under the Original Credit Agreement and accept Borrower as the substitute borrower thereunder;

(3) WHEREAS, the outstanding principal amount under the Original Credit Agreement has been reduced by $10,000,000 and such $10,000,000 is now secured by the Credit Agreement and other related documents being entered into by Alexander's with Lender simultaneously herewith in the amount of $35,000,000;

(4) WHEREAS, the Lender is willing to release Alexander's and accept Borrower's assumption of the obligations of Alexander's under the Original Credit Agreement, in the reduced amount of $40,000,000, upon the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

A. Effective as of the date hereof, Alexander's is hereby released from its obligations under the Original Credit Agreement and Borrower hereby assumes such obligations, as amended and restated herein, in the reduced, current outstanding principal amount of $40,000,000;

B. Effective as of the date hereof, the Original Credit Agreement is hereby restated and amended in its entirety and 59th Street Corp. is substituted as borrower thereunder as set forth below.

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms. As used in this Credit Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

"59th Street Property" means the Property designated on Schedule I to this Credit Agreement as the "59th Street Property."

"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

"Assignment of Collateral Account and Security Agreement" means the Assignment of Collateral Account and Security Agreement, substantially in the form of Exhibit E hereto.

"Borrower" has the meaning specified in the recital of parties to this Credit Agreement.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City.

"Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt.

"Cash Collateral Account" has the meaning specified in Section 6.01.

"Cash Collateral Agreement" has the meaning specified in Section 6.01.

"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time.

"Closing Date" means July 3, 2002.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender.

"Collateral Documents" means collectively each Guaranty, Mortgage, Pledge Agreement and the Lockbox Documents.

"Confidential Information" means information that the Borrower furnishes to the Lender on a confidential basis, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by the Lender of its obligations hereunder or that is or becomes available to the Lender from a source other than the Borrower that is not, to the best of the Lender's knowledge, acting in violation of a confidentiality agreement with the Borrower.

"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.

"Construction Loan" shall have the meaning given to such term in Section 5.01(m) hereof.

"Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Debt of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"Default Rate" means 4% per annum above the rate per annum required to be paid on the Loan pursuant to Section 2.04(a).

"Deposit Account Control Agreement" means the Control Agreement for Notification and Acknowledgement of Security Interest in Deposit Accounts substantially in the form of Exhibit F hereto.

"Disclosed Litigation" means the matters described on Schedule IV hereto.

"Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit including, without limitation, (a) any written claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and
(b) any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

"Environmental Law" means any applicable federal, state or local law, rule, regulation, order, writ, judgment, injunction, decree, determination or award relating to the environment, health, safety or Hazardous Materials.

"Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law.

"Events of Default" has the meaning specified in Section 7.01.

"Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement.

"Flushing Property" means the ground leasehold estate on the Property designated on Schedule I to this Credit Agreement as the "Flushing Property."

"GAAP" has the meaning specified in Section 1.03.

"Guarantor" means each of Alexander's, Inc., Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc., Alexander's of Third Avenue, Inc., and Alexander's of Flushing, Inc. and subsequent assignees thereof and any other Person who shall execute a Guaranty after the date hereof.

"Guaranty" means the Guaranty as to Alexander's, substantially in the form of Exhibit B-1 to this Credit Agreement, and in the case of each other Guarantor, substantially in the form of Exhibit B-2 to the Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor.

"Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and
(c) any other substance exposure to which is regulated under any Environmental Law.

"Indemnified Party" has the meaning specified in Section 8.04(b).

"Interest Rate" means a rate equal to the one-year treasury bill rate (the "Base Rate") as of March 15, 2002 plus 9.48%, such rate to be reset quarterly (i.e., on June 15, September 15, December 15 and March 15) to equal the Base Rate as of the reset date plus 9.48%; provided, however, that if the one-year treasury bill rate as of any reset date is less than 3%, the Base Rate for purposes of such reset shall be 3%.

"Leasing Agreement" means (a) that certain 59th Street Real Estate Retention Agreement, dated as of the date hereof, among Vornado Realty Trust and the Borrower as amended from time to time, and (b) that certain Real Estate Retention Agreement dated July, 1992 between Vornado, Inc., Alexander's and certain other parties as amended by Amendment to Real Estate Retention Agreement, dated as of the date hereof.

"Lender's Account" means an account of or specified by the Lender and, until the Lender shall notify the Borrower of a change in such account, shall mean the account of Vornado Lending L.L.C. maintained at Fleet Bank (Account No. 9403934589).

"Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

"Loan" means the loan from Lender to Borrower in the amount of $40,000,000 evidenced by this Credit Agreement.

"Loan Documents" means this Amended and Restated Credit Agreement, the Amended and Restated Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan.

"Loan Obligations" means all amounts due and payable to the Lender under the Loan Documents.

"Loan Parties" means the Borrower, each Guarantor, and each Mortgagor.

"Lockbox Documents" means collectively, that certain Assignment of Collateral Account and Security Agreement and that certain Deposit Account Control Agreement, each dated on or about the date hereof.

"Major Lease" means any lease at Property (i) for an entire free-standing building, including without limitation a building to be constructed, (ii) for over 10,000 rentable square feet, or (iii) with an anchor tenant.

"Management Agreement" means (a) that certain 59th Street Management and Development Agreement, dated as of the date hereof, between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp., as amended from time to time, and (b) that certain Amended and Restated Management Agreement

dated as of the date hereof between Alexander's and Vornado Management Corp., as amended from time to time.

"Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole.

"Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or related Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document or related Document to which it is or is to be a party.

"Maturity Date" means the earlier of (i) January 3, 2006 and (ii) the date on which the Construction Loan is paid in full.

"Mortgage" or "Mortgages" means one or more mortgages, in substantially the form of Exhibit D to this Credit Agreement and covering all or any of the Properties, as the same may be amended from time to time, duly executed by the applicable Mortgagor in favor of Lender.

"Mortgagor" means the Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc., Alexander's of Third Avenue or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage.

"Note" or "Notes" means, collectively, the promissory notes of the Borrower payable to the order of the Lender, in substantially the form of Exhibit A hereto, as amended from time to time, evidencing the indebtedness of the Borrower to the Lender resulting from the Loan made by the Lender.

"Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that the Lender, in accordance with the terms of the applicable Loan Document, may elect to pay or advance on behalf of such Loan Party.

"Other Taxes" has the meaning specified in Section 2.07(b).

"Other Vornado Loans" means, collectively (i) that certain loan in the principal amount of $20,000,000 evidenced by a Credit Agreement dated as of even date herewith from Lender, as lender to Alexander's, as borrower;
(ii) that certain loan in the principal amount of $35,000,000 evidenced by a Credit Agreement dated as of even date herewith from Lender, as lender, to Alexander's, as borrower; (iii) that certain credit line in the maximum principal amount of $50,000,000 evidenced by an Amended and Restated Credit Line Agreement dated as of even date herewith, from Lender, as lender, to Alexander's, as borrower; and (iv) the Reimbursement Facility.

"Participant" has the meaning set forth in Section 8.08.

"Permitted Encumbrances" has the meaning specified in the Mortgages.

"Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Permitted Encumbrances; (c) with respect to any real property acquired by Borrower, Alexander's or any Subsidiary or Affiliate of Borrower or Alexander's after the date hereof, liens to which such property is subject as of the date of such acquisition, purchase money mortgages or other similar purchase liens and liens in favor of lenders providing construction or development financing in connection with such property provided, that all proceeds of such financings are used for construction or development of such property or the retirement of Existing Debt secured by one or more liens on such property; (d) Liens permitted to be incurred by Borrower pursuant to the terms of this Credit Agreement; (e) Liens in connection with taxes being contested in good faith in compliance with this Credit Agreement; (f) Liens securing the Construction Loan; and (g) any renewal or replacement of any Lien permitted pursuant to the foregoing clauses (a) through (g), inclusive, provided that any such renewal or replacement Lien secures Debt in an amount not in excess of the Debt secured by the Lien so renewed or replaced, provided, however, that notwithstanding the foregoing, the Lender shall not be required to subordinate to any Lien pursuant to this clause except as otherwise provided in this Credit Agreement.

"Permitted Related Owner" means any of (a) any Subsidiary now existing or hereafter created all shares of issued and outstanding capital stock of which are owned by Alexander's or (b) a corporation (x) 90% or more of the economic interests of which shall be held by Alexander's through the ownership of shares of preferred and/or common stock of such corporation and (y) 10% or less of the economic interests of which shall be held by an entity reasonably satisfactory to the Lender through the ownership of shares of common and/or preferred stock of such corporation; provided that such Subsidiary or corporation enters into a guaranty substantially in the form of the Guaranty pursuant to which it guarantees the obligations of the Borrower under the Notes, the obligations of Alexander's

under its Guaranty or (c) 731 Commercial LLC, 731 Residential LLC, 731 Commercial Holding LLC and 731 Residential Holding LLC. The conditions regarding share ownership set forth in clauses (x) and (y) above may be varied to the extent necessary for any income received by Alexander's to be described in Section 856(c)(2) of the Code or for Alexander's to continue to qualify as a REIT.

"Person" means an individual, partnership, limited liability company, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

"Pledge Agreement" means that certain Amended and Restated Pledge Agreement substantially in the form of Exhibit G hereto.

"Prepayment Date" has the meaning specified in Section 2.03.

"Properties" means the properties listed on Schedule I to this Credit Agreement and any real property acquired by the Borrower or any Mortgagor after the Closing Date.

"Rego Park II Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park II Property".

"Rego Park III Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park III Property".

"Reimbursement Facility" means the credit facility evidenced by the Reimbursement Agreement, dated the date hereof, by and among Alexander's, Inc., 731 Commercial LLC and 731 Residential LLC, as Obligor, and Vornado Realty, L.P.

"REIT" means an entity described in Section 856(a) of the Code and entitled to the benefits of Section 857(a) of the Code.

"Secured Debt" means any Debt of the Borrower incurred after the Closing Date that is secured by any of the Properties and/or the Collateral and that otherwise contains terms and conditions satisfactory to the Lender.

"Subordinate Debt" means any Debt of the Borrower that is subordinated to the Loan Obligations under the Loan Documents on, and that otherwise contains, terms and conditions satisfactory to the Lender.

"Subsidiary" means, with respect to the Borrower, any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by the

Borrower, by the Borrower and one or more of its other Subsidiaries or by one or more of the Borrower's other Subsidiaries.

"Taxes" has the meaning specified in Section 2.07(a).

"Third Avenue Property" means the Property designated in Schedule I to this Credit Agreement as the "Third Avenue Property".

"Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency.

SECTION 1.02. Computation of Time Periods. In this Credit Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding".

SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(f) ("GAAP").

ARTICLE II.

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01. Intentionally Omitted.

SECTION 2.02. Repayment. The Borrower shall repay to the Lender the aggregate principal amount of the Loan and all other Loan Obligations on the Maturity Date or on such earlier date as the Loan Obligations become due as provided in the Loan Documents.

SECTION 2.03. Prepayments. The Borrower may, upon at least two (2) days' notice to the Lender prepay all or any portion of the outstanding principal amount of the Loan, together with (i) accrued interest to the date of such prepayment on the principal amount prepaid and (ii) if the entire outstanding principal amount of the Loan is repaid, all other accrued and unpaid amounts due hereunder or under any other Loan Document.

SECTION 2.04. Interest. (a) Ordinary Interest. The Borrower shall pay interest on the unpaid principal amount of the Loan owing to the Lender from the Closing Date, until such principal amount shall be paid in full, payable in arrears on the fifteenth day of each month (each an "Interest Payment Date") at a rate per annum equal to the Interest Rate, but in no event shall the Loans be repaid later than the Maturity Date.

(ii) the amount of any interest, fee or other amount due and payable hereunder which is not paid when due, from the date such amount shall be due until such amount shall be paid in full, in either clause (i) or (ii) payable immediately on the Maturity Date or on demand after such occurrence and during such continuance, at a rate per annum equal at all times to the Default Rate.

(c) Late Charges. In the event any payment of principal or any interest is not made within five (5) days after the date on which such amount first becomes due and payable, the Lender may, at its option, require the Borrower to make an additional payment to the Lender as a late charge in an amount equal to 5% of such overdue amount.

SECTION 2.05. Increased Costs. If, with respect to any assignee of the Lender or a Participant that is a bank (a "Bank Lender"), due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than a law or regulation relating to taxes) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the amount of capital required by such Bank Lender or authority to be maintained by such Bank Lender or any corporation controlling Bank Lender as a result of or based upon the existence of Bank Lender's commitment to lend hereunder then, upon demand by Bank Lender, the Borrower shall pay to Bank Lender, from time to time as reasonably specified by Bank Lender, additional amounts sufficient to compensate Bank Lender in the light of such circumstances, to the extent that Bank Lender reasonably determines such increase in capital to be allocable to the existence of the Loan.

SECTION 2.06. Payments and Computations. (a) The Borrower shall make each payment required to be made hereunder and under the Notes not later than 11:00
A.M., New York City time, on the day when due in U.S. dollars to the Lender at the Lender's Account in immediately available (same day) funds.

(b) All computations of interest and fees shall be made by the Lender on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest.

execution of every such power as though no such law had been enacted. It is the intent of the Lender and the Borrower in the execution of the Notes, this Credit Agreement and all other instruments now or hereafter securing the Notes or executed in connection therewith or under any other written or oral agreement by the Borrower in favor of the Lender to contract in strict compliance with applicable usury law. In furtherance thereof, the Lender and the Borrower stipulate and agree that none of the terms and provisions contained in the Notes, this Credit Agreement or any other instrument securing the Notes or executed in connection herewith, or in any other written or oral agreement by the Borrower in favor of the Lender, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law. Neither the Borrower nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Notes shall ever be required to pay interest on the Notes or on indebtedness arising under any instrument securing the Notes or executed in connection therewith, or in any other written or oral agreement by the Borrower in favor of the Lender, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this Section 2.06(d) shall control over all other provisions of the Notes, this Credit Agreement and any other instruments now or hereafter securing the Notes or executed in connection herewith or any other oral or written agreements that may be in apparent conflict herewith. The Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Notes is accelerated. If the maturity of the Notes shall be accelerated for any reason or if the principal of the Notes is paid prior to the end of the term of the Notes, and as a result thereof the interest received for the actual period of existence of the Loan exceeds the applicable maximum lawful rate, the Lender shall, at its option, either refund to the Borrower the amount of such excess or credit the amount of such excess against the principal balance of the Notes then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. In the event that the Lender shall collect monies and/or any other thing of value that are then or at any time deemed to constitute interest that would increase the effective interest rate on the Notes to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of the Lender, be either immediately returned to the Borrower or credited against the principal balance of the Notes then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Credit Agreement, the Borrower acknowledges that it believes the Loan to be non-usurious and agrees that if, at any time, the Borrower should have reason to believe, that the Loan is in fact usurious, it will give the Lender notice of such condition and the Borrower agrees that the Lender shall have ninety (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists.

identity or connection with the United States of the Lender or a Participant, if compliance is required by statute or by regulation of the United States Treasury Department as a precondition to exemption from such tax, assessment or other governmental charge, (iii) any tax, assessment or other governmental charge that would not have been imposed but for either (a) a sale or other transfer of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to a Person that is not an entity that is treated as a corporation organized or created under the laws of the United States or of any State for U.S. federal tax purposes or (b) Lender's merger or consolidation with, or transfer of substantially all of its assets to, another entity, and
(iv) any tax, assessment or other governmental charge that would not have been imposed but for any present or former connection between the Lender or a Participant (or a shareholder of the Lender or a Participant) and the jurisdiction imposing such tax, assessment or other governmental charge, including, without limitation, the Lender or a Participant's being or having been a citizen or resident of, present or engaged in a trade or business in, such jurisdiction, but excluding a connection arising solely as a result of the Lender's having entered into, received payments under and enforced this Credit Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions ("Additional Taxes") applicable to additional sums payable pursuant to this sentence), the Lender receives an amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Credit Agreement or the Notes (hereinafter referred to as "Other Taxes").

(c) The Borrower shall indemnify the Lender for the full amount of Taxes, and Other Taxes, paid by the Lender and any liability (including penalties, additions to tax, Additional Taxes, interest and expenses) arising therefrom or with respect thereto except as may arise as a result of the Lender's gross negligence or willful misconduct.

(d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Lender, at its address referred to in Section 8.02, the original receipt of payment thereof or a certified copy of such receipt.

(e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.07 shall survive the payment in full of principal and interest hereunder and under the Note.

SECTION 2.08. Payment of Certain Costs and Expenses. The Borrower shall pay to the Lender within five (5) days after demand therefor all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by the Lender in connection with (i) the approval of any lease, (ii) the preparation, negotiation and execution of any non-disturbance agreement requested for any lease, (iii) review and approval of any plans,

construction contracts or any other documents relating to construction or development of a Property; and (iv) the assignment of any liens of the Mortgages.

SECTION 2.09. Use of Proceeds. The proceeds of the Loan shall be available (and the Borrower agrees that it shall use such proceeds) only to provide working capital for the Borrower and its Subsidiaries.

ARTICLE III.

CONDITIONS OF LENDING

SECTION 3.01. Intentionally Omitted.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

(a) Each Loan Party that is a corporation (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(b) Each Loan Party that is a partnership or a limited liability company
(i) is a partnership or a limited liability company duly formed and validly existing under the laws of the State of its formation, (ii) is duly qualified in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite partnership or limited liability company power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

Adverse Effect except as set forth on Schedule II hereof, (iii) except as set forth on Schedule II hereof, conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, except where such conflict, breach or default is not reasonably likely to have a Material Adverse Effect or
(iv) except for the Liens created by the Collateral Documents result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries.

(d) Other than as set forth on Schedule III hereof, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Credit Agreement, the Notes, any other Loan Document or any related document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents or (iv) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents.

(e) This Credit Agreement has been, and the Notes, each other Loan Document and each related document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Credit Agreement is, and the Notes, each other Loan Document and each related Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms.

(f) The Consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 2002, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and the Consolidated balance sheet of the Borrower, and its Subsidiaries as at March 31, 2002 and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the Chairman of the Board of Borrower or any other officer of Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at March 31, 2002, and said statement of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since March 31, 2002, there has been no Material Adverse Change.

