ALEXANDERS INC - Quarter Report: 2003 March (Form 10-Q)

     At March 31, 2003, the Company was indebted to Vornado in the amount of $119,000,000 comprised of (i) $95,000,000 financing, and (ii) $24,000,000 under a $50,000,000 line of credit (which carries a 1% unused commitment fee). The interest rate on the loan and line of credit is 12.48% and the maturity has been extended to the earlier of January 3, 2006 or the date the Lexington Avenue construction loan is repaid in full. The interest rate on the loan and line of credit will reset quarterly, using the same spread to treasuries and a 3.00% floor for treasuries. The Company incurred interest on its loans from Vornado of $3,778,000 and $4,082,000 in the three months ended March 31, 2003 and 2002. At March 31, 2003, $26,000,000 was available under the line of credit.

3. DEBT

     Below is a summary of the Company’s outstanding debt.

7

Table of Contents

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     The scheduled principal repayments for the next five years and thereafter are as follows:

(amounts in thousands)

4. LEXINGTON AVENUE

     The development plans at Lexington Avenue consist of approximately 1.3 million square foot multi-use building. The building will contain approximately 154,000 net rentable square feet of retail (45,000 square feet of which has been leased to Hennes & Mauritz), approximately 878,000 net rentable square feet of office (695,000 square feet of which has been leased to Bloomberg L.P.) and approximately 248,000 net saleable square feet of residential consisting of condominium units (through a taxable REIT subsidiary). Construction is expected to be completed in 2005. 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 has been provided by the Company. The Construction Loan has an interest rate of LIBOR plus 2.5% (currently 3.88%) and a term of forty-two months subject to two one-year extensions. The Company received funding of $80,000,000 under the Construction Loan as of March 31, 2003. Of the total construction budget of $630,000,000, $246,000,000 has been expended through March 31, 2003 and an additional $143,000,000 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.

     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.

5. COMMITMENTS AND CONTINGENCIES

     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 since the Company’s current all risk insurance policies, differ from policies in effect prior to September 11, 2001 as to coverage for terrorist acts, there are breaches of these debt instruments that allow the lenders to declare an event of default and accelerate repayment of the debt. In addition, if lenders insist on coverage for these risks, as it existed prior to September 11, 2001, 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 ($2,176,000 has been paid as of March 31, 2003) for its estimated obligation with respect to the clean up

8

Table of Contents

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     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 Company believes 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 March 31, 2003 for possible recoveries of environmental remediation costs from potentially responsible third parties.

     Neither the Company nor any of its subsidiaries is a party to, nor is their property the subject of, any material pending legal proceeding other than routine litigation incidental to their businesses. 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 $8,100,000 in standby letters of credit were issued at March 31, 2003.

6. INCOME PER SHARE

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

     Options to purchase 125,000 shares of the Company’s common stock were not included in the computation of diluted income per share because the options’ exercise price was greater than the average market price of the common shares for the periods presented.

9

Table of Contents

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7. DISCONTINUED OPERATIONS

     Discontinued operations include the Company’s Third Avenue property which was sold on August 30, 2002 and the Flushing property which is shown on the Balance Sheet as an “Asset held for sale”. Details of the operations at these properties are as follows:

     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 $1,875,000 from the purchaser. By Notice of Default dated August 16, 2002, the Landlord of the premises notified the Company of certain alleged defaults under the lease, including, but not limited to the fact that the purchaser performed unauthorized construction at the premises. The Company commenced an action for injunctive relief and a declaration of the rights and obligations of the parties under the lease. The Company has obtained an injunction which temporarily restrains the Landlord from terminating the lease. On September 6, 2002, the scheduled closing date, the Company notified the purchaser that the purchaser failed to close and is in default of its obligations under the purchase contract. While negotiations are in process with the parties to attempt to settle the disputes, there can be no assurance that the sale will be consummated, or that the dispute with the Landlord will be resolved favorably, or that the deposit will not be required to be returned. The Company continues to explore all of its options, including subleasing the property.

10

Table of Contents

INDEPENDENT ACCOUNTANTS’ REPORT

Shareholders and Board of Directors
Alexander’s Inc.
New York, New York

     We have reviewed the accompanying condensed consolidated balance sheet of Alexander’s Inc. and Subsidiaries as of March 31, 2003, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management.

