Wall Street Watch

Approximately US$ 800 Million of Securities Affected.

New York, June 18, 2002 -- Moody's Investors Service has assigned a Baa2 rating to the proposed offering of senior unsecured notes by Vornado Realty, L.P., the operating partnership for Vornado Realty Trust. This is the first time that Moody's has rated unsecured senior notes for Vornado Realty L.P.. Proceeds of the offering are expected to be used to repay mortgages coming due this year. Upon the issuance of the Vornado Realty, L.P.'s unsecured notes Moody's will upgrade the preferred stock of Vornado Realty Trust to Baa3 from Ba1. Consistent with Moody's notching convention for REIT's, Vornado Realty Trust's preferred stock will be upgraded to reflect the existence of constraining financial covenants that provides protection for the preferred shareholder. The ratings outlook is stable.

According to Moody's the Baa2 rating reflects Vornado's well respected management team with a successful record of adding value and operating profitably while managing risk, a diversified portfolio of highly productive assets, substantial financial flexibility resulting from a sizeable and high quality pool of unencumbered assets and an undrawn $1billion bank credit facility, and demonstrated ability to consistently access the capital markets. Offsetting these credit positives are the company's opportunistic investment strategy which is less predictable, an expectation that the company will continue to maintain high levels of secured debt even as it transitions its capital structure to include unsecured bonds, relatively high levels of variable rate debt and modest fixed charge coverages for its rating category.

Vornado's diversified portfolio and competent operating infrastructure for each of its platforms should enable the company to maintain relative stability of earnings. With the recent acquisition of the remaining 66% interest in the Charles E. Smith office portfolio, Vornado's office assets will generate approximately 57% of its total EBITDA. The office portfolio is primarily located in two major markets - D.C., which has proven to be the most resilient office market during cyclical downturns and New York City, where fundamentals are softening but Vornado's assets should continue to benefit from embedded rent growth. The REIT's remaining business segments individually generated between 8% and 12% of EBITDA, and consists of retail assets which includes community shopping centers and 3 regional malls, its merchandise mart segment, a 60% ownership interest in a joint venture that owns temperature controlled logistics facilities, and other investments.

Vornado has many joint venture relationships and its ownership in some of its investments can be complex. The company owns a 33% interest in Alexander's (NYSE: ALX) and also shares senior management, board members and major investors, effectively controlling the strategic direction of that entity. Today, most of Vornado's development exposure is through its ownership interest in Alexanders and its role as the developer for the 1.3 million sf mixed use, 57% preleased 59th Street project. Moody's believes the appropriate way to assess the company's credit profile is on the basis of prorata consolidation of all its ownership interest with a 100% consolidation of Alexander's, given that entity's strategic importance to Vornado. Vornado has traditionally maintained leverage levels that are approximately 50% of total assets at cost, but post the recent acquisition of the remaining 66% interest in the Charles E. Smith office portfolio and subsequent equity issuance, total leverage is approximately 45%, and anticipated to improve as mortgages amortize. However, the company's effective leverage ratio which includes the impact of preferred stock and preferred operating partnership units in the capital structure is higher and expected to be at 54% proforma for the bond issuance and the conversion of its Series A preferred stock into common stock. Although secured debt comprises a substantial portion of the REIT's capital structure at 40% of total assets at cost, the size and quality of Vornado's proforma pool of unencumbered assets is strong. Proforma for the bond offering unencumbered assets at cost is 5.8X unsecured debt, with unencumbered interest coverage of 17.3X. Vornado targets variable rate debt exposure at about 25%, which is high for its rating category. However, the company has been able to maintain its targeted coverage ratios even during periods of high interest rates and other adverse conditions.

Moody's noted that the financial covenants for the proposed unsecured bond offering are expected to be different from standard REIT bond covenants, although not unique. Covenant calculations are to be based on a prorata consolidation of all the firm's ownership interest, which is more appropriate for Vornado's investment strategy. However, the covenants uses a cap rate valuation methodology versus a more conservative original cost basis for calculating total assets. Furthermore, the proposed bond covenants allow for higher levels of secured debt - 55% of total assets. While Moody's will monitor compliance with these covenants, the company is anticipated to maintain a credit profile well above these covenant levels and consistent with its rating. On a prorata consolidated basis with 100% consolidation for Alexander's, the company is anticipated to maintain debt levels less than 50% of total assets at cost, effective leverage including the effect of preferred stock less than 55% of total assets, strong unencumbered ratios, with fixed charge coverages (including preferred stock dividends, funded capitalized interest, and principal amortization) comfortably over 2.0Xs. Moody's expects that the REIT's credit profile will continue to improve as it transitions its capital structure to include material levels of unsecured bonds and as development projects are placed into service, while continuing to have solid operating results.

With a commitment to an opportunistic investment strategy, high levels of effective leverage including preferred stock, and a capital structure still anticipated to be comprised of substantial amounts of secured debt, improvement in the rating would be difficult. Downward rating pressure would result from a major leveraged acquisition, engagement in substantial additional development, or failure to improve its leverage ratios and fixed charge coverages as the capital structure transitions.

Vornado Realty Trust [NYSE: VNO], headquartered in New York, New York, USA had assets at cost of $8.9 billion at March 31, 2002 and $346 million in revenues for the quarter ended of March 31, 2002.

New York
Arlene Isaacs-Lowe
Senior Vice President
Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John J. Kriz
Managing Director
Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653