(g) All financial statements delivered by any Loan Party to the Lender, are true, correct and complete in all material respects, fairly represent such Loan Party's financial condition as of the date hereof and thereof, and no information has been omitted that would make the information previously furnished misleading or incorrect in any material respect.

agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of this Credit Agreement, the Notes, any other Loan Document or any Related Document or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status or financial effect on any Loan Party of the Disclosed Litigation from that described on Schedule IV hereof.

(i) Except as set forth on Schedule V(a) hereof to such Loan Party's knowledge, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Loan Party and its Subsidiaries, each Loan Party and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and, no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any properties described in the Mortgages or the 59th Street Property that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(j) Except as set forth in the environmental reports heretofore delivered to the Lender as set forth on Schedule V(b) hereof, none of the operations and properties of each Loan Party is listed or, to the knowledge of any Loan Party, proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup or is adjacent to any such property. Except as would not have a Material Adverse Effect, no underground storage tanks, as such term is defined in 42 U.S.C.Section 6991, are located on any property in violation of applicable Environmental Laws. Except as set forth on the environmental reports heretofore provided to the Lender, the Borrower has no knowledge of any underground storage tank located on any Property adjoining any Property.

(k) Each Loan Party and each of its Subsidiaries has filed or has caused to be filed all income tax returns (Federal, state and local) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. The Borrower is not aware of any material unasserted claims for prior taxes against it for which adequate reserves satisfactory to the Lender have not been established.

(l) Each Mortgagor, and each of 731 Commercial LLC and 731 Residential LLC has good, marketable and insurable fee simple title to the real property described in the Mortgage executed and delivered by such Mortgagor and the 59th Street Property, as applicable, free and clear of all Liens, other than those disclosed on such Schedule and Liens created or permitted by the Loan Documents.

(m) Except as set forth on Schedule VI hereof, no Loan Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained herein or in any material agreement or instrument to which it is a party or by which it or any of its properties is bound.

(n) As of the date hereof, there has been no Material Adverse Change since the date of the most recent financial statements provided by the Borrower or such Loan Party to the Lender.

(o) No Loan Document or other document, certificate or statement furnished to the Lender by or on behalf of the Borrower or any other Loan Party contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. It is specifically understood by the Borrower that all such statements, representations and warranties shall be deemed to have been relied upon by the Lender as an inducement to make the Loan to the Borrower.

ARTICLE V.

COVENANTS

SECTION 5.01. Affirmative Covenants of the Borrower. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:

(a) Compliance with Laws, Etc. Comply and cause its Subsidiaries to comply in all respects, with all applicable laws, rules, regulations and orders, except as set forth on Schedule VII hereof, or except where such non-compliance is not likely to have a Material Adverse Effect; and keep, and cause each Subsidiary to keep, at all times in full force and effect all authorizations required for the continued use and operation of the properties of the Borrower except as set forth on such Schedule.

(b) Payment of Taxes, Etc. Prepare and timely file all federal, state and local tax returns required to be filed by the Borrower and promptly pay and discharge all taxes, assessments and other governmental charges, imposed upon the Borrower or its income or any of its property, and cause each Subsidiary to do so, with respect to real estate taxes, before interest and penalties commence to accrue thereon and, with respect to all other taxes, before they become a Lien upon such property, except for those taxes, assessments and other governmental charges then being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has maintained adequate reserves and with respect to which (i) there is a not a reasonable likelihood, in the judgment of the Lender, that the Borrower or the Lender shall be subject to any risk of criminal or material civil liability and (ii) there is not a reasonable likelihood, in the judgment of the Lender, that the Borrower's or any of its Subsidiaries' properties shall be subject to the risk, respectively, of forfeiture or impairment, provided, however, that all real estate taxes must be paid when due. The Borrower shall submit to the Lender, upon request, an affidavit signed by the Borrower certifying that all federal, state and local income tax returns have been filed to date and all real property taxes, assessments and other governmental charges with respect to the Borrower's or any Subsidiary's properties have been paid to date.

Permits applicable to its operations and properties, except where the non-compliance with such laws or the absence or non-renewal of such permits is not likely to have a Material Adverse Effect; obtain and renew all Environmental Permits necessary for its operations and properties, except where such non-compliance is not likely to have a Material Adverse Effect; and to the extent and in the timeframe required by applicable Environmental Law conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and with respect to which (i) there is no reasonable likelihood of any risk of criminal or material civil liability to the Lender,
(ii) there is no reasonable likelihood that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment and (iii) appropriate reserves are being maintained with respect to such circumstances.

(d) Maintenance of Insurance. Maintain and cause its Subsidiaries to maintain insurance with responsible and reputable insurance companies or associations in such amounts (subject to reasonable deductibles) and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates.

(e) Preservation of Corporation, Partnership or Limited Liability Company Existence, Etc. Preserve and maintain, in full force and effect, and cause each Subsidiary, where applicable, to preserve and maintain its corporate, partnership or limited liability company existence, rights (charter and statutory) and franchises and all authorizations and rights material to its business; provided, however, that neither the Borrower nor any Subsidiary shall be required to preserve any right or franchise if the Board of Directors or general partners of the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower, or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower or such Subsidiary or the Lender.

(f) Inspection Rights. At any reasonable time and from time to time, in each case upon reasonable prior notice, and at such times as shall not unreasonably disrupt tenants, permit the Lender or any agents or representatives thereof, to examine, audit and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower, and any Subsidiary and to discuss the affairs, finances and accounts of, the Borrower or any Subsidiary with any of their officers or directors and with their independent certified public accountants.

(g) Keeping of Books. Keep and cause each Subsidiary to keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time consistently applied.

(h) Compliance with Terms of Lease Agreements. Perform, and cause each Subsidiary to perform, timely all of the obligations, covenants and agreements of the landlord

contained in any lease now or hereafter affecting any of the Properties and require the timely performance by the tenant of all of the obligations, covenants and agreements to be performed by such tenant.

(i) Approval of Leases. The Borrower shall not and shall cause each Subsidiary not to lease space at any of the Properties without the Lender's consent, which consent shall not unreasonably be withheld, provided, however, that no such consent of Lender shall be required for any lease of 10,000 square feet or less unless (i) such lease requires the Lender to provide a non-disturbance agreement to the lessee or (ii) such lease is not on commercially reasonable terms. It is hereby expressly acknowledged and agreed by the Lender that all leases at any Property identified on the certified rent roll delivered to the Lender prior to the date hereof are and shall be deemed to be approved.

(j) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates or any Permitted Related Owners on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. Transactions with the Lender, Vornado Realty Trust and any of its Affiliates pursuant to agreements existing as of the date hereof among Borrower or its Subsidiaries and Vornado Realty Trust and its Affiliates are approved.

(k) Maintenance of Properties. Maintain or cause to be maintained the Properties and all other items constituting Collateral.

(l) Compliance with Loan Documents. Comply and cause each Loan Party to comply with all of its covenants set forth in each of the Loan Documents.

(m) After Acquired Properties. Subject to the requirements of (i) liens existing at the time of acquisition, (ii) purchase money mortgage liens and
(iii) liens in connection with construction or development financing which construction or development financing is reasonably acceptable to the Lender, grant to the Lender a valid mortgage lien on, or spread the lien of a Mortgage to encumber, any real property acquired by Borrower or any Subsidiary after the date hereof. Reference is made to that certain Building Loan Agreement, dated as of July 3, 2002 (the "Building Loan Agreement"), by and among 731 Commercial LLC and 731 Residential LLC and Bayerische Hypo-und Vereinsbank, AG (the "Bank"), that certain Project Loan Agreement, dated as of July 3, 2002 (the "Project Loan Agreement"), and that certain Supplemental Loan Agreement, dated as of July 3, 2002 (the "Supplemental Loan Agreement" and together with the Building Loan Agreement and the Project Loan Agreement, the "Loan Agreements") pursuant to which the Bank will lend to 731 Commercial LLC and 731 Residential LLC a maximum of $_____ million (the "Construction Loan") for the purposes of funding the cost of constructing a ___ square foot mixed residential/office/retail building at the property known as 731 Lexington Avenue, New York, New York (the "Project"). It is understood and agreed that so long as the Construction Loan (and any refinancing thereof that has been approved by Lender and that does not permit a mortgage in favor of Lender to be granted with respect to the 59th Street Property) shall remain outstanding, no such mortgage shall be required with respect to the 59th Street Property.

(n) Trust Fund. In compliance with Section 13 and Article 3-A of the Lien Law of the State of New York, receive all proceeds of the Loan and hold the right to receive all such proceeds as a trust fund to be used first for the purpose of paying the cost of improvement, and apply all such proceeds first to the payment of the cost of improvement before using any part of such proceeds for any other purpose.

(o) Flushing Property. To keep at all times the ground lease covering the Flushing Property in full force and effect.

SECTION 5.02. Negative Covenants. So long as any portion of the Loan Obligations shall remain unpaid, the Borrower will not, or permit any other Loan Party or Subsidiary that directly or indirectly owns a Property to, at any time, without the written consent of the Lender:

(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any Loan Party or Subsidiary to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower, or any Mortgagor or any Subsidiary as debtor, or sign, or permit any Loan Party or Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any Mortgagor or Subsidiary to assign any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following:

(i) Liens created by the Loan Documents or the Other Vornado Loan Documents;

(ii) Permitted Liens;

(iii) Liens otherwise consented to by the Lender in writing; and

(iv) Liens created by the Loan Agreements or the other documents entered into in connection with the Loan Agreements (and any refinancings of the Construction Loan approved by Lender or any workouts or additional financings by the holders of the Construction Loan to 731 Residential LLC and/or 731 Commercial LLC).

(b) Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or Subsidiary to create, incur, assume or suffer to exist, any Debt other than:

(i) Debt under the Loan Documents, or the other Vornado Loan Documents;

(ii) Subordinate Debt or subordinated indebtedness approved by the Lender;

(iii) Debt secured by Permitted Liens; and

(iv) The Construction Loan and any other Debt incurred pursuant to the Loan Agreements (and any refinancings of the Construction Loan approved by Lender or any

workouts or additional financings by the holders of the Construction Loan to 731 Residential LLC and/or 731 Commercial LLC).

(c) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any Loan Party or Subsidiary to do so, except that (i) any Loan Party may merge into or consolidate with any other Loan Party; provided that, in the case of any such consolidation, the Person formed by such consolidation shall be a wholly owned Subsidiary of the Borrower; provided further, that the Borrower shall pledge and grant to Lender a first priority perfected lien in and security interest on the capital stock or other equity interests of such Subsidiary owned by the Borrower to the Lender as further collateral for the Loan Obligations, and (ii) any Subsidiary or Permitted Related Owner that is not a Loan Party may merge into or consolidate with any Subsidiary or Permitted Related Owner which is not a Loan Party.

(d) Investments in Other Persons. Purchase or acquire the obligations or stock of, or any other interest in, any Person (other than a Permitted Related Owner), except such investments as are made with surplus cash and do not expose the Borrower to any risk of loss in excess of the amount of cash invested.

(e) Loans, etc. Make, or permit any Mortgagor or Subsidiary to make, loans to any Person, other than to the Borrower, Alexander's, a wholly owned Subsidiary or a Permitted Related Owner.

(f) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding (except that Permitted Related Owners may pay dividends to the Borrower or Alexander's) return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock (except for capital stock issued by Permitted Related Owners), or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or Alexander's or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock; provided, however, that nothing contained in this section shall prohibit Borrower or Alexander's from (i) paying a dividend or making a distribution in the form of, or from the proceeds of an issuance of, subordinated indebtedness or otherwise (including, without limitation, payment in cash) as may reasonably be required, based upon the advice of counsel, to enable the Borrower or Alexander's to qualify as a REIT under the Code or (ii) paying a dividend or making a distribution from the proceeds of the issuance by the Borrower or Alexander's of equity securities.

(g) Change in Nature of Business. Make, or permit any Mortgagor to make, any material change in the nature of its business as carried on at the date hereof and will not, nor permit any Mortgagor or Subsidiary to, remove, demolish, materially alter, discontinue the use of, sell, transfer, assign, hypothecate, pledge or otherwise dispose of, except as permitted hereunder and for sales, transfers, assignments and pledges to Subsidiaries or Permitted Related Owners, any part of its assets necessary for the continuance of its business, as presently

conducted and as presently contemplated, except in the normal course of business. Notwithstanding the foregoing, no Mortgagor or Subsidiary shall transfer any Property except to a Permitted Related Owner.

(h) Charter Amendments. Amend, or permit any Mortgagor or Subsidiary to amend, its certificate of incorporation or bylaws, partnership agreement, certificate of limited partnership, operating agreement or certificate of limited liability company.

(i) Accounting Changes. Make, or permit any Mortgagor to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles.

(j) Amendment, Etc. of Related Documents. Except as may be required in order for the Borrower or Alexander's to qualify as a REIT under the Code, with respect to (i) the Management Agreement, (ii) the Leasing Agreement, (iii) Major Leases, (iv) the Architect's Contract (as defined in the Loan Agreements to be executed in connection with the Construction Loan), (v) the Bloomberg Lease (as defined in the Loan Agreements), (vi) the Construction Management Agreement (as defined in the Loan Agreements), (vii) the Loan Agreements and other Loan Documents and (viii) the Major Trade Contracts (as defined in the Loan Agreements), cancel or terminate or consent to or accept any cancellation or termination thereof, amend, modify or change in any material manner any term or condition thereof, waive any material default under or any material breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof or take any other action in connection therewith that would impair the value of the interest or rights of the Borrower, Alexander's or other Subsidiary thereunder or that would impair the rights or interests of the Lender, or permit any Mortgagor or other Subsidiary to do any of the foregoing.

(k) Future Speculative Development. Develop, or permit any Mortgagor or Subsidiary to develop, any undeveloped real property owned by the Borrower or such Mortgagor or Subsidiary in the absence of executed leases approved by Lender for more than 50% of the projected leasable space on such property; provided, that development of the Project shall be permitted.

(l) Negative Pledge. Except in connection with (i) Existing Debt, (ii) Secured Debt permitted hereby, (iii) Subordinate Debt permitted hereby, and (iv) Permitted Liens, but only to the extent expressly permitted herein, the Borrower shall not enter into any covenant or other agreement that prevents it or could prevent it in the future from pledging, granting a security interest in, mortgaging, assigning, encumbering or otherwise creating a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender, or that would be breached if the Borrower were to pledge, grant a security interest in, mortgage, assign, encumber or otherwise create a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender.

(m) Future Property Acquisition. Except as permitted in Section 6.01, acquire, or permit any Mortgagor or Subsidiary to acquire, any real property without the consent of the

Lender and without executing and delivering or causing such Mortgagor or Subsidiary to execute and deliver any instrument the Lender may deem necessary or desirable to effectuate such real property becoming additional security for the Loan.

(n) Payments Under Subordinate Loan Documents. Make any payment in respect of any Subordinate Debt (i) at any time while any amount shall be due and owing under any of the Loan Documents or (ii) after the Loan shall have matured or the Lender shall have accelerated payment of the Loan pursuant to Section 7.01 or prepay any Subordinate Debt while at any time that any Loan Obligation remains unpaid.

(o) Transfer of Properties. Transfer title to any of the Properties except to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition of Permitted Related Owner, (iii) any Person described in clause (b) of the definition of Permitted Related Owner, or (iv) with respect to the 59th Street Property, 731 Commercial LLC and 731 Residential LLC or to the holders of the construction loan (or their nominee or nominees) as part of a deed in lien transaction, provided that, (x) in the case of clause (iii), a receiver of a Property sought to be transferred to such Permitted Related Owner has proposed to enter into a lease at such Property or take any other action which would materially adversely affect the Borrower's or Alexander's qualification as a REIT and the Borrower has given ten (10) days' notice to the Lender of its intention to transfer such Property to such Permitted Related Owner and (y) in the case of the 59th Street Property, residential condominium units may be sold.

SECTION 5.03. Reporting Requirements. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender:

(a) Quarterly Financials. As soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and represented to be true and correct (subject to year-end audit adjustments) by the Chairman of the Board of the Borrower or other officer of the Borrower.

(b) Annual Financials. As soon as available and in any event within 120 days after the end of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and an unaudited consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, represented to be true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower.

(c) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party of the type described in Section 4.01(h), and promptly after the occurrence thereof, notice

of any material adverse change in the status of the Disclosed Litigation from that described on Schedule IV.

(d) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any Property that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any Property that could have a Material Adverse Effect or (ii) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(e) Financial Data for Each Property. Not later than 120 days after the end of each fiscal year, and not later than sixty (60) days after the end of each fiscal quarter, financial data in form reasonably satisfactory to the Lender relating to the operation of each of the Properties, including, without limitation, certified rent roll and summary of leases represented as true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower.

(f) Budget. To the extent required and received under the Management Agreement, not less than 30 days prior to the commencement of each fiscal year, an annual operating budget relating to the Properties for the upcoming fiscal year including, without limitation, the projected gross rental income and projected operating expenses on a line item basis, provided, however, nothing herein contained shall be deemed to require the Borrower to comply with such budgets.

(g) Other Information. Such other information respecting the business, financial condition, operations, performance or properties of any Loan Party as the Lender may from time to time reasonably request.

SECTION 5.04. Covenants of the Lender. (a) The Lender hereby covenants to Borrower that it will not exercise any rights, including rights exercisable upon the occurrence of an Event of Default, that it has arising from or as a result of this Credit Agreement or any related agreement to cause Borrower or any Subsidiary of Borrower or any Permitted Related Owner to (i) enter into a lease or lease amendment that either (A) provides for payments that are based, directly or indirectly (including through sub-leasing), upon the net "income or profits" of any person (as defined in Section 856(d) (2) of the Code) or (B) requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner to provide a service to a tenant, other than through an independent contractor (as defined in Section 856(d)(2) of the Code), where the provision of such service by Borrower or any of its Subsidiaries or any Permitted Related Owner would cause rents received by the Borrower or any of its Subsidiaries to fail to be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage in a new line of business which (A) is unrelated to the development or leasing of real property and (B) would create a substantial risk, as a result of its generation of income not described in Section 856(c)(2) or (c)(3) of the Code, that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an asset that would cause Borrower to fail to satisfy the asset test of Section 856(c)(5) of the Code; provided, however, that the foregoing covenants of this
Section 5.04(a) shall not (x) preclude the Lender from collecting amounts due to the Lender under this Credit Agreement or from foreclosing on any property securing such indebtedness or (y) be deemed to have been breached or violated by the Lender as a result of any act or action (including, without limitation, the execution of a lease)

made, done or taken by any receiver for any property of any Loan Party (including a receiver appointed at the request of the Lender) unless a motion to compel such act or action was made by the Lender to the court which appointed such receiver.

(b) The Lender agrees to use reasonable efforts to preserve the confidentiality of any Confidential Information received by it from the Borrower except as required by law or court order.

(c) The Lender shall execute and deliver a non-disturbance agreement substantially in the form of Exhibit C hereto (with such changes as the Lender may reasonably request) in connection with any lease approved by the Lender pursuant to Section 5.01(i) where the tenant is a nationally recognized credit-worthy retail tenant, provided that the tenant under such Lease shall require such non-disturbance agreement.

ARTICLE VI.

SPECIAL PROVISIONS

SECTION 6.01. Condemnation and Casualty. (a) In the event of any condemnation or casualty of any Property in part or in the entirety, the proceeds of such condemnation or casualty to the extent not retained or otherwise applied by the holder of the Construction Loan applied as required pursuant to any Major Lease approved by the Lender at the Property or applied by such mortgagee or in accordance with such Major Lease either to restore the improvements on such Property or to reduce the Construction Loan applied as required pursuant to any condominium declaration and/or related by-laws affecting any Property that has previously been approved by Lender to restore the improvements on such Property or applied in accordance with the Loan Documents, shall be immediately deposited by Borrower in a cash collateral account to be maintained by Borrower at a depository designated by Lender and under the sole dominion and control of Lender (the "Cash Collateral Account") pursuant to a cash collateral agreement to be entered into between Borrower, Lender and such Depository (the "Cash Collateral Agreement"); (such proceeds of condemnation so deposited being herein called "Condemnation Proceeds"; such proceeds of casualty so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds and/or Casualty Proceeds being herein called "Proceeds") and shall constitute additional collateral for the Loan Obligations.

substance reasonably satisfactory to the Lender; (iii) the Lender shall be granted a priority lien mortgage on said real estate to further secure the Guaranty (the "Additional Mortgage"); (iv) the Borrower shall have delivered to Lender a paid-up mortgage title insurance policy in favor of Lender, insuring the Additional Mortgage as a second priority mortgage on such real estate, subject to no encumbrances or other title exceptions except those title exceptions which Lender reasonably determines are acceptable based on good institutional lending practices; and (v) the Borrower shall have paid all reasonable costs and expenses of the Lender (including reasonable attorneys' fees and expenses) incurred by the Lender in connection with the review of any of the foregoing conditions.

(c) The Borrower shall also have the right to withdraw the Condemnation Proceeds remaining in the Cash Collateral Account to pay for the cost of constructing improvements on any Property covered by any Mortgage, and the Borrower shall have the right to withdraw any Casualty Proceeds in the Cash Collateral Account to pay for the repair and restoration of improvements whose damage or destruction generated such Casualty Proceeds, provided that, in all cases subject to the Loan Agreements, any condominium declaration and/or related by-laws affecting such Property that has previously been approved by Lender, and the Loan Documents: (i) no Default or Event of Default shall be continuing; (ii) the Lender shall have approved the plans and specifications for the construction of such improvements as well as the general contract and other major contracts to be entered into by the Borrower in connection with such construction, which approval will not unreasonably be withheld; (iii) the Lender shall have received such certification and assurances as Lender shall reasonably request to assure it that the cost of constructing the improvements as shown on the plans approved by Lender does not exceed the amount of the Proceeds sought to be withdrawn by the Borrower to pay for such improvements; and (iv) the Lender may impose such further conditions and restrictions upon the disbursement of such Proceeds as the Lender deems necessary or desirable, consistent with prudent institutional construction lending practices, to assure the completion of the proposed improvements subject to no liens or encumbrances (except Permitted Liens) and in accordance with the aforesaid approved plans and all applicable laws.

SECTION 6.02. Payment of REIT Dividends. In the event that the Borrower or Alexander's shall determine, upon the advice of counsel then generally used by Borrower or Alexander's for tax advice, that it shall be required to pay a dividend or make a distribution to stockholders in order to preserve its qualification as a REIT, whether or not the Proceeds shall have been applied as contemplated pursuant to Section 6.01(b) or (c), then, anything herein to the contrary notwithstanding, the Borrower or Alexander's may, with the consent of the Lender incur unsecured subordinated indebtedness for the purpose of paying such dividend or making such distribution or to pay such dividend or make such distribution in the form of subordinated indebtedness and/or (ii) withdraw Proceeds from the Cash Collateral Account to pay such dividend or make such distribution.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(a) the Borrower shall fail to pay (i) any principal of the Loan, when the same becomes due and payable or (ii) any other payment under any Loan Document, in each case under this clause (ii) within five days after notice of the same becoming due and payable; or

(b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c) the Borrower shall fail to perform or observe, in any material respect, any term, covenant or agreement contained in Section 5.02; or

(d) except as otherwise specified in such Loan Document, any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice (or such longer period, if any, as may be set forth in the applicable covenant or agreement) thereof shall have been given to the Borrower by the Lender; or

(e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of or any Subordinate Debt of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable notice and grace period, if any, specified in the agreement or instrument relating to such Subordinate Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Subordinate Debt and shall continue after the applicable notice and grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Subordinate Debt or otherwise to cause such Subordinate Debt to mature; or any such Subordinate Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Subordinate Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(f) any Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or

(g) any judgment or order for the payment of money in excess of $500,000 shall be rendered against any Loan Party, and either (i) enforcement proceedings shall have been commenced and be continuing by any creditor upon such judgment or order or (ii) there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(h) any non-monetary judgment or order shall be rendered against any Loan Party that is reasonably likely to have a Material Adverse Effect, and there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) any material provision of any Loan Document after delivery thereof shall for any reason cease to be valid and binding on or enforceable against any Loan Party to it, or any such Loan Party shall so state in writing; or

(j) except as otherwise permitted under Section 5.02(a), any Collateral Document after delivery thereof shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected Lien on the Collateral purported to be covered thereby with the priority of liens set forth therein;

(k) any Event of Default (as such term is defined in any Loan Document) shall occur and be continuing;

(l) any Event of Default (as such term is defined in any Mortgage or other loan document of the Other Vornado Loans) shall occur and be continuing; or

(m) any Event of Default (as such term is defined in the Loan Agreements) shall occur and be continuing;

then, and in any such event, the Lender may, by notice to the Borrower, declare the Loan Obligations, together with all interest thereon and all other amounts payable under this Credit Agreement and the other Loan Documents, to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party under the United States Bankruptcy Code, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VIII.

MISCELLANEOUS

Lender, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 8.02. Notices, Etc. All notices and communications under this Credit Agreement shall be in writing and shall be given by either (a) hand-delivery, (b) facsimile transmission, (c) first class mail (postage prepaid), or (d) reliable overnight commercial courier (charges prepaid)

      (i)   if to the Borrower, to:

            59th Street Corporation
            c/o Vornado Realty Trust
            210 Route 4 East
            Paramus, New Jersey  07652-0910
            Attention:  Chief Financial Officer
            Facsimile No.: (201) 587-0600

            with a copy to:

            Winston & Strawn
            200 Park Avenue
            New York, New York 10166
            Facsimile No.: (212) 294-4700
            Attention:  Neil Underberg

and         Vornado Realty Trust
            888 Seventh Avenue
            New York, New York 10019
            Attention:  President
            Facsimile No.: (212)  894-7070


      (ii)  if to the Lender, to:

            Vornado Lending L.L.C.
            c/o Vornado Realty Trust
            210 Route 4 East
            Paramus, New Jersey  07652-0910
            Attention:  Chief Financial Officer
            Facsimile No.: (201) 587-0600

Notice shall be deemed to have been given and received: (i) if by hand delivery, upon delivery; (ii) if by facsimile, upon transmission; (iii) if by mail, three
(3) calendar days after the date first deposited in the United States mail; and
(iv) if by overnight courier, on the date scheduled for delivery. A party may change its address by giving written notice to the other party as specified herein.

SECTION 8.03. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 8.04. Costs, Expenses. (a) The Borrower agrees to pay on demand
(i) all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto) and (ii) all reasonable costs and expenses of the Lender in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto).

(b) The Borrower agrees to indemnify and hold harmless the Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the transactions contemplated hereby, (ii) the actual or alleged presence of Hazardous Materials on any property or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, (iii) disputes with any architect, general contractor, subcontractor, materialman or supplier, or on account of any act or omission to act by the Lender in connection with any Property, (iv) any untrue statement of a material fact contained in information submitted to the Lender by the Borrower or the omission of any material fact necessary to be stated therein in order to make such statement not misleading or incomplete, (v) the failure of the Borrower or any Loan Party to perform any obligations required to be performed by the Borrower or any Loan Party under any Loan Document and (vi) the ownership, construction, occupancy, operation, use or maintenance of any of the Properties, in each case whether or not the transactions contemplated hereby are consummated, except (i) to the extent such claim, damage, loss, liability or expense is found to have resulted from any Indemnified Party's gross negligence or willful misconduct. Notwithstanding the foregoing provisions of this Section 8.04(b), the Borrower shall have no obligation to indemnify any Indemnified Party against, or hold it harmless from, (i) any judgment rendered by a court of competent jurisdiction against any Indemnified Party and in favor of the Borrower, or (ii) any legal fees and expenses incurred by the Indemnified Party in defending the action brought by the Borrower which resulted in such judgment in favor of the Borrower, but the foregoing provisions of this sentence shall not diminish or otherwise affect the Borrower's liability for payment of all legal fees and expenses incurred by the Lender in enforcing the Lender's rights and remedies under any of the Loan Documents.

defense thereof, including the employment of counsel selected by the Borrower and reasonably satisfactory to the Lender, the payment of all costs and expenses and the right to negotiate and consent to settlement. The failure of the Lender to so notify the Borrower shall not relieve the Borrower of any liability it may have under the foregoing indemnification provisions or from any liability which it may otherwise have to the Lender or any of the other Indemnified Parties except to the extent that the Borrower incurs actual expenses or suffers actual monetary loss as a result of such failure to give notice. The Lender shall have the right, at its sole option, to employ separate counsel and as long as Borrower is complying with its indemnification obligations hereunder, the fees and disbursements of such separate counsel shall be paid by Lender. The Borrower shall not be liable for any settlement of any such action effected without its consent, but if settled with the Borrower's consent, or if there be a final judgment for the claimant in any such action, the Borrower agrees to indemnify and save harmless the Lender from and against any loss or liability by reason of such settlement or judgment.

(d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Lender, in its sole discretion.

(e) The provisions of this Section 8.04 shall survive the repayment or other satisfaction of the Borrower's Obligations hereunder.

SECTION 8.05. Merger. This Credit Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the transactions contemplated herein and therein and supersede all oral negotiations and prior writings with respect thereto.

SECTION 8.06. Binding Effect. This Credit Agreement shall become effective when it shall have been executed by the Borrower and the Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.

SECTION 8.07. Lender's Discretion. Except as otherwise specified in this Credit Agreement, whenever this Credit Agreement provides that the Lender's consent or approval is required, or that any action may be taken or not taken at the Lender's option, such consent or approval may be given or not, and such action may be taken or not, in the Lender's sole discretion. Any reference in this Credit Agreement to Lender's consent or approval being required shall be deemed to refer to Lender's prior consent or approval given in writing.

effective for all purposes hereunder notwithstanding any such sale of participations. Upon the sale of any participation permitted hereunder, the Borrower shall cooperate with such reasonable requests of the Lender, at the sole expense of the Lender, to sever and split the note issued hereunder among the Lender and any Participants.

(b) The Lender may, in connection with any participation or proposed participation pursuant to this Section 8.08, disclose to the Participant or proposed Participant, any information relating to the Borrower furnished to the Lender by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the Participant or proposed Participant shall agree to preserve the confidentiality of any Confidential Information received by it from the Lender.

(c) Notwithstanding any other provision set forth in this Credit Agreement, the Lender may at any time create a security interest in all or any portion of its rights under this Credit Agreement (including, without limitation, the Loan and the Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 8.10. Execution in Counterparts. This Credit Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Credit Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Credit Agreement.

SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Obligations, the Loan or the actions of the Lender in the negotiation, administration, performance or enforcement thereof. The Borrower acknowledges and agrees that this section is a specific and material aspect of this Credit Agreement and that the Lender would not extend credit to the Borrower if the waiver set forth in this section were not a part of this Credit Agreement.

District of New York shall have jurisdiction with respect to the subject matter hereof and the person of the Borrower and all collateral securing the obligations of the Borrower. The Borrower agrees not to assert any defense to any proceeding initiated by the Lender in such court based upon improper venue or inconvenient forum. The foregoing shall not limit, restrict or otherwise affect the right of the Borrower or the Lender to commence any action on this Credit Agreement or any other Loan Document in any other courts having jurisdiction.

SECTION 8.13. Continuing Enforcement. If, after receipt of any payment of all or any part of the Borrower's Obligations hereunder, the Lender is required by law in connection with insolvency, fraudulent conveyance, bankruptcy or similar proceedings to surrender such payment then this Credit Agreement and the other Loan Documents shall continue in full force and effect, and the Borrower shall be liable for, and shall indemnify defend and hold harmless the Lender with respect to the full amount so surrendered. The provisions of this Section 8.13 shall survive the termination of this Credit Agreement and the other Loan Documents and shall remain effective notwithstanding the payment of the Borrower's Obligations hereunder, the cancellation of the Notes or any other Loan Document, the release of any security interest, lien or encumbrance securing the Borrower's Obligations hereunder or any other action which the Lender may have taken in reliance upon its receipt of such payment. Any cancellation, release or other such action by the Lender shall be deemed to have been conditioned upon any payment of the Borrower's Obligations hereunder having become final and irrevocable.

* * *

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

59TH STREET CORPORATION

By:   /s/ Brian Kurtz
   -----------------------------------
   Name:  Brian Kurtz
   Title: Assistant Secretary

VORNADO LENDING L.L.C.

By:   /s/ Joseph Macnow
   -----------------------------------
   Name:  Joseph Macnow
   Title: Executive Vice President_

SCHEDULE I
PROPERTIES

FLUSHING PROPERTY

Address: 136-20 through 136-30 Roosevelt Avenue, a/k/a 40-17-19 Main Street, Queens, New York

Tax Map Designation:

      Block:  5019      Lot: 5
      City:  New York   County: Queens    State: New York

59TH STREET PROPERTY

Address:    162-64 East 59th St. a/k/a 976-88 Third Ave.
            135-39 East 58th St. a/k/a 723-33 Lexington Ave.
            136-40 East 59th St. a/k/a 735-41 Lexington Ave.
            New York, New York

Tax Map Designation:

Block: 1313 Lots: 40, 42, 43, 50

City: New York County: New York State: New York

REGO PARK II PROPERTY

Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:

Block: 2080 Lot: 101

REGO PARK III PROPERTY

Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:

      Block:  2077            Lot:  90 and 98
      Block:  2076            Lot:  50 and 63

THIRD AVENUE PROPERTY

Address:    2948-54 Third Avenue
            633 Bergen Avenue;
            2964 Third Avenue; and
            2970 Third Avenue
            Bronx, New York

Tax Map Designation:

Section: 9 Block: 2362 Lots: 44, 72, 71, 52 & 53 City: New York County: Bronx State: New York

SCHEDULE II
CONFLICTS UNDER LOAN DOCUMENTS

1. Completing recordation and filing of the Mortgages and other documents.

SCHEDULE III
REQUIRED AUTHORIZATIONS

1. Recording Mortgages and making other security filings.

SCHEDULE IV
DISCLOSED LITIGATION

1. Claims in process in the Bankruptcy Proceeding as set forth in attached Schedule IV-A.

SCHEDULE V(a)
ENVIRONMENTAL NON-COMPLIANCE

1. Environmental matters disclosed in Alexander's, Inc. quarterly report on Form 10-Q for the quarter ended September 30, 1994, et. seq.

SCHEDULE V(b)
ENVIRONMENTAL REPORTS

Phase I Environmental Site Assessments prepared for Alexander's, Inc., 31 West 34th Street, Seventh Floor, New York, NY 10001 and prepared by Certified Engineering & Testing Company, Inc., 444 Park Avenue South, Suite 702, New York, NY 10016:

1. Roosevelt Avenue & Main Street, 136-20 Roosevelt Avenue, Flushing, New York 11354 (December 1, 1993)

2. Alexander's Department Store, 96-05 Queens Boulevard, Rego Park, New York 11374 (December 1, 1993)

3. Third Avenue & 152nd Street, Bronx, New York (December 1, 1993)

4. East 59th Street & Lexington Ave., 731-733 & 735-741 Lexington Ave., 982-988 & 976-980 Third Ave., New York, New York 10022 (December 1, 1993)

SCHEDULE VI
DEFAULTS UNDER MATERIAL AGREEMENTS

(None)

SCHEDULE VII
NON-COMPLIANCE WITH LAWS

(None)

EXHIBIT A
FORM OF NOTE

A-1

EXHIBIT B-1
FORM OF GUARANTY

B-2

EXHIBIT B-2
FORM OF GUARANTY

B-2

EXHIBIT C
FORM OF NON-DISTURBANCE AGREEMENT

B-2

EXHIBIT D
FORM OF MORTGAGE

B-2

EXHIBIT E
FORM OF ASSIGNMENT OF COLLATERAL
ACCOUNT AND SECURITY AGREEMENT

B-2

EXHIBIT F
FORM OF DEPOSIT ACCOUNT
CONTROL AGREEMENT

B-2

EXHIBIT G
FORM OF PLEDGE AGREEMENT

B-2

STATE OF     New York               )
                                    )   ss.:
COUNTY OF         New York          )

On the 2nd day of July, in the year 2002, before me, the undersigned, personally appeared Joseph Macnow, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

/s/ Leon T. Busteed
-------------------------------------------
      Notary Public
      My commission expires: Nov. 30, 2002

Leon T. Busteed

Notary Public, State of New York

No. 31-4721172

Qualified in New York County

Commission Expires on Nov. 30, 2002

Exhibit 10(i)B(2)

CREDIT AGREEMENT

dated as of July 3, 2002

among

ALEXANDER'S INC.,
as Borrower

and

VORNADO LENDING L.L.C.,

as Lender

TABLE OF CONTENTS

                                                                            Page
                                                                            ----
ARTICLE I.        DEFINITIONS AND ACCOUNTING TERMS........................    1

        SECTION 1.01. Certain Defined Terms...............................    1

        SECTION 1.02. Computation of Time Periods.........................    7

        SECTION 1.03. Accounting Terms....................................    7

ARTICLE II.       AMOUNTS AND TERMS OF THE ADVANCES.......................    7

        SECTION 2.01. The Loan............................................    7

        SECTION 2.02. Repayment...........................................    7

        SECTION 2.03. Prepayments.........................................    7

        SECTION 2.04. Interest............................................    7

        SECTION 2.05. Increased Costs.....................................    8

        SECTION 2.06. Payments and Computations...........................    8

        SECTION 2.07. Taxes ..............................................    9

        SECTION 2.08. Payment of Certain Costs and Expenses...............   10

        SECTION 2.09. Use of Proceeds.....................................   10

ARTICLE III.      CONDITIONS OF LENDING...................................   11

        SECTION 3.01. Conditions Precedent to Funding Loan................   11

ARTICLE IV.       REPRESENTATIONS AND WARRANTIES..........................   11

        SECTION 4.01. Representations and Warranties of the Borrower......   11

ARTICLE V.        COVENANTS ..............................................   14

        SECTION 5.01. Affirmative Covenants of the Borrower...............   14

        SECTION 5.02. Negative Covenants..................................   17

        SECTION 5.03. Reporting Requirements..............................   20

        SECTION 5.04. Covenants of the Lender.............................   21

ARTICLE VI.       SPECIAL PROVISIONS......................................   22

        SECTION 6.01. Condemnation and Casualty...........................   22

        SECTION 6.02. Payment of REIT Dividends...........................   24

ARTICLE VII.      EVENTS OF DEFAULT.......................................   24

        SECTION 7.01. Events of Default...................................   24

ARTICLE VIII.     MISCELLANEOUS...........................................   26

        SECTION 8.01. Amendments, Etc.....................................   26

SECTION 8.02. Notices, Etc........................................   26

SECTION 8.03. No Waiver; Remedies.................................   27

SECTION 8.04. Costs, Expenses.....................................   27

SECTION 8.05. Merger..............................................   28

SECTION 8.06. Binding Effect......................................   28

SECTION 8.07. Lender's Discretion.................................   29

SECTION 8.08. Participations......................................   29

SECTION 8.09. Governing Law.......................................   29

SECTION 8.10. Execution in Counterparts...........................   29

SECTION 8.11. Waiver of Jury Trial................................   29

SECTION 8.12. Jurisdiction........................................   30

SECTION 8.13. Continuing Enforcement..............................   30

Schedule I        -    Properties
Schedule II            Conflicts under Loan Documents
Schedule III           Required Authorizations
Schedule IV            Disclosed Litigation
Schedule V(a)          Environmental Non-Compliance
Schedule V(b)          Environmental Reports
Schedule VI            Defaults under Material Agreements
Schedule VII           Non-compliance with Laws

Exhibit A         -    Form of Note
Exhibit B         -    Form of Guaranty
Exhibit C         -    Form of Non-Disturbance Agreement
Exhibit D         -    Form of Mortgage
Exhibit E         -    Form of Pledge Agreement

CREDIT AGREEMENT dated as of July 3, 2002 by and between Alexander's Inc., a Delaware corporation ("Alexander's" or the "Borrower"), as borrower, and Vornado Lending L.L.C., a New Jersey limited liability company (the "Lender"), as lender.

WHEREAS, Borrower has requested that Lender make a loan in the amount and for the purposes herein specified and Lender is willing to make such a loan on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

"Borrower" has the meaning specified in the recital of parties to this Credit Agreement.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City.

"Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt.

"Cash Collateral Account" has the meaning specified in Section 6.01.

"Cash Collateral Agreement" has the meaning specified in Section 6.01.

"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time.

"Closing Date" means July 3, 2002.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender.

"Collateral Documents" means collectively each Guaranty, Mortgage, and the Pledge Agreement.

"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.

"Construction Loan" shall have the meaning given to such term in Section 5.01(m) hereof.

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"Default Rate" means 4% per annum above the rate per annum required to be paid on the Loan pursuant to Section 2.04(a).

"Disclosed Litigation" means the matters described on Schedule IV hereto.

seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

"Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law.

"Events of Default" has the meaning specified in Section 7.01.

"Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement.

"GAAP" has the meaning specified in Section 1.03.

"Guarantor" means each of Alexander's of Rego Park II, Inc. and Alexander's of Rego Park III, Inc. and subsequent assignees thereof and any other Person who shall execute a Guaranty after the date hereof.

"Guaranty" means the Guaranty substantially in the form of Exhibit B to this Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor.

"Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law.

"Indemnified Party" has the meaning specified in Section 8.04(b).

"Interest Payment Date" has the meaning specified in Section 2.04(a).

"Leasing Agreement" means that certain Real Estate Retention Agreement dated July, 1992 between Vornado, Inc., Alexander's and certain other parties as amended by Amendment to Real Estate Retention Agreement dated as of the date hereof.

"Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained

security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property and any easement, right of way or other encumbrance on title to real property.

"Loan" means the loan from Lender to Borrower in the amount of $20,000,000 evidenced by this Credit Agreement.

"Loan Documents" means this Credit Agreement, the Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan.

"Loan Obligations" means all amounts due payable to the Lender under the Loan Documents.

"Loan Parties" means the Borrower, each Guarantor and each Mortgagor.

"Management Agreement" means that certain Amended and Restated Management and Development Agreement, dated as of the date hereof, between the Borrower and Vornado Management Corp., as amended from time to time.

"Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole.

"Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

"Maturity Date" means the earlier of (i) January 3, 2006 and (ii) the date on which the Construction Loan is paid in full.

"Mortgagor" means Alexander's of Rego Park II, Inc. and Alexander's of Rego Park III, Inc. or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage.

proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that the Lender, in accordance with the terms of the applicable Loan Document, may elect to pay or advance on behalf of such Loan Party.

"Other Taxes" has the meaning specified in Section 2.07(b).

"Other Vornado Loans" means, collectively (i) that certain loan in the principal amount of $35,000,000 evidenced by a Credit Agreement dated as of even date herewith from Lender, as lender to Alexander's, as borrower; (ii) that certain loan in the principal amount of $40,000,000 evidenced by an Amended and Restated Credit Agreement dated as of even date herewith from Lender, as lender, to 59th Street Corporation, as borrower; (iii) that certain credit line in the maximum principal amount of $50,000,000 evidenced by an Amended and Restated Credit Line Agreement dated as of even date herewith, from Lender, as lender, to Alexander's, as borrower; and (iv) the Reimbursement Facility.

"Participant" has the meaning set forth in Section 8.08.

"Permitted Encumbrances" has the meaning specified in the Mortgages.

"Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Permitted Encumbrances; (c) with respect to any real property acquired by Borrower or any Subsidiary or Affiliate of Borrower after the date hereof, liens to which such property is subject as of the date of such acquisition, purchase money mortgages or other similar purchase liens and liens in favor of lenders providing construction or development financing in connection with such property provided, that all proceeds of such financings are used for construction or development of such property or the retirement of Existing Debt secured by one or more liens on such property; (d) Liens permitted to be incurred by Borrower pursuant to the terms of this Credit Agreement; (e) Liens in connection with taxes being contested in good faith in compliance with this Credit Agreement; (f) Liens securing the Construction Loan; and (g) any renewal or replacement of any Lien permitted pursuant to the foregoing clauses
(a) through (g), inclusive, provided that any such renewal or replacement Lien secures Debt in an amount not in excess of the Debt secured by the Lien so renewed or replaced, provided, however, that notwithstanding the foregoing, the Lender shall not be required to subordinate to any Lien pursuant to this clause except as otherwise provided in this Credit Agreement.

"Permitted Related Owner" means any of (a) any Subsidiary now existing or hereafter created all shares of issued and outstanding capital stock of which are owned by the Borrower, (b) a corporation (x) 90% or more of the economic interests of which shall be held by the Borrower through the ownership of shares of preferred and/or common stock of such corporation and (y) 10% or less of the economic interests of which shall be held by an entity reasonably satisfactory to the Lender through the ownership of shares of common and/or preferred stock of such corporation; provided that such Subsidiary or corporation enters into a guaranty substantially in the form of the Guaranty pursuant to which it guarantees the obligations of the Borrower under the Notes, or (c) 731 Commercial LLC, 731 Residential LLC, 731 Commercial

Holding LLC and 731 Residential Holding LLC. The conditions regarding share ownership set forth in clauses (x) and (y) above may be varied to the extent necessary for any income received by the Borrower to be described in Section 856(c)(2) of the Code or for the Borrower to continue to qualify as a REIT.

"Pledge Agreement" means that certain Pledge Agreement substantially in the form of Exhibit E hereto.

"Prepayment Date" has the meaning specified in Section 2.03.

"Properties" means the properties listed on Schedule I to this Credit Agreement and any real property acquired by the Borrower or any Mortgagor after the Closing Date.

"Rego Park II Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park II Property".

"Rego Park III Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park III Property".

"REIT" means an entity described in Section 856(a) of the Code and entitled to the benefits of Section 857(a) of the Code.

"Subsidiary" means, with respect to the Borrower, (i) in any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by the Borrower, by the Borrower and one or more of its other Subsidiaries or by one or more of the Borrower's other Subsidiaries and (ii) 731 Commercial LLC, 731 Residential LLC, 731 Commercial Holding LLC and 731 Residential Holding LLC

"Taxes" has the meaning specified in Section 2.07(a).

ARTICLE II.

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions hereinafter set forth, to make a single advance to the Borrower on the Closing Date in an amount equal to Twenty Million and 00/100 Dollars ($20,000,000.00) (such sum being hereinafter referred to as the "Loan"). Amounts borrower under this Section 2.01 and repaid or prepaid may not be reborrowed.

(b) Default Interest. From and after the Maturity Date and upon the occurrence and during the continuance of an Event of Default specified in
Section 7.01 of this Credit Agreement, the Borrower shall pay interest on (i) the unpaid principal amount of the Loan and (ii) the amount of any interest, fee or other amount due and payable hereunder which is not paid when due, from the date such amount shall be due until such amount shall be paid in full, in either clause (i) or (ii) payable immediately on the Maturity Date or on demand after such occurrence and during such continuance, at a rate per annum equal at all times to the Default Rate.

payment of the Notes shall ever be required to pay interest on the Notes or on indebtedness arising under any instrument securing the Notes or executed in connection therewith, or in any other written or oral agreement by the Borrower in favor of the Lender, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this Section 2.06(d) shall control over all other provisions of the Notes, this Credit Agreement and any other instruments now or hereafter securing the Notes or executed in connection herewith or any other oral or written agreements that may be in apparent conflict herewith. The Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Notes is accelerated. If the maturity of the Notes shall be accelerated for any reason or if the principal of the Notes is paid prior to the end of the term of the Notes, and as a result thereof the interest received for the actual period of existence of the Loan exceeds the applicable maximum lawful rate, the Lender shall, at its option, either refund to the Borrower the amount of such excess or credit the amount of such excess against the principal balance of the Notes then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. In the event that the Lender shall collect monies and/or any other thing of value that are then or at any time deemed to constitute interest that would increase the effective interest rate on the Notes to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of the Lender, be either immediately returned to the Borrower or credited against the principal balance of the Notes then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Credit Agreement, the Borrower acknowledges that it believes the Loan to be non-usurious and agrees that if, at any time, the Borrower should have reason to believe, that the Loan is in fact usurious, it will give the Lender notice of such condition and the Borrower agrees that the Lender shall have ninety (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists.

other governmental charge, including, without limitation, the Lender or a Participant's being or having been a citizen or resident of, present or engaged in a trade or business in, such jurisdiction, but excluding a connection arising solely as a result of the Lender's having entered into, received payments under and enforced this Credit Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions ("Additional Taxes") applicable to additional sums payable pursuant to this sentence), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

ARTICLE III.

CONDITIONS OF LENDING

SECTION 3.01. Conditions Precedent to Funding Loan. The Loan shall be advanced by the Lender on or about the date hereof, or such later date as the Borrower and the Lender may otherwise agree, provided that the following conditions shall be conditions precedent to the obligations of the Lender hereunder to make the Loan:

(1) the representations and warranties of the Borrower contained herein shall be true and correct as of the Closing Date as if made on such date; and

(2) all costs and fees of the Lender (including attorney's fees and expenses) in connection with the Loan shall have been paid.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

(b) Each Loan Party that is a partnership or a limited liability company
(i) is a partnership or a limited liability company duly formed and validly existing under the laws of the State of its formation, (ii) is duly qualified in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite partnership or a limited liability company power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(c) The execution, delivery and performance by each Loan Party of this Credit Agreement, the Notes, each other Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated herein and therein, are within such Loan Party's corporate, partnership or limited liability company powers, have been duly authorized by all necessary corporate, partnership or limited liability company action, and, to each such Loan Party's knowledge, do not (i) contravene such Loan Party's organizational documents,
(ii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award,

except where such violation is not reasonably likely to have a Material Adverse Effect except as set forth on Schedule II hereof, (iii) except as set forth on Schedule II hereof, conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, except where such conflict, breach or default is not reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created by the Collateral Documents result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries.

(d) Other than as set forth on Schedule III hereof, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Credit Agreement, the Notes, any other Loan Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby,
(ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents or (iv) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents.

(e) This Credit Agreement has been, and the Notes, each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Credit Agreement is, and the Notes, each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms.

(f) The Consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 2002, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 2002, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the Chairman of the Board of Borrower or any other officer of Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at March 31, 2002, and said statement of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since March 31, 2002, there has been no Material Adverse Change.

agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of this Credit Agreement, the Notes, any other Loan Document or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status or financial effect on any Loan Party of the Disclosed Litigation from that described on Schedule IV hereof.

(l) Each Mortgagor has good, marketable and insurable fee simple title to the real property described in the Mortgage executed and delivered by such Mortgagor, as applicable, free and clear of all Liens, other than those disclosed on such Schedule and Liens created or permitted by the Loan Documents.

(n) As of the date hereof, there has been no Material Adverse Change since the date of the most recent financial statements provided by the Borrower or such Loan Party to the Lender.

ARTICLE V.

COVENANTS

SECTION 5.01. Affirmative Covenants of the Borrower. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:

(a) Compliance with Laws, Etc. Comply, and cause each Mortgagor to comply, in all respects, with all applicable laws, rules, regulations and orders, except as set forth on Schedule VII hereof, or except where such non-compliance is not likely to have a Material Adverse Effect; and keep, and cause each Mortgagor to keep, at all times in full force and effect all authorizations required for the continued use and operation of the properties of the Borrower and of each Mortgagor except as set forth on such Schedule.

(d) Maintenance of Insurance. Maintain and cause each Mortgagor to maintain, insurance with responsible and reputable insurance companies or associations in such amounts (subject to reasonable deductibles) and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and as otherwise required by the Mortgages, provided, however, that Borrower shall cause the Mortgagors to maintain the insurance required by the Mortgages.

(e) Preservation of Corporate, Partnership or Limited Liability Company Existence, Etc. Preserve and maintain, in full force and effect, and cause each Mortgagor and each other Subsidiary, where applicable, to preserve and maintain its corporate, partnership or limited liability company existence, rights (charter and statutory) and franchises and all authorizations and rights material to its business; provided, however, that neither the Borrower nor any Mortgagor or other Subsidiary shall be required to preserve any right or franchise if the Board of Directors or general partners of the Borrower or such Mortgagor or other Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such or other Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Mortgagor or other Subsidiary or the Lender.

(f) Inspection Rights. At any reasonable time and from time to time, in each case upon reasonable prior notice, and at such times as shall not unreasonably disrupt tenants, permit the Lender or any agents or representatives thereof, to examine, audit and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and the Mortgagor, or other Subsidiary, and to discuss the affairs, finances and accounts of, the Borrower and any Mortgagor, or other Subsidiary, with any of their officers or directors and with their independent certified public accountants.

(g) Keeping of Books. Keep, and cause each Mortgagor and other Subsidiary to keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in

accordance with generally accepted accounting principles in effect from time to time consistently applied.

(h) Compliance with Terms of Lease Agreements. Perform, and cause each Subsidiary to perform, timely all of the obligations, covenants and agreements of the landlord contained in any lease now or hereafter affecting any of the Properties and require the timely performance by the tenant of all of the obligations, covenants and agreements to be performed by such tenant.

(i) Approval of Leases. The Borrower shall not, and shall cause each Mortgagor and other Subsidiary not to, lease space at any of the Properties without the Lender's consent, which consent shall not unreasonably be withheld, provided, however, that no such consent of Lender shall be required for any lease of 10,000 square feet or less unless (i) such lease requires the Lender to provide a non-disturbance agreement to the lessee or (ii) such lease is not on commercially reasonable terms. It is hereby expressly acknowledged and agreed by the Lender that all leases at any Property identified on the certified rent roll delivered to the Lender prior to the date hereof are and shall be deemed to be approved.

(k) Maintenance of Properties. Maintain or cause to be maintained the Properties and all other items constituting Collateral.

(l) Compliance with Loan Documents. Comply and cause each Loan Party to comply with all of its covenants set forth in each of the Loan Documents.

agreed that so long as the Construction Loan (and any refinancing thereof that has been approved by Lender and that does not permit a mortgage in favor of Lender to be granted with respect to the Project) shall remain outstanding, no such mortgage shall be required with respect to the Project.

SECTION 5.02. Negative Covenants. So long as any portion of the Loan Obligations shall remain unpaid, the Borrower will not, or permit any other Loan Party to, at any time, without the written consent of the Lender:

(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any Loan Party or Subsidiary to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower or any Mortgagor or any Subsidiary as debtor, or sign, or permit any Loan Party or Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign or permit any Mortgagor or Subsidiary to assign, any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following:

(i) Liens created by the Loan Documents or the Other Vornado Loan Documents;

(ii) Permitted Liens;

(iii) Liens otherwise consented to by the Lender in writing; and

Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or Subsidiary to create, incur, assume or suffer to exist, any Debt other than:

(i) Debt under the Loan Documents, or the Other Vornado Loan Documents;

(ii) Subordinate Debt or subordinated indebtedness approved by the Lender;

(iii) Debt secured by Permitted Liens; and

(iv) The Construction Loan and any other Debt incurred pursuant to the Loan Agreements (and any refinancings of the Construction Loan approved by Lender or any workouts or additional financings by the holders of the Construction Loan to 731 Residential LLC and/or 731 Commercial LLC).

(b) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any Loan Party or Subsidiary to do so, except that (i) any Loan Party may merge into or consolidate with any other Loan Party; provided that, in the case of any such consolidation, the Person formed by such consolidation shall be a wholly owned Subsidiary of the Borrower; provided further, that the Borrower shall pledge and grant to Lender a first priority perfected lien in and security interest on the capital stock or other equity interests of such Subsidiary owned by the Borrower to the Lender as further collateral for the Loan Obligations, and (ii) any Subsidiary or Permitted Related Owner that is not a Loan Party may merge into or consolidate with any Subsidiary or Permitted Related Owner which is not a Loan Party.

(c) Investments in Other Persons. Purchase or acquire the obligations or stock of, or any other interest in, any Person (other than a Permitted Related Owner), except such investments as are made with surplus cash and do not expose the Borrower to any risk of loss in excess of the amount of cash invested.

(d) Loans, etc. Make, or permit any Mortgagor or Subsidiary to make, loans to any Person, other than to the Borrower, a wholly owned Subsidiary or a Permitted Related Owner.

(e) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding (except that Permitted Related Owners may pay dividends to the Borrower) return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock (except for capital stock issued by Permitted Related Owners), or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock; provided, however, that nothing contained in this Section shall prohibit Borrower from (i) paying a dividend or making a distribution in the form of, or from the proceeds of an issuance of, subordinated indebtedness or otherwise (including, without limitation, payment in cash) as may reasonably be required, based upon the advice of counsel, to enable the Borrower to qualify as a REIT under the Code or (ii) paying a dividend or making a distribution from the proceeds of the issuance by the Borrower of equity securities.

(f) Change in Nature of Business. Make, or permit any Mortgagor to make, any material change in the nature of its business as carried on at the date hereof and will not, nor permit any Mortgagor or Subsidiary to, remove, demolish, materially alter, discontinue the use of, sell, transfer, assign, hypothecate, pledge or otherwise dispose of, except as permitted hereunder and for sales, transfers, assignments and pledges to Subsidiaries or Permitted Related Owners, any part of its assets necessary for the continuance of its business, as presently

(g) Charter Amendments. Amend, or permit any Mortgagor or Subsidiary to amend, its certificate of incorporation or bylaws, partnership agreement, certificate of limited partnership, operating agreement or certificate of limited liability company.

(h) Accounting Changes. Make, or permit any Mortgagor to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles.

(i) Amendment, Etc. of Related Documents. Except as may be required in order for the Borrower to qualify as a REIT under the Code, with respect to (i) the Management Agreement, (ii) the Leasing Agreement, (iii) Major Leases, (iv) the Architect's Contract (as defined in the Loan Agreements to be executed in connection with the Construction Loan), (v) the Bloomberg Lease (as defined in the Loan Agreements), (vi) the Construction Management Agreement (as defined in the Loan Agreements), (vii) the Loan Agreements and other Loan Documents and
(ix) the Major Trade Contracts (as defined in the Loan Agreements), cancel or terminate or consent to or accept any cancellation or termination thereof, amend, modify or change in any material manner any term or condition thereof, waive any material default under or any material breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof or take any other action in connection therewith that would impair the value of the interest or rights of the Borrower or other Subsidiary thereunder or that would impair the rights or interests of the Lender, or permit any Mortgagor or other Subsidiary to do any of the foregoing.

(j) Future Speculative Development. Develop, or permit any Mortgagor or Subsidiary to develop, any undeveloped real property owned by the Borrower or such Mortgagor or Subsidiary in the absence of executed leases approved by Lender for more than 50% of the projected leasable space on such property; provided, that development of the Project shall be permitted.

(k) Negative Pledge. Except in connection with (i) Existing Debt, (ii) Secured Debt permitted hereby, (iii) Subordinate Debt permitted hereby, and (iv) Permitted Liens, but only to the extent expressly permitted herein, the Borrower shall not enter into any covenant or other agreement that prevents it or could prevent it in the future from pledging, granting a security interest in, mortgaging, assigning, encumbering or otherwise creating a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender, or that would be breached if the Borrower were to pledge, grant a security interest in, mortgage, assign, encumber or otherwise create a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender.

(l) Future Property Acquisition. Except as permitted in Section 6.01, acquire, or permit any Mortgagor or Subsidiary to acquire, any real property without the consent of the Lender and without executing and delivering or causing such Mortgagor or Subsidiary to execute

and deliver any instrument the Lender may deem necessary or desirable to effectuate such real property becoming additional security for the Loan.

(m) Payments Under Subordinate Loan Documents. Make any payment in respect of any Subordinate Debt (i) at any time while any amount shall be due and owing under any of the Loan Documents or (ii) after the Loan shall have matured or the Lender shall have accelerated payment of the Loan pursuant to Section 7.01 or prepay any Subordinate Debt while at any time that any Loan Obligation remains unpaid.

(n) Transfer of Properties. Transfer title to any of the Properties except to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition of Permitted Related Owner, (iii) any Person described in clause (b) of the definition of Permitted Related Owner or (iv) with respect to the 59th Street Property, 731 Commercial LLC and 731 Residential LLC, or to the holders of the construction loan (or their nominee or nominees) as part of a deed in lien transaction, provided that, (x) in the case of clause (iii), a receiver of a Property sought to be transferred to such Permitted Related Owner has proposed to enter into a lease at such Property or take any other action which would materially adversely affect the Borrower's qualification as a REIT and the Borrower has given ten (10) days' notice to the Lender of its intention to transfer such Property to such Permitted Related Owner and (y) in the case of the 59th Street Property, residential condominium units may be sold.

(o) Issuance of Shares. Issue, or permit any Subsidiary (other than a Permitted Related Owner) to issue any shares of stock that are not issued as of the date hereof, except that notwithstanding this paragraph the Borrower shall be permitted to issue shares of stock at any time so long as, taking into account such issuance, Vornado Realty Trust and its Affiliates (including for this purpose Interstate Properties) shall continue to own in the aggregate not less than 20% of the outstanding shares of common stock of the Borrower, and, provided further, with respect to Borrower only, that an automatic exchange involving Excess Stock as defined in and pursuant to Borrower's Amended and Restated Certificate of Incorporation shall not be treated as an issuance of shares for the purposes of this Section.

SECTION 5.03. Reporting Requirements. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender:

(a) Quarterly Financials. (i) As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Borrower's Quarterly Report on Form 10-Q for the preceding quarter as filed with the Securities and Exchange Commission (the "Commission"), containing unaudited financial statements as required by law; and (ii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and represented to be true and correct (subject to year-end

audit adjustments) by the Chairman of the Board of the Borrower or other officer of the Borrower.

(b) Annual Financials. (i) As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the Borrower's Annual Report on Form 10-K for such fiscal year as filed with the Commission; and (ii) as soon as available and in any event within 120 days after the end of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and an unaudited consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, represented to be true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower.

(d) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any Property that could have a Material Adverse Effect or (ii) cause any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

directly or indirectly (including through sub-leasing), upon the net "income or profits" of any person (as defined in Section 856(d) (2) of the Code) or (B) requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner to provide a service to a tenant, other than through an independent contractor (as defined in Section 856(d)(2) of the Code), where the provision of such service by Borrower or any of its Subsidiaries or any Permitted Related Owner would cause rents received by the Borrower or any of its Subsidiaries to fail to be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage in a new line of business which (A) is unrelated to the development or leasing of real property and (B) would create a substantial risk, as a result of its generation of income not described in Section 856(c)(2) or (c)(3) of the Code, that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an asset that would cause Borrower to fail to satisfy the asset test of Section 856(c)(5) of the Code; provided, however, that the foregoing covenants of this
Section 5.04(a) shall not (x) preclude the Lender from collecting amounts due to the Lender under this Credit Agreement or from foreclosing on any property securing such indebtedness or (y) be deemed to have been breached or violated by the Lender as a result of any act or action (including, without limitation, the execution of a lease) made, done or taken by any receiver for any property of any Loan Party (including a receiver appointed at the request of the Lender) unless a motion to compel such act or action was made by the Lender to the court which appointed such receiver.

(b) The Lender agrees to use reasonable efforts to preserve the confidentiality of any Confidential Information received by it from the Borrower except as required by law or court order.

ARTICLE VI.

SPECIAL PROVISIONS

SECTION 6.01. Condemnation and Casualty. (a) In the event of any condemnation or casualty of any Property in part or in the entirety, the proceeds of such condemnation or casualty, to the extent not retained or otherwise applied by the holder of any mortgage securing Senior Debt on such Property, or by the holder of the Construction Loan, applied as required pursuant to any Major Lease approved by the Lender at the Property or applied by such mortgagee or in accordance with such Major Lease either to restore the improvements on such Property or to reduce such Senior Debt or the Construction Loan, as applicable, applied as required pursuant to any condominium declaration and/or related by-laws affecting any Property that has previously been approved by Lender to restore the improvements on such Property or applied in accordance with the Loan Documents, shall be immediately deposited by Borrower in a cash collateral account to be maintained by Borrower at a depository designated by Lender and under the sole dominion and control of Lender (the "Cash Collateral Account") pursuant to a cash collateral agreement to be entered into between Borrower, Lender and such Depository (the "Cash Collateral Agreement"); (such proceeds of condemnation so

deposited being herein called "Condemnation Proceeds"; such proceeds of casualty so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds and/or Casualty Proceeds being herein called "Proceeds") and shall constitute additional collateral for the Loan Obligations.

(b) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower shall be entitled to withdraw any Condemnation Proceeds from the Cash Collateral Account for the purpose of acquiring additional real estate assets with the consent of the Lender, which consent shall not be unreasonably withheld, provided that, subject to the Loan Documents, the Loan Agreements and the Other Vornado Loans (i) Borrower shall have delivered to Lender an appraisal for such real estate (x) for an amount at least equal to the amount of the Condemnation Proceeds sought to be withdrawn by the Borrower to purchase such real estate and (y) issued by an appraisal company and in form and substance reasonably satisfactory to the Lender; (ii) the Borrower shall have delivered to Lender environmental, engineering and such other studies, reports, documents, title reports, violation searches and other information relating to such real estate as would be generally required by the Lender in accordance with good institutional lending practices, all of which studies, reports, documents and other information shall be in form and substance reasonably satisfactory to the Lender; (iii) the Lender shall be granted a priority lien mortgage on said real estate to further secure the Guaranty (the "Additional Mortgage"); (iv) the Borrower shall have delivered to Lender a paid-up mortgage title insurance policy in favor of Lender, insuring the Additional Mortgage as a second priority mortgage on such real estate, subject to no encumbrances or other title exceptions except those title exceptions which Lender reasonably determines are acceptable based on good institutional lending practices; and (v) the Borrower shall have paid all reasonable costs and expenses of the Lender (including reasonable attorneys' fees and expenses) incurred by the Lender in connection with the review of any of the foregoing conditions.

(c) The Borrower shall also have the right to withdraw the Condemnation Proceeds remaining in the Cash Collateral Account to pay for the cost of constructing improvements on any Property covered by any Mortgage, and the Borrower shall have the right to withdraw any Casualty Proceeds in the Cash Collateral Account to pay for the repair and restoration of improvements whose damage or destruction generated such Casualty Proceeds, provided that, in all cases, subject to the Loan Documents, the Loan Agreements and any condominium declaration and/or related by-laws affecting such Property that has previously been approved by Lender and the Other Vornado Loans: (i) no Default or Event of Default shall be continuing; (ii) the Lender shall have approved the plans and specifications for the construction of such improvements as well as the general contract and other major contracts to be entered into by the Borrower in connection with such construction, which approval will not unreasonably be withheld; (iii) the Lender shall have received such certification and assurances as Lender shall reasonably request to assure it that the cost of constructing the improvements as shown on the plans approved by Lender does not exceed the amount of the Proceeds sought to be withdrawn by the Borrower to pay for such improvements; and (iv) the Lender may impose such further conditions and restrictions upon the disbursement of such Proceeds as the Lender deems necessary or desirable, consistent with prudent institutional construction lending practices, to assure the completion of the proposed improvements subject to no liens or encumbrances (except Permitted Liens) and in accordance with the aforesaid approved plans and all applicable laws.

SECTION 6.02. Payment of REIT Dividends. In the event that the Borrower shall determine, upon the advice of counsel then generally used by Borrower for tax advice, that it shall be required to pay a dividend or make a distribution to stockholders in order to preserve its qualification as a REIT, whether or not the Proceeds shall have been applied as contemplated pursuant to Section 6.01
(b) or (c), then, anything herein to the contrary notwithstanding, the Borrower may, with the consent of the Lender (i) incur unsecured subordinated indebtedness for the purpose of paying such dividend or making such distribution or to pay such dividend or make such distribution in the form of subordinated indebtedness and/or (ii) withdraw Proceeds from the Cash Collateral Account to pay such dividend or make such distribution.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(c) the Borrower shall fail to perform or observe, in any material respect, any term, covenant or agreement contained in Section 5.02; or

(e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of or any Subordinated Debt of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable notice and grace period, if any, specified in the agreement or instrument relating to such Subordinated Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Subordinated Debt and shall continue after the applicable notice and grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Subordinated Debt or otherwise to cause such Subordinated Debt to mature; or any such Subordinated Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased

or defeased, or an offer to prepay, redeem, purchase or defease such Subordinated Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(k) any Event of Default (as such term is defined in any Loan Document) shall occur and be continuing;

(l) any Event of Default (as such term is defined in any loan document of the Other Vornado Loans) shall occur and be continuing; or

(m) any Event of Default (as such term is defined in the Loan Agreements of the Construction Loan) shall occur and be continuing;

then, and in any such event, the Lender may, by notice to the Borrower, declare the Loan Obligations, together with all interest thereon and all other amounts payable under this Credit

Agreement and the other Loan Documents, to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party under the United States Bankruptcy Code, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VIII.

MISCELLANEOUS

SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Credit Agreement or the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Lender, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(i) if to the Borrower, to:

Alexander's Inc.
c/o Vornado Realty Trust 210 Route 4 East
Paramus, New Jersey 07652-0910 Attention: Chief Financial Officer Facsimile No.: (201) 587-0600

with a copy to:

Winston & Strawn
200 Park Avenue
New York, New York 10166 Facsimile No.: (212) 294-4700 Attention: Neil Underberg

and Vornado Realty Trust
888 Seventh Avenue
New York, New York 10019 Attention: President
Facsimile No.: (212) 894-7070

(ii) if to the Lender, to:

Vornado Lending L.L.C.

c/o Vornado Realty Trust
210 Route 4 East
Paramus, New Jersey 07652-0910

Attention: Chief Financial Officer Facsimile No.: (201)587-0600

Loan Document and (vi) the ownership, construction, occupancy, operation, use or maintenance of any of the Properties, in each case whether or not the transactions contemplated hereby are consummated, except (i) to the extent such claim, damage, loss, liability or expense is found to have resulted from any Indemnified Party's gross negligence or willful misconduct. Notwithstanding the foregoing provisions of this Section 8.04(b), the Borrower shall have no obligation to indemnify any Indemnified Party against, or hold it harmless from,
(i) any judgment rendered by a court of competent jurisdiction against any Indemnified Party and in favor of the Borrower, or (ii) any legal fees and expenses incurred by the Indemnified Party in defending the action brought by the Borrower which resulted in such judgment in favor of the Borrower, but the foregoing provisions of this sentence shall not diminish or otherwise affect the Borrower's liability for payment of all legal fees and expenses incurred by the Lender in enforcing the Lender's rights and remedies under any of the Loan Documents.

(c) In case any action shall be brought against the Lender or any other Indemnified Party in respect of which indemnity may be sought against the Borrower, the Lender or such other Indemnified Party shall promptly notify the Borrower and the Borrower shall assume the defense thereof, including the employment of counsel selected by the Borrower and reasonably satisfactory to the Lender, the payment of all costs and expenses and the right to negotiate and consent to settlement. The failure of the Lender to so notify the Borrower shall not relieve the Borrower of any liability it may have under the foregoing indemnification provisions or from any liability which it may otherwise have to the Lender or any of the other Indemnified Parties except to the extent that the Borrower incurs actual expenses or suffers actual monetary loss as a result of such failure to give notice. The Lender shall have the right, at its sole option, to employ separate counsel and as long as Borrower is complying with its indemnification obligations hereunder, the fees and disbursements of such separate counsel shall be paid by Lender. The Borrower shall not be liable for any settlement of any such action effected without its consent, but if settled with the Borrower's consent, or if there be a final judgment for the claimant in any such action, the Borrower agrees to indemnify and save harmless the Lender from and against any loss or liability by reason of such settlement or judgment.

(e) The provisions of this Section 8.04 shall survive the repayment or other satisfaction of the Borrower's Obligations hereunder.

SECTION 8.08. Participations. (a) The Lender may sell participations in up to one-third of its rights and obligations under this Credit Agreement (including, without limitation, of its Loan and the Notes held by it) (the purchaser of any rights and obligations being referred to herein as a "Participant"); provided, however, that (i) the obligations of the Borrower and the Lender under this Credit Agreement and the other Loan Documents shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower shall continue to deliver all notices, communications and payments solely to the Lender and any such notice, communication or payment shall be valid and effective for all purposes hereunder notwithstanding any such sale of participations. Upon the sale of any participation permitted hereunder, the Borrower shall cooperate with such reasonable requests of the Lender, at the sole expense of the Lender, to sever and split the note issued hereunder among the Lender and any Participants.

SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Loan or the actions of the Lender in the negotiation, administration, performance or enforcement thereof. The Borrower acknowledges and agrees that this section is a specific and material

aspect of this Credit Agreement and that the Lender would not extend credit to the Borrower if the waiver set forth in this section were not a part of this Credit Agreement.

SECTION 8.12. Jurisdiction. The Borrower irrevocably appoints each and every owner, partner and/or officer of the Borrower as its attorneys upon whom may be served, by regular or certified mail at the address set forth herein, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Credit Agreement or any other Loan Document; and the Borrower hereby consents that any action or proceeding against it may be commenced and maintained in any court within the State of New Jersey or the State of New York or in the United States District Court for the District of New Jersey or the United States District Court for the Southern District of New York by service of process on any such owner, partner and/or officer; and the Borrower agrees that the courts of the State of New Jersey and the courts for the State of New York and the courts for the United States District Court for the District of New Jersey and the courts for the United States District Court for the Southern District of New York shall have jurisdiction with respect to the subject matter hereof and the person of the Borrower and all collateral securing the obligations of the Borrower. The Borrower agrees not to assert any defense to any proceeding initiated by the Lender in such court based upon improper venue or inconvenient forum. The foregoing shall not limit, restrict or otherwise affect the right of the Borrower or the Lender to commence any action on this Credit Agreement or any other Loan Document in any other courts having jurisdiction.

* * *

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

ALEXANDER'S, INC.

By:   /s/ Brian Kurtz
   -----------------------------------
   Name:  Brian Kurtz
   Title: Assistant Secretary

VORNADO LENDING L.L.C.

By:   /s/ Joseph Macnow
   -----------------------------------
   Name:  Joseph Macnow
   Title: Executive Vice President

STATE OF        New York            )
                                    )       ss.:
COUNTY OF       New York            )

On the 2nd day of July, in the year 2002, before me, the undersigned, personally appeared Brian Kurtz, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

/s/ Leon T. Busteed
--------------------------------------
   Notary Public Leon Busteed
   My commission expires: Nov. 30, 2002

STATE OF        New York            )
                                    )       ss.:
COUNTY OF       New York            )

/s/ Leon T. Busteed
--------------------------------------
   Notary Public Leon Busteed
   My commission expires: Nov. 30, 2002

SCHEDULE I
PROPERTIES

REGO PARK II PROPERTY
Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:
Block: 2080 Lot: 101

REGO PARK III PROPERTY
Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:
      Block: 2077       Lot: 90 and 98
      Block: 2076       Lot: 50 and 63

SCHEDULE II
CONFLICTS UNDER LOAN DOCUMENTS

1. Completing recordation and filing of the Mortgages and other documents.

SCHEDULE III
REQUIRED AUTHORIZATIONS

1. Recording Mortgages and making other security filings.

SCHEDULE IV
DISCLOSED LITIGATION

1. Claims in process in the Bankruptcy Proceeding as set forth in attached Schedule IV-A.

SCHEDULE V(a)
ENVIRONMENTAL NON-COMPLIANCE

1. Environmental matters disclosed in Alexander's, Inc. quarterly report on Form 10-Q for the quarter ended September 30, 1994, et. seq.

SCHEDULE V(b)
ENVIRONMENTAL REPORTS

Phase I Environmental Site Assessment prepared for Alexander's, Inc., 31 West 34th Street, Seventh Floor, New York, NY 10001 and prepared by Certified Engineering & Testing Company, Inc., 444 Park Avenue South, Suite 702, New York, NY 10016 for:

1. Alexander's Department Store, 96-05 Queens Boulevard, Rego Park, New York 11374 (December 1, 1993)

SCHEDULE VI
DEFAULTS UNDER MATERIAL AGREEMENTS

(None)

SCHEDULE VII
NON-COMPLIANCE WITH LAWS

(None)

EXHIBIT A
FORM OF NOTE

A-1

EXHIBIT B
FORM OF GUARANTY

B-1

EXHIBIT C
FORM OF NON-DISTURBANCE AGREEMENT

B-1

EXHIBIT D
FORM OF MORTGAGE

EXHIBIT E
FORM OF PLEDGE AGREEMENT

Exhibit 10(i)B(3)

AMENDED AND RESTATED CREDIT LINE AGREEMENT

dated as of July 3, 2002

among

ALEXANDER'S INC.,
as Borrower

and

VORNADO LENDING L.L.C.,

as Lender

TABLE OF CONTENTS

                                                                                                                 Page
ARTICLE I.            DEFINITIONS AND ACCOUNTING TERMS..........................................................   1

         SECTION 1.01.     Certain Defined Terms................................................................   1

         SECTION 1.02.     Computation of Time Periods..........................................................   9

         SECTION 1.03.     Accounting Terms.....................................................................   9

ARTICLE II.           AMOUNTS AND TERMS OF THE ADVANCES.........................................................   9

         SECTION 2.01.     The Loan.............................................................................   9

         SECTION 2.02.     Repayment............................................................................  10

         SECTION 2.03.     Prepayments..........................................................................  10

         SECTION 2.04.     Interest.............................................................................  10

         SECTION 2.05.     Increased Costs......................................................................  10

         SECTION 2.06.     Payments and Computations............................................................  10

         SECTION 2.07.     Taxes................................................................................  12

         SECTION 2.08.     Payment of Certain Costs and Expenses................................................  13

         SECTION 2.09.     Use of Proceeds......................................................................  13

ARTICLE III.          CONDITIONS OF LENDING.....................................................................  13

         SECTION 3.01.     Conditions Precedent to Funding Loan.................................................  13

ARTICLE IV.           REPRESENTATIONS AND WARRANTIES............................................................  14

         SECTION 4.01.     Representations and Warranties of the Borrower.......................................  14

ARTICLE V.            COVENANTS.................................................................................  17

         SECTION 5.01.     Affirmative Covenants of the Borrower................................................  17

         SECTION 5.02.     Negative Covenants...................................................................  20

         SECTION 5.03.     Reporting Requirements...............................................................  23

         SECTION 5.04.     Covenants of the Lender..............................................................  25

ARTICLE VI.           SPECIAL PROVISIONS........................................................................  26

         SECTION 6.01.     Condemnation and Casualty............................................................  26

         SECTION 6.02.     Payment of REIT Dividends............................................................  27

ARTICLE VII.          EVENTS OF DEFAULT.........................................................................  27

         SECTION 7.01.     Events of Default....................................................................  27

ARTICLE VIII.         MISCELLANEOUS.............................................................................  29

         SECTION 8.01.     Amendments, Etc......................................................................  29

SECTION 8.02.     Notices, Etc.........................................................................  29

SECTION 8.03.     No Waiver; Remedies..................................................................  30

SECTION 8.04.     Costs, Expenses......................................................................  30

SECTION 8.05.     Merger...............................................................................  32

SECTION 8.06.     Binding Effect.......................................................................  32

SECTION 8.07.     Lender's Discretion..................................................................  32

SECTION 8.08.     Participations.......................................................................  32

SECTION 8.09.     Governing Law........................................................................  33

SECTION 8.10.     Execution in Counterparts............................................................  33

SECTION 8.11.     Waiver of Jury Trial.................................................................  33

SECTION 8.12.     Jurisdiction.........................................................................  33

SECTION 8.13.     Continuing Enforcement...............................................................  33

Schedule I                 -        Properties
Schedule II                -        Conflicts under Loan Documents
Schedule III               -        Required Authorizations
Schedule IV                -        Disclosed Litigation
Schedule V(a)              -        Environmental Non-Compliance
Schedule V(b)              -        Environmental Reports
Schedule VI                -        Defaults under Material Agreements
Schedule VII               -        Non-compliance with Laws

Exhibit A                  -        Form of Note
Exhibit B-1                -        Form of Guaranty
Exhibit B-2                -        Form of Guaranty
Exhibit C                  -        Form of Non-Disturbance Agreement
Exhibit D                  -        Form of Mortgage
Exhibit E                  -        Form of Assignment of Collateral Account and Security Agreement
Exhibit F                  -        Form of Deposit Account Control Agreement
Exhibit G                  -        Form of Pledge Agreement
Exhibit H                  -        Form of Borrowing Request

AMENDED AND RESTATED CREDIT LINE AGREEMENT dated as of July 3, 2002 by and between Alexander's Inc., a Delaware corporation ("Alexander's" or the "Borrower"), as borrower, and Vornado Lending L.L.C., a New Jersey limited liability company (the "Lender"), as lender.

(1) WHEREAS, Borrower and Lender previously entered into that certain Credit Line Agreement, dated as of August 2, 2000 (the "ORIGINAL CREDIT AGREEMENT"), pursuant to which Lender offered a line of credit to Borrower in the aggregate principal amount of Fifty Million and 00/100 Dollars ($50,000,000.00); and

(2) WHEREAS, Lender and Borrower desire to amend and restate the Original Credit Agreement in its entirety in accordance with the terms and provisions hereof.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

A. Effective as of the date hereof, the Original Credit Agreement is hereby restated and amended in its entirety as set forth below.

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

"59th Street Property" means the Property designated on Schedule I to this Credit Agreement as the "59th Street Property."

"Assignment of Collateral Account and Security Agreement" means the Assignment of Collateral Account and Security Agreement, substantially in the form of Exhibit E hereto.

"Borrower" has the meaning specified in the recital of parties to this Credit Agreement.

"Borrower Request" shall have the meaning set forth in Section 2.01.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City.

"Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt.

"Cash Collateral Account" has the meaning specified in Section 6.01.

"Cash Collateral Agreement" has the meaning specified in Section 6.01.

"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time.

"Closing Date" means July 3, 2002.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender.

"Collateral Documents" means collectively each Guaranty, Mortgage, Pledge Agreement, the Lockbox Documents and any documents given to secure the Loan.

"Consolidated" refers to the consolidation of accounts in accordance with GAAP.

"Construction Loan" shall have the meaning given to such term in
Section 5.01(m) hereof.

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sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Debt of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"Default Rate" means 4% per annum above the rate per annum required to be paid on the Loan pursuant to Section 2.04(a).

"Deposit Account Control Agreement" means the Control Agreement for Notification and Acknowledgement of Security Interest in Deposit Accounts substantially in the form of Exhibit F hereto.

"Disbursement Date" shall have the meaning set forth in Section 2.01.

"Disclosed Litigation" means the matters described on Schedule IV hereto.

"Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit including, without limitation, (a) any written claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (b) any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

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"Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law.

"Events of Default" has the meaning specified in Section 7.01.

"Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement.

"Flushing Property" means the ground leasehold estate on the Property designated on Schedule I to this Credit Agreement as the "Flushing Property."

"GAAP" has the meaning specified in Section 1.03.

"Guarantor" means each of Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc., Alexander's of Third Avenue, Inc., and Alexander's of Flushing, Inc. and subsequent assignees thereof and any other Person who shall execute a Guaranty after the date hereof.

"Guaranty" means the Guaranty substantially in the form of Exhibit B to this Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor.

"Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law.

"Indemnified Party" has the meaning specified in Section 8.04(b).

"Interest Payment Date" has the meaning specified in Section 2.04(a).

"Leasing Agreement" means (a) that certain 59th Street Real Estate Retention Agreement, dated the date hereof, among Vornado Realty Trust and the Borrower

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as amended from time to time, and (b) that certain Real Estate Retention Agreement dated July, 1992 between Vornado, Inc., Alexander's, and certain other parties as amended by Amendment to Real Estate Retention Agreement dated as of the date hereof.

"Line of Credit" has the meaning specified in the Recitals.

"Loan" has the meaning specified in Section 2.01.

"Loan Documents" means this Credit Agreement, the Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan.

"Loan Obligations" means all amounts due payable to the Lender under the Loan Documents.

"Loan Parties" means the Borrower, each Guarantor and each Mortgagor.

"Management Agreement" means (a) that certain Management and Development Agreement, dated as the date hereof, between the Borrower and Vornado Management Corp., as amended from time to time and (b) that certain 59th Street Management and Development Agreement dated as of the date hereof between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp., as amended from time to time.

"Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole.

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"Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

"Maturity Date" means the earlier of (i) January 3, 2006 and (ii) the date on which the Construction Loan is paid in full.

"Mortgagor" means the Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc., Alexander's of Third Avenue, Inc. or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage.

"Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include
(a) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that the Lender, in accordance with the terms of the applicable Loan Document, may elect to pay or advance on behalf of such Loan Party.

"Other Taxes" has the meaning specified in Section 2.07(b).

"Other Vornado Loans" means, collectively (i) that certain loan in the principal amount of $20,000,000 evidenced by a Credit Agreement dated as of even date herewith from Lender, as lender to Alexander's, as borrower; (ii) that certain loan in the principal amount of $40,000,000 evidenced by an Amended and Restated Credit Agreement dated as of even date herewith from Lender, as lender, to 59th Street Corporation, as borrower; (iii) that certain loan in the principal amount of

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$35,000,000 evidenced by a Credit Agreement dated as of even date herewith, from Lender, as lender, to Alexander's, as borrower; and (iv) the Reimbursement Facility.

"Participant" has the meaning set forth in Section 8.08.

"Permitted Encumbrances" has the meaning specified in the Mortgages.

"Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Permitted Encumbrances; (c) with respect to any real property acquired by Borrower or any Subsidiary or Affiliate of Borrower after the date hereof, liens to which such property is subject as of the date of such acquisition, purchase money mortgages or other similar purchase liens and liens in favor of lenders providing construction or development financing in connection with such property provided, that all proceeds of such financings are used for construction or development of such property or the retirement of Existing Debt secured by one or more liens on such property; (d) Liens permitted to be incurred by Borrower pursuant to the terms of this Credit Agreement; (e) Liens in connection with taxes being contested in good faith in compliance with this Credit Agreement; (f) Liens securing the Construction Loan; and (g) any renewal or replacement of any Lien permitted pursuant to the foregoing clauses (a) through (g), inclusive, provided that any such renewal or replacement Lien secures Debt in an amount not in excess of the Debt secured by the Lien so renewed or replaced, provided, however, that notwithstanding the foregoing, the Lender shall not be required to subordinate to any Lien pursuant to this clause except as otherwise provided in this Credit Agreement.

"Permitted Related Owner" means any of (a) any Subsidiary now existing or hereafter created all shares of issued and outstanding capital stock of which are owned by the Borrower, (b) a corporation (x) 90% or more of the economic interests of which shall be held by the Borrower through the ownership of shares of preferred and/or common stock of such corporation and (y) 10% or less of the economic interests of which shall be held by an entity reasonably satisfactory to the Lender through the ownership of shares of common and/or preferred stock of such corporation; provided that such Subsidiary or corporation enters into a guaranty substantially in the form of the Guaranty pursuant to which it guarantees the obligations of the Borrower under the Notes, or
(c) 731 Commercial LLC, 731 Residential LLC, 731 Commercial Holding LLC and 731 Residential Holding LLC. The conditions regarding share ownership set forth in clauses (x) and (y) above may be varied to the extent necessary for any income received by the Borrower to be described in Section 856(c)(2) of the Code or for the Borrower to continue to qualify as a REIT.

"Person" means an individual, partnership, limited liability company, corporation (including a business trust), joint stock company, trust, unincorporated

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association, joint venture or other entity, or a government or any political subdivision or agency thereof.

"Pledge Agreement" means that certain Pledge Agreement substantially in the form of Exhibit G hereto.

"Prepayment Date" has the meaning specified in Section 2.03.

"Properties" means the properties listed on Schedule I to this Credit Agreement and any real property acquired by the Borrower or any Mortgagor after the Closing Date.

"Rego Park II Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park II Property".

"Rego Park III Property" means the Property designated on Schedule I to this Credit Agreement as the "Rego Park III Property".

"REIT" means an entity described in Section 856(a) of the Code and entitled to the benefits of Section 857(a) of the Code.

"Subsidiary" means, with respect to the Borrower, (i) in any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by the Borrower, by the Borrower and one or more of its other Subsidiaries or by one or more of the Borrower's other Subsidiaries and
(ii) 731 Commercial LLC, 731 Residential LLC, 731 Commercial Holding LLC and 731 Residential Holding LLC

"Taxes" has the meaning specified in Section 2.07(a).

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"Third Avenue Property" means the Property designated in Schedule I to this Credit Agreement as the "Third Avenue Property".

"Unused Line Fee" has the meaning specified in Section 2.11.

ARTICLE II.

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions hereinafter set forth, to make advances, upon the request of the Borrower, on or after the Closing Date, with the aggregate amount of such advances, regardless of any repayment or prepayment thereof, being no more than Fifty Million and 00/100 Dollars ($50,000,000.00) (such sum being the Line of Credit and each advance thereunder being referred to both individually and collectively as the "Loan"). Amounts borrowed under this Section 2.01 shall be debited from the Line of Credit in determining the credit available for any further Loans, and amounts repaid or prepaid may not reborrowed. Borrower shall provide Lender with a borrowing request substantially in the form attached hereto as Exhibit H (a "Borrowing Request") not later than 11:00 a.m., New York time, on the requested date of advance of each Loan (each date of each advance, a "Disbursement Date"), specifying (i) the aggregate principal amount of such Loan; and (ii) the proposed Disbursement Date of such Loan, which shall be a Business Day. If the Lender agrees to make a requested Loan, bearing interest at the rate determined in accordance with Section 2.04, then on the Disbursement Date of a Loan, the Lender shall make such Loan to the Borrower by crediting the principal amount thereof to the Borrower's account at First Union National Bank 002030267849959 (or to such account as the Borrower may specify in its Borrowing Request), in immediately available funds. The principal amount shall be noted in the transaction records of the Lender and, absent manifest error, such records shall be conclusive as to the matters noted. Notwithstanding the foregoing, Lender's failure to note the principal amount of the Loan shall not affect the Borrower's obligations under the Loan Documents. Lender and Borrower acknowledge that as of the date hereof, $24,000,000.00 of the Loan has been advanced and remains outstanding.

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SECTION 2.04. Interest. (a) Ordinary Interest. The Borrower shall pay interest on the unpaid principal amount of the Loan owing to the Lender from the Closing Date, until such principal amount shall be paid in full, payable in arrears on the fifteenth day f each month (each an "Interest Payment Date") at a rate per annum equal to the Interest Rate, but in no event shall the Loan be repaid later than the Maturity Date.

SECTION 2.06. Payments and Computations. (a) The Borrower shall make each payment required to be made hereunder and under the Notes not later than 11:00 A.M., New York City time, on the day when due in U.S. dollars to the Lender at the Lender's Account in immediately available (same day) funds.

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(d) The Borrower covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury or similar law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Credit Agreement, the Notes or the other Loan Documents; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Lender, but will suffer and permit the execution of every such power as though no such law had been enacted. It is the intent of the Lender and the Borrower in the execution of the Notes, this Credit Agreement and all other instruments now or hereafter securing the Notes or executed in connection therewith or under any other written or oral agreement by the Borrower in favor of the Lender to contract in strict compliance with applicable usury law. In furtherance thereof, the Lender and the Borrower stipulate and agree that none of the terms and provisions contained in the Notes, this Credit Agreement or any other instrument securing the Notes or executed in connection herewith, or in any other written or oral agreement by the Borrower in favor of the Lender, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law. Neither the Borrower nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Notes shall ever be required to pay interest on the Notes or on indebtedness arising under any instrument securing the Notes or executed in connection therewith, or in any other written or oral agreement by the Borrower in favor of the Lender, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this Section 2.06(d) shall control over all other provisions of the Notes, this Credit Agreement and any other instruments now or hereafter securing the Notes or executed in connection herewith or any other oral or written agreements that may be in apparent conflict herewith. The Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Notes is accelerated. If the maturity of the Notes shall be accelerated for any reason or if the principal of the Notes is paid prior to the end of the term of the Notes, and as a result thereof the interest received for the actual period of existence of the Loan exceeds the applicable maximum lawful rate, the Lender shall, at its option, either refund to the Borrower the amount of such excess or credit the amount of such excess against the principal balance of the Notes then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. In the event that the Lender shall collect monies and/or any other thing of value that are then or at any time deemed to constitute interest that would increase the effective interest rate on the Notes to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the

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lawful rate shall, upon such determination, at the option of the Lender, be either immediately returned to the Borrower or credited against the principal balance of the Notes then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Credit Agreement, the Borrower acknowledges that it believes the Loan to be non-usurious and agrees that if, at any time, the Borrower should have reason to believe, that the Loan is in fact usurious, it will give the Lender notice of such condition and the Borrower agrees that the Lender shall have ninety (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists.

SECTION 2.07. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with this Section 2.07, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings other than (i) net income taxes, franchise taxes and similar taxes imposed on the Lender or a Participant, (ii) any tax, assessment or other governmental charge that would not have been imposed but for the failure of the Lender or a purchaser of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the Lender or a Participant, if compliance is required by statute or by regulation of the United States Treasury Department as a precondition to exemption from such tax, assessment or other governmental charge, (iii) any tax, assessment or other governmental charge that would not have been imposed but for either (a) a sale or other transfer of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to a Person that is not an entity that is treated as a corporation organized or created under the laws of the United States or of any State for U.S. federal tax purposes or (b) Lender's merger or consolidation with, or transfer of substantially all of its assets to, another entity, and
(iv) any tax, assessment or other governmental charge that would not have been imposed but for any present or former connection between the Lender or a Participant (or a shareholder of the Lender or a Participant) and the jurisdiction imposing such tax, assessment or other governmental charge, including, without limitation, the Lender or a Participant's being or having been a citizen or resident of, present or engaged in a trade or business in, such jurisdiction, but excluding a connection arising solely as a result of the Lender's having entered into, received payments under and enforced this Credit Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions ("Additional Taxes") applicable to additional sums payable pursuant to this sentence), the Lender receives an amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

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SECTION 2.10. Unused Line of Credit Facility Fee. In the event that the average daily principal amount of the Loans outstanding under the Line of Credit during any calendar month, or part thereof, is less than the maximum amount which may be borrowed under the Line of Credit (the "Maximum Loan Amount"), Borrower shall pay Lender an unused line of credit fee (the "Unused Line Fee") on the shortfall at a rate equal to one percent (1%) per annum. The Unused Line Fee shall be calculated as of the last day of each calendar month for the shortfall in average daily usage during said calendar month and shall be 1/12th of what the annual fee would be if the shortfall existed for an entire year. On or around March 1st of each year, Lender shall bill Borrower for the aggregate Unused Line Fees, if any, then due, for the preceding 12 month period and Borrower shall pay such Unused Line Fees within 10 days after the receipt of such bill.

ARTICLE III.

CONDITIONS OF LENDING

(1) the representations and warranties of the Borrower contained herein shall be true and correct as of the Closing Date as if made on such date;

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(2) all costs and fees of the Lender (including attorney's fees and expenses) in connection with the Loan shall have been paid; and

(3) no Default or Event of Default remains uncured or outstanding.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

(b) Each Loan Party that is a partnership or a limited liability company (i) is a partnership or a limited liability company duly formed and validly existing under the laws of the State of its formation, (ii) is duly qualified in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite partnership or a limited liability company power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(c) The execution, delivery and performance by each Loan Party of this Credit Agreement, the Notes, each other Loan Document and each related document to which it is or is to be a party, and the consummation of the transactions contemplated herein and therein, are within such Loan Party's corporate, partnership or limited liability company powers, have been duly authorized by all necessary corporate, partnership or limited liability company action, and, to each such Loan Party's knowledge, do not (i) contravene such Loan Party's organizational documents, (ii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, except where such violation is not reasonably likely to have a Material Adverse Effect except as set forth on Schedule II hereof, (iii) except as set forth on Schedule II hereof, conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, except where such conflict, breach or default is not reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created by the Collateral Documents result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries.

(d) Other than as set forth on Schedule III hereof, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or

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any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Credit Agreement, the Notes, any other Loan Document or any related document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby,
(ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents or (iv) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents.

(e) This Credit Agreement has been, and the Notes, each other Loan Document and each related document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Credit Agreement is, and the Notes, each other Loan Document and each related document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms.

(f) The Consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 2002, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 2002, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the Chairman of the Board of Borrower or any other officer of Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at March 31, 2002, and said statement of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since March 31, 2002, there has been no Material Adverse Change.

(h) To such Loan Party's knowledge, there is no action, suit, investigation, litigation or proceeding affecting any Loan Party not covered by insurance (subject to reasonable deductibles), including any Environmental Action, pending before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of this Credit Agreement, the Notes, any other Loan Document or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status or financial effect on any Loan Party of the Disclosed Litigation from that described on Schedule IV hereof.

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Loan Party and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and, no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any properties described in the Mortgages or the 59th Street Property that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(l) Each Mortgagor, and each of 731 Commercial LLC and 731 Residential LLC has good, marketable and insurable fee simple title to the real property described in the Mortgage executed and delivered by such Mortgagor and 59th Street Property, as applicable, free and clear of all Liens, other than those disclosed on such Schedule and Liens created or permitted by the Loan Documents.

(n) As of the date hereof, there has been no Material Adverse Change since the date of the most recent financial statements provided by the Borrower or such Loan Party to the Lender.

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ARTICLE V.

COVENANTS

SECTION 5.01. Affirmative Covenants of the Borrower. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:

(a) Compliance with Laws, Etc. Comply, and cause each Mortgagor, 731 Commercial LLC and 731 Residential LLC, to comply, in all respects, with all applicable laws, rules, regulations and orders, except as set forth on Schedule VII hereof, or except where such non-compliance is not likely to have a Material Adverse Effect; and keep, and cause each Mortgagor, 731 Commercial LLC and 731 Residential LLC to keep, at all times in full force and effect all authorizations required for the continued use and operation of the properties of the Borrower and of each Mortgagor, 731 Commercial LLC and 731 Residential LLC, except as set forth on such Schedule.

(b) Payment of Taxes, Etc. Prepare and timely file all federal, state and local tax returns required to be filed by the Borrower and promptly pay and discharge all taxes, assessments and other governmental charges, imposed upon the Borrower or its income or any of its property, and cause each Subsidiary to do so, with respect to real estate taxes, before interest and penalties commence to accrue thereon and, with respect to all other taxes, before they become a Lien upon such property, except for those taxes, assessments and other governmental charges then being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has maintained adequate reserves and with respect to which (i) there is a not a reasonable likelihood, in the judgment of the Lender, that the Borrower or the Lender shall be subject to any risk of criminal or material civil liability and (ii) there is not a reasonable likelihood, in the judgment of the Lender, that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment, provided, however, that all real estate taxes must be paid when due. The Borrower shall submit to the Lender, upon request, an affidavit signed by the Borrower certifying that all federal, state and local income tax returns have been filed to date and all real property taxes, assessments and other governmental charges with respect to the Borrower's or any Subsidiary's properties have been paid to date.

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to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and with respect to which (i) there is no reasonable likelihood of any risk of criminal or material civil liability to the Lender, (ii) there is no reasonable likelihood that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment and (iii) appropriate reserves are being maintained with respect to such circumstances.

(d) Maintenance of Insurance. Maintain and cause each Mortgagor, 731 Commercial LLC and 731 Residential LLC, to maintain, insurance with responsible and reputable insurance companies or associations in such amounts (subject to reasonable deductibles) and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and as otherwise required by the Mortgages, provided, however, that Borrower shall cause the Mortgagors to maintain the insurance required by the Mortgages and shall cause 731 Commercial LLC and 731 Residential LLC to maintain the insurance required by the Loan Agreements.

(f) Inspection Rights. At any reasonable time and from time to time, in each case upon reasonable prior notice, and at such times as shall not unreasonably disrupt tenants, permit the Lender or any agents or representatives thereof, to examine, audit and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and the Mortgagor, or other Subsidiary, and to discuss the affairs, finances and accounts of, the Borrower and any Mortgagor, or other Subsidiary, with any of their officers or directors and with their independent certified public accountants.

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performance by the tenant of all of the obligations, covenants and agreements to be performed by such tenant.

(k) Maintenance of Properties. Maintain or cause to be maintained the Properties and all other items constituting Collateral.

(l) Compliance with Loan Documents. Comply and cause each Loan Party to comply with all of its covenants set forth in each of the Loan Documents.

(m) After Acquired Properties. Subject to the requirements of (i) liens existing at the time of acquisition, (ii) purchase money mortgage liens and (iii) liens in connection with construction or development financing which construction or development financing is reasonably acceptable to the Lender, grant to the Lender a valid mortgage lien on, or spread the lien of a Mortgage to encumber, any real property acquired by Borrower or any Subsidiary after the date hereof. Reference is made to that certain Building Loan Agreement, dated as of July 3, 2002 (the "Building Loan Agreement"), by and among 731 Commercial LLC and 731 Residential LLC and Bayerische Hypo-und Vereinsbank, AG (the "Bank"), that certain Project Loan Agreement, dated as of July 3, 2002 (the "Project Loan Agreement"), and that certain Supplemental Loan Agreement, dated as of July 3, 2002 (the "Supplemental Loan Agreement" and together with the Building Loan Agreement and the Project Loan Agreement, the "Loan Agreements") pursuant to which the Bank will lend to 731 Commercial LLC and 731 Residential LLC a maximum of $_____ million (the "Construction Loan") for the purposes of funding the cost of constructing a ___ square foot mixed residential/office/retail building at the property known as 731 Lexington Avenue, New York, New York (the "Project"). It is understood and agreed that so long as the Construction Loan (and any refinancing thereof that has been approved by Lender and that does not permit a mortgage in favor of Lender to be granted with respect to the 59th Street Property) shall remain outstanding, no such mortgage shall be required with respect to the 59th Street Property.

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(o) Flushing Property. To keep at all times the ground lease covering the Flushing Property in full force and effect.

(p) Compliance with Terms of Loan Agreements and Other Contracts. Cause 731 Commercial LLC and 731 Residential LLC, as applicable, to timely perform all of the obligations, covenants and agreements of (i) the borrower in the Loan Agreements and the other Loan Documents (as such term is defined in the Loan Agreements), (ii) the owner under the Architect's Contract, the Construction Management Agreement and the Major Trade Contracts (as those terms are defined in the Loan Agreements) and (iii) the landlord under the Bloomberg Lease (as such term is defined in the Loan Agreements).

For purposes of this Section 5.01, the term "cause 731 Commercial LLC and/or 731 Residential LLC" (or any variation of such term) and the term "cause any Subsidiary" (or any variation of such term, but only as it relates to 731 Commercial LLC and/or 731 Residential LLC) shall mean for Borrower to take action in its capacity as the sole member of 731 Commercial Holdings LLC and the sole regular member of 731 Residential Holdings LLC, as the case may be, which entities are the sole members of 731 Commercial LLC and 731 Residential LLC, respectively.

SECTION 5.02. Negative Covenants. So long as any portion of the Loan Obligations shall remain unpaid, the Borrower (in its capacity as the sole member of 731 Commercial Holding LLC and the sole regular member of 731 Residential Holding LLC, which entities are the sole members of 731 Commercial LLC and 731 Residential LLC) will not, or permit any other Loan Party or Subsidiary that is the direct or indirect owner of a Property to, at any time, without the written consent of the Lender:

(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any Loan Party or Subsidiary to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower or any Mortgagor or any Subsidiary as debtor, or sign, or permit any Loan Party or Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign or permit any Mortgagor or Subsidiary to assign, any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following:

(i) Liens created by the Loan Documents or the Other Vornado Loan Documents;

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(ii) Permitted Liens;

(iii) Liens otherwise consented to by the Lender in writing; and

(b) Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or Subsidiary to create, incur, assume or suffer to exist, any Debt other than:

(i) Debt under the Loan Documents, or the Other Vornado Loan Documents;

(ii) Subordinate Debt or subordinated indebtedness approved by the Lender;

(iii) Debt secured by Permitted Liens; and

(e) Loans, etc. Make, or permit any Mortgagor or Subsidiary to make, loans to any Person, other than to the Borrower, a wholly owned Subsidiary or a Permitted Related Owner.

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Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock; provided, however, that nothing contained in this Section shall prohibit Borrower from (i) paying a dividend or making a distribution in the form of, or from the proceeds of an issuance of, subordinated indebtedness or otherwise (including, without limitation, payment in cash) as may reasonably be required, based upon the advice of counsel, to enable the Borrower to qualify as a REIT under the Code or (ii) paying a dividend or making a distribution from the proceeds of the issuance by the Borrower of equity securities.

(i) Accounting Changes. Make, or permit any Mortgagor to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles.

(j) Amendment, Etc. of Related Documents. Except as may be required in order for the Borrower to qualify as a REIT under the Code, with respect to (i) the Management Agreement, (ii) the Leasing Agreement, (iii) Major Leases, (iv) the Architect's Contract (as defined in the Loan Agreements to be executed in connection with the Construction Loan), (v) the Bloomberg Lease (as defined in the Loan Agreements), (vi) the Construction Management Agreement (as defined in the Loan Agreements), (vii) the Loan Agreements and other Loan Documents and (ix) the Major Trade Contracts (as defined in the Loan Agreements), cancel or terminate or consent to or accept any cancellation or termination thereof, amend, modify or change in any material manner any term or condition thereof, waive any material default under or any material breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof or take any other action in connection therewith that would impair the value of the interest or rights of the Borrower or other Subsidiary thereunder or that would impair the rights or interests of the Lender, or permit any Mortgagor or other Subsidiary to do any of the foregoing.

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projected leasable space on such property; provided, that development of the Project shall be permitted.

(l) Negative Pledge. Except in connection with (i) Existing Debt,
(ii) Secured Debt permitted hereby, (iii) Subordinate Debt permitted hereby, and
(iv) Permitted Liens, but only to the extent expressly permitted herein, the Borrower shall not enter into any covenant or other agreement that prevents it or could prevent it in the future from pledging, granting a security interest in, mortgaging, assigning, encumbering or otherwise creating a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender, or that would be breached if the Borrower were to pledge, grant a security interest in, mortgage, assign, encumber or otherwise create a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender.

(m) Future Property Acquisition. Except as permitted in Section 6.01, acquire, or permit any Mortgagor or Subsidiary to acquire, any real property without the consent of the Lender and without executing and delivering or causing such Mortgagor or Subsidiary to execute and deliver any instrument the Lender may deem necessary or desirable to effectuate such real property becoming additional security for the Loan.

(n) Payments Under Subordinate Loan Documents. Make any payment in respect of any Subordinate Debt (i) at any time while any amount shall be due and owing under any of the Loan Documents or (ii) after the Loan shall have matured or the Lender shall have accelerated payment of the Loan pursuant to
Section 7.01 or prepay any Subordinate Debt while at any time that any Loan Obligation remains unpaid.

(o) Transfer of Properties. Transfer title to any of the Properties except to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition of Permitted Related Owner, (iii) any Person described in clause (b) of the definition of Permitted Related Owner or (iv) with respect to the 59th Street Property, 731 Commercial LLC and 731 Residential LLC, or to the holders of the construction loan (or their nominee or nominees) as part of a deed in lien transaction, provided that, (x) in the case of clause (iii), a receiver of a Property sought to be transferred to such Permitted Related Owner has proposed to enter into a lease at such Property or take any other action which would materially adversely affect the Borrower's qualification as a REIT and the Borrower has given ten (10) days' notice to the Lender of its intention to transfer such Property to such Permitted Related Owner and (y) in the case of the 59th Street Property, residential condominium units may be sold.

(p) Issuance of Shares. Issue, or permit any Subsidiary (other than a Permitted Related Owner) to issue any shares of stock that are not issued as of the date hereof, except that notwithstanding this paragraph the Borrower shall be permitted to issue shares of stock at any time so long as, taking into account such issuance, Vornado Realty Trust and its Affiliates (including for this purpose Interstate Properties) shall continue to own in the aggregate not less than 20% of the outstanding shares of common stock of the Borrower, and, provided further, with respect to Borrower only, that an automatic exchange involving Excess Stock as defined in and pursuant to Borrower's Amended and Restated Certificate of Incorporation shall not be treated as an issuance of shares for the purposes of this Section.

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Reporting Requirements. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender:

(q) Quarterly Financials. (i) As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Borrower's Quarterly Report on Form 10-Q for the preceding quarter as filed with the Securities and Exchange Commission (the "Commission"), containing unaudited financial statements as required by law; and
(ii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and represented to be true and correct (subject to year-end audit adjustments) by the Chairman of the Board of the Borrower or other officer of the Borrower.

(r) Annual Financials. (i) As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the Borrower's Annual Report on Form 10-K for such fiscal year as filed with the Commission; and (ii) as soon as available and in any event within 120 days after the end of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and an unaudited consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, represented to be true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower.

(s) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party of the type described in Section 4.01(h), and promptly after the occurrence thereof, notice of any material adverse change in the status of the Disclosed Litigation from that described on Schedule IV hereof.

(t) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any Property that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any Property that could have a Material Adverse Effect or (ii) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(u) Financial Data for Each Property. Not later than 120 days after the end of each fiscal year, and not later than sixty (60) days after the end of each fiscal quarter, financial data in form reasonably satisfactory to the Lender relating to the operation of each of the Properties, including, without limitation, certified rent roll and summary of leases represented as true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower.

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(v) Budget. To the extent required and received under the Management Agreement, not less than 30 days prior to the commencement of each fiscal year, an annual operating budget relating to the Properties for the upcoming fiscal year including, without limitation, the projected gross rental income and projected operating expenses on a line item basis, provided, however, nothing herein contained shall be deemed to require the Borrower to comply with such budgets.

(w) Other Information. Such other information respecting the business, financial condition, operations, performance or properties of any Loan Party as the Lender may from time to time reasonably request.

SECTION 5.03. Covenants of the Lender. (a) The Lender hereby covenants to Borrower that it will not exercise any rights, including rights exercisable upon the occurrence of an Event of Default, that it has arising from or as a result of this Credit Agreement or any related agreement to cause Borrower or any Subsidiary of Borrower or any Permitted Related Owner to (i) enter into a lease or lease amendment that either (A) provides for payments that are based, directly or indirectly (including through sub-leasing), upon the net "income or profits" of any person (as defined in Section 856(d) (2) of the Code) or (B) requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner to provide a service to a tenant, other than through an independent contractor (as defined in Section 856(d)(2) of the Code), where the provision of such service by Borrower or any of its Subsidiaries or any Permitted Related Owner would cause rents received by the Borrower or any of its Subsidiaries to fail to be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage in a new line of business which (A) is unrelated to the development or leasing of real property and (B) would create a substantial risk, as a result of its generation of income not described in Section 856(c)(2) or (c)(3) of the Code, that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an asset that would cause Borrower to fail to satisfy the asset test of Section 856(c)(5) of the Code; provided, however, that the foregoing covenants of this
Section 5.04(a) shall not (x) preclude the Lender from collecting amounts due to the Lender under this Credit Agreement or from foreclosing on any property securing such indebtedness or (y) be deemed to have been breached or violated by the Lender as a result of any act or action (including, without limitation, the execution of a lease) made, done or taken by any receiver for any property of any Loan Party (including a receiver appointed at the request of the Lender) unless a motion to compel such act or action was made by the Lender to the court which appointed such receiver.

(b) The Lender agrees to use reasonable efforts to preserve the confidentiality of any Confidential Information received by it from the Borrower except as required by law or court order.

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ARTICLE VI.

SPECIAL PROVISIONS

SECTION 6.01. Condemnation and Casualty. (a) In the event of any condemnation or casualty of any Property in part or in the entirety, the proceeds of such condemnation or casualty, to the extent not retained or otherwise applied by the holder of any mortgage securing Senior Debt on such Property, or by the holder of the Construction Loan, applied as required pursuant to any Major Lease approved by the Lender at the Property or applied by such mortgagee or in accordance with such Major Lease either to restore the improvements on such Property or to reduce such Senior Debt or the Construction Loan, as applicable, applied as required pursuant to any condominium declaration and/or related by-laws affecting any Property that has previously been approved by Lender to restore the improvements on such Property or applied in accordance with the Loan Documents, shall be immediately deposited by Borrower in a cash collateral account to be maintained by Borrower at a depository designated by Lender and under the sole dominion and control of Lender (the "Cash Collateral Account") pursuant to a cash collateral agreement to be entered into between Borrower, Lender and such Depository (the "Cash Collateral Agreement"); (such proceeds of condemnation so deposited being herein called "Condemnation Proceeds"; such proceeds of casualty so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds and/or Casualty Proceeds being herein called "Proceeds") and shall constitute additional collateral for the Loan Obligations.

(c) The Borrower shall also have the right to withdraw the Condemnation Proceeds remaining in the Cash Collateral Account to pay for the cost of constructing improvements on

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any Property covered by any Mortgage, and the Borrower shall have the right to withdraw any Casualty Proceeds in the Cash Collateral Account to pay for the repair and restoration of improvements whose damage or destruction generated such Casualty Proceeds, provided that, in all cases, subject to the Loan Documents, the Loan Agreements and any condominium declaration and/or related by-laws affecting such Property that has previously been approved by Lender and the Other Vornado Loans: (i) no Default or Event of Default shall be continuing;
(ii) the Lender shall have approved the plans and specifications for the construction of such improvements as well as the general contract and other major contracts to be entered into by the Borrower in connection with such construction, which approval will not unreasonably be withheld; (iii) the Lender shall have received such certification and assurances as Lender shall reasonably request to assure it that the cost of constructing the improvements as shown on the plans approved by Lender does not exceed the amount of the Proceeds sought to be withdrawn by the Borrower to pay for such improvements; and (iv) the Lender may impose such further conditions and restrictions upon the disbursement of such Proceeds as the Lender deems necessary or desirable, consistent with prudent institutional construction lending practices, to assure the completion of the proposed improvements subject to no liens or encumbrances (except Permitted Liens) and in accordance with the aforesaid approved plans and all applicable laws.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(c) the Borrower shall fail to perform or observe, in any material respect, any term, covenant or agreement contained in Section 5.02; or

-27-

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(k) any Event of Default (as such term is defined in any Loan Document) shall occur and be continuing;

(l) any Event of Default (as such term is defined in any loan document of the Other Vornado Loans) shall occur and be continuing; or

(m) any Event of Default (as such term is defined in the Loan Agreements of the Construction Loan) shall occur and be continuing;

ARTICLE VIII.

MISCELLANEOUS

(i) if to the Borrower, to:

Alexander's Inc. c/o Vornado Realty Trust 210 Route 4 East

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                     Paramus, New Jersey  07652-0910
                     Attention:  Chief Financial Officer
                     Facsimile No.: (201) 587-0600

                     with a copy to:

                     Winston & Strawn
                     200 Park Avenue
                     New York, New York 10166

                     Facsimile No.: (212) 294-4700
                     Attention:  Neil Underberg

and                  Vornado Realty Trust
                     888 Seventh Avenue
                     New York, New York 10019
                     Attention:  President
                     Facsimile No.: (212)  894-7070

            (ii)     if to the Lender, to:

                     Vornado Lending L.L.C.
                     c/o Vornado Realty Trust
                     210 Route 4 East
                     Paramus, New Jersey  07652-0910
                     Attention:  Chief Financial Officer
                     Facsimile No.: (201) 587-0600

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(including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto).

-31-

(e) The provisions of this Section 8.04 shall survive the repayment or other satisfaction of the Borrower's Obligations hereunder.

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any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Loan or the actions of the Lender in the negotiation, administration, performance or enforcement thereof. The Borrower acknowledges and agrees that this section is a specific and material aspect of this Credit Agreement and that the Lender would not extend credit to the Borrower if the waiver set forth in this section were not a part of this Credit Agreement.

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cancellation of the Notes or any other Loan Document, the release of any security interest, lien or encumbrance securing the Borrower's Obligations hereunder or any other action which the Lender may have taken in reliance upon its receipt of such payment. Any cancellation, release or other such action by the Lender shall be deemed to have been conditioned upon any payment of the Borrower's Obligations hereunder having become final and irrevocable.

* * *

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

ALEXANDER'S, INC.

By:   /s/Brian Kurtz
   ---------------------------------
   Name:  Brian Kurtz
        ----------------------------
   Title: Assistant Secretary
         ---------------------------

VORNADO LENDING L.L.C.

By:   /s/ Joseph Macnow
   ---------------------------------
   Name:  Joseph Macnow
        ----------------------------
   Title: Executive Vice President
         ---------------------------

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SCHEDULE I
PROPERTIES

FLUSHING PROPERTY

Address: 136-20 through 136-30 Roosevelt Avenue, a/k/a 40-17-19 Main Street, Queens, New York

Tax Map Designation:
      Block:  5019            Lot:  5
      City:  New York         County:  Queens           State:  New York

59TH STREET PROPERTY

Address:    162-64 East 59th St. a/k/a 976-88 Third Ave.
            135-39 East 58th St. a/k/a 723-33 Lexington Ave.
            136-40 East 59th St. a/k/a 735-41 Lexington Ave.
            New York, New York

Tax Map Designation:
      Block:  1313            Lots:  40, 42, 43, 50
      City:  New York         County:  New York         State:  New York

REGO PARK II PROPERTY

Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:
Block: 2080 Lot: 101

REGO PARK III PROPERTY

Address: Junction Boulevard
Rego Park, New York

Tax Map Designation:
      Block:  2077            Lot:  90 and 98
      Block:  2076            Lot:  50 and 63

THIRD AVENUE PROPERTY

Address:    2948-54 Third Avenue
            633 Bergen Avenue
            2964 Third Avenue; and
            2970 Third Avenue
            Bronx, New York

Tax Map Designation:
Section: 9 Block: 2362 Lots: 44, 72, 71, 52 & 53 City: New York County: Bronx State: New York

SCHEDULE II
CONFLICTS UNDER LOAN DOCUMENTS

1. Completing recordation and filing of the Mortgages and other documents.

SCHEDULE III
REQUIRED AUTHORIZATIONS

1. Recording Mortgages and making other security filings.

SCHEDULE IV
DISCLOSED LITIGATION

1. Claims in process in the Bankruptcy Proceeding as set forth in attached Schedule IV-A.

SCHEDULE V(a)
ENVIRONMENTAL NON-COMPLIANCE

1. Environmental matters disclosed in Alexander's, Inc. quarterly report on Form 10-Q for the quarter ended September 30, 1994, et. seq.

SCHEDULE V(b)
ENVIRONMENTAL REPORTS

1. Roosevelt Avenue & Main Street, 136-20 Roosevelt Avenue, Flushing, New York 11354 (December 1, 1993)

2. Alexander's Department Store, 96-05 Queens Boulevard, Rego Park, New York 11374 (December 1, 1993)

3. Third Avenue & 152nd Street, Bronx, New York (December 1, 1993)

4. East 59th Street & Lexington Ave., 731-733 & 735-741 Lexington Ave., 982-988 & 976-980 Third Ave., New York, New York 10022 (December 1, 1993)

SCHEDULE VI
DEFAULTS UNDER MATERIAL AGREEMENTS

(None)

SCHEDULE VII
NON-COMPLIANCE WITH LAWS

(None)

EXHIBIT A
FORM OF NOTE

EXHIBIT B
FORM OF GUARANTY

EXHIBIT C
FORM OF NON-DISTURBANCE AGREEMENT

EXHIBIT D
FORM OF MORTGAGE

EXHIBIT E
FORM OF ASSIGNMENT OF COLLATERAL ACCOUNT AND SECURITY AGREEMENT

EXHIBIT F

FORM OF DEPOSIT ACCOUNT CONTROL AGREEMENT

EXHIBIT G

FORM OF PLEDGE AGREEMENT

EXHIBIT H

FORM OF BORROWING REQUEST

STATE OF     New York         )
         ---------------------
                              )     ss.:
COUNTY OF         New York    )
          --------------------

/s/ Leon Busteed
---------------------------------------
      Notary Public Leon Busteed
      My commission expires: Nov. 30, 2002

Exhibit 10(i)B(4)

CREDIT AGREEMENT

dated as of July 3, 2002

among

ALEXANDER'S INC.,
as Borrower

and

VORNADO LENDING L.L.C.,

as Lender

TABLE OF CONTENTS

                                                                            Page
                                                                            ----
ARTICLE I.     DEFINITIONS AND ACCOUNTING TERMS .......................      1

      SECTION 1.01.    Certain Defined Terms ..........................      1

      SECTION 1.02.    Computation of Time Periods ....................      9

      SECTION 1.03.    Accounting Terms ...............................      9

ARTICLE II.    AMOUNTS AND TERMS OF THE ADVANCES ......................      9

      SECTION 2.01.    The Loan .......................................      9

      SECTION 2.02.    Repayment ......................................      9

      SECTION 2.03.    Prepayments ....................................      9

      SECTION 2.04.    Interest .......................................      9

      SECTION 2.05.    Increased Costs ................................     10

      SECTION 2.06.    Payments and Computations ......................     10

      SECTION 2.07.    Taxes ..........................................     11

      SECTION 2.08.    Payment of Certain Costs and Expenses ..........     12

      SECTION 2.09.    Use of Proceeds ................................     13

ARTICLE III.   CONDITIONS OF LENDING ..................................     13

      SECTION 3.01.    Conditions Precedent to Funding Loan ...........     13

ARTICLE IV.    REPRESENTATIONS AND WARRANTIES .........................     13

      SECTION 4.01.    Representations and Warranties of the Borrower .     13

ARTICLE V.     COVENANTS ..............................................     16

      SECTION 5.01.    Affirmative Covenants of the Borrower ..........     16

      SECTION 5.02.    Negative Covenants .............................     19

      SECTION 5.03.    Reporting Requirements .........................     23

      SECTION 5.04.    Covenants of the Lender ........................     24

ARTICLE VI.    SPECIAL PROVISIONS .....................................     25

      SECTION 6.01.    Condemnation and Casualty ......................     25

      SECTION 6.02.    Payment of REIT Dividends ......................     26

ARTICLE VII.   EVENTS OF DEFAULT ......................................     27

      SECTION 7.01.    Events of Default ..............................     27

ARTICLE VIII.  MISCELLANEOUS ..........................................     29

      SECTION 8.01.    Amendments, Etc ................................     29

SECTION 8.02.    Notices, Etc ...................................     29

SECTION 8.03.    No Waiver; Remedies ............................     30

SECTION 8.04.    Costs, Expenses ................................     30

SECTION 8.05.    Merger .........................................     31

SECTION 8.06.    Binding Effect .................................     31

SECTION 8.07.    Lender's Discretion ............................     31

SECTION 8.08.    Participations .................................     31

SECTION 8.09.    Governing Law ..................................     32

SECTION 8.10.    Execution in Counterparts ......................     32

SECTION 8.11.    Waiver of Jury Trial ...........................     32

SECTION 8.12.    Jurisdiction ...................................     32

SECTION 8.13.    Continuing Enforcement .........................     33

Schedule I        -     Properties
Schedule II             Conflicts under Loan Documents
Schedule III            Required Authorizations
Schedule IV             Disclosed Litigation
Schedule V(a)           Environmental Non-Compliance
Schedule V(b)           Environmental Reports
Schedule VI             Defaults under Material Agreements
Schedule VII            Non-compliance with Laws

Exhibit A         -     Form of Note
Exhibit B-1       -     Form of Guaranty
Exhibit B-2       -     Form of Guaranty
Exhibit C         -     Form of Non-Disturbance Agreement
Exhibit D         -     Form of Mortgage
Exhibit E         -     Form of Assignment of Collateral Account and Security
                        Agreement
Exhibit F         -     Form of Deposit Account Control Agreement
Exhibit G         -     Form of Pledge Agreement

(1) WHEREAS, Borrower and Lender previously entered into that certain Credit Agreement, dated as of October 20, 1999 (as heretofore amended, the "ORIGINAL CREDIT AGREEMENT"), pursuant to which Lender advanced to Borrower the aggregate principal amount of Fifty Million and 00/100 Dollars ($50,000,000.00);

(2) WHEREAS, the outstanding principal amount under the Original Credit Agreement has been reduced by $10,000,000 and such $10,000,000 is now secured by this Credit Agreement and the Loan Documents; and

(3) WHEREAS, Borrower is being released from its obligations as borrower under the Original Credit Agreement effective as of the date hereof;

(4) WHEREAS, Borrower has requested that Lender make a loan in the amount and for the purposes herein specified and Lender is willing to make such a loan on the terms and conditions set forth herein; and

(5) WHEREAS, an additional sum of $25,000,000 is being advanced by Lender to Borrower on the date hereof.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

"59th Street Property" means the Property designated on Schedule I to this Credit Agreement as the "59th Street Property."

direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

"Assignment of Collateral Account and Security Agreement" means the Assignment of Collateral Account and Security Agreement, substantially in the form of Exhibit E hereto.

"Borrower" has the meaning specified in the recital of parties to this Credit Agreement.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City.

"Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt.

"Cash Collateral Account" has the meaning specified in Section 6.01.

"Cash Collateral Agreement" has the meaning specified in Section 6.01.

"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time.

"Closing Date" means July 3, 2002.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender.

"Collateral Documents" means collectively each Guaranty, Mortgage, Pledge Agreement and the Lockbox Documents.

"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.

"Construction Loan" shall have the meaning given to such term in Section 5.01(m) hereof.

"Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred

purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Debt of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"Default Rate" means 4% per annum above the rate per annum required to be paid on the Loan pursuant to Section 2.04(a).

"Deposit Account Control Agreement" means the Control Agreement for Notification and Acknowledgement of Security Interest in Deposit Accounts substantially in the form of Exhibit F hereto.

"Disclosed Litigation" means the matters described on Schedule IV hereto.

injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

"Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law.

"Events of Default" has the meaning specified in Section 7.01.

"Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement.

"Flushing Property" means the ground leasehold estate on the Property designated on Schedule I to this Credit Agreement as the "Flushing Property."

"GAAP" has the meaning specified in Section 1.03.

"Guaranty" means the Guaranty substantially in the form of Exhibit B to this Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor.

"Indemnified Party" has the meaning specified in Section 8.04(b).

"Interest Payment Date" has the meaning specified in Section 2.04(a).

"Leasing Agreement" means (a) that certain 59th Street Real Estate Retention Agreement, as of the date hereof, among Vornado Realty Trust and the Borrower as amended from time to time and (b) that certain Real Estate Retention Agreement dated July, 1992, between Vornado, Inc., Alexander's, and certain other parties as amended by Amendment to Real Estate Retention Agreement dated as of the date hereof.

"Loan" means the loan from Lender to Borrower in the amount of $35,000,000 evidenced by this Credit Agreement.

"Loan Documents" means this Credit Agreement, the Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan.

"Loan Obligations" means all amounts due payable to the Lender under the Loan Documents.

"Loan Parties" means the Borrower, each Guarantor and each Mortgagor.

"Management Agreement" means (a) that certain Amended and Restated Management and Development Agreement, dated as of the date hereof, between the Borrower and Vornado Management Corp., as amended from time to time, and (b) that 59th Street Management and Development Agreement dated as of the date hereof between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp., as amended from time to time.

"Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole.

"Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

"Maturity Date" means the earlier of (i) January 3, 2006 and (ii) the date on which the Construction Loan is paid in full.

"Mortgagor" means the Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc., and Alexander's of Third Avenue, Inc. or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage.

"Other Taxes" has the meaning specified in Section 2.07(b).

Street Corporation, as borrower; (iii) that certain credit line in the maximum principal amount of $50,000,000 evidenced by an Amended and Restated Credit Line Agreement dated as of even date herewith, from Lender, as lender, to Alexander's, as borrower; and (iv) the Reimbursement Facility.