     We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

     Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

     We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Alexander’s Inc. and Subsidiaries as of December 31, 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 5, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
May 7, 2003

11

Table of Contents

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.

     For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Form 10-Q.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements for the three months ended March 31, 2003 and 2002. 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, 2002.

Critical Accounting Policies

     In preparing the consolidated financial statements management has made estimates and assumptions that affect the reported amounts of 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. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. The summary should be read in conjunction with the more complete discussion of significant accounting policies included in Note 2 to the consolidated financial statements of the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2002.

Real Estate

     Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are charged to operations as incurred. Depreciation requires an estimate by management of the useful life of each property as well as an allocation of the costs associated with a property to its various components. If the Company does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated. When real estate and other property is undergoing development activities, all property operating expenses, including interest expense, are capitalized to the cost of the real property to the extent that management believes such costs are recoverable through the value of the property. The Company’s properties are reviewed for impairment if events or circumstances indicate that the carrying amount of the asset may not be recoverable. In such event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis, to the carrying amount of such property. If the Company incorrectly estimates the value of the asset or the undiscounted cash flows, the impairment charges may be different.

12

Table of Contents

Revenue Recognition

     Base rent – income arising from tenant leases. These rents are recognized over the non-cancellable term of the related leases on a straight-line basis which included the rent steps and free rent abatements under the leases.

     Percentage Rents – income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with SAB 101, which states that this income is to be recognized only after the contingency has been removed (i.e. sales threshold have been achieved).

     Expenses Reimbursement Income – income arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This income is accrued in the same periods as the expenses are incurred.

Income Taxes

     The Company operates in a manner intended to enable it to continue to qualify as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). Under the Code, the Company’s net operating loss (“NOL”) carryovers generally would be available to offset the amount of the Company’s REIT taxable income that otherwise would be required to be distributed as a dividend to its stockholders.

Results of Operations

     The Company had net income of $4,804,000 in the quarter ended March 31, 2003, compared to $3,531,000 in the quarter ended March 31, 2002, an increase of $1,273,000. 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 and sold as discontinued operations.

     Property rentals were $12,672,000 in the quarter ended March 31, 2003, compared to $12,405,000 in the prior year’s quarter, an increase of $267,000. This increases resulted primarily from an increase in occupancy at the Kings Plaza Regional Shopping Center.

     Tenant expense reimbursements were $6,896,000 in the quarter ended March 31, 2003, compared to $6,317,000 in the prior year’s quarter, an increase of $579,000. This increases resulted from a $906,000 increase in tenant reimbursements, offset by $327,000 of adjustments to accruals for the year ended December 31,2002, based on actual expenses for those periods.

     Operating expenses were $8,913,000 in the quarter ended March 31, 2003, compared to $6,870,000 in the prior year’s quarter, an increase of $2,043,000. Of this increase (i) $363,000 resulted primarily from higher fuel costs for the utility plant at the Company’s Kings Plaza Regional Shopping Center, (ii) $307,000 resulted from bad debt expense this year as compared to a bad debt recovery in the prior year’s quarter and (iii) $180,000 resulted from higher garage expenses. The balance of the increase was due to higher insurance, real estate taxes and repairs and maintenance, which were billed to tenants.

     Interest and debt expense was $3,200,000 in the quarter ended March 31, 2003, compared to $6,578,000 in the prior year quarter a decrease of $3,378,000. The decrease in interest expense resulting from higher capitalized interest relating to the Lexington Avenue development property (interest expense of $8,731,000 was capitalized in 2003, as compared to $4,685,000 in 2002) and a decrease in average interest rates from 8.55% to 7.98%.

     Interest and other income, net was $123,000 in the quarter ended March 31, 2003, compared to $667,000 in the prior year’s quarter, a decrease of $544,000. This decrease resulted primarily from lower average cash invested due to funding of the Lexington Avenue development project.

13

Table of Contents

     Discontinued operations include the Company’s Third Avenue property which was sold on August 30, 2002 and the Flushing property which is shown on the Balance Sheet as an “Asset held for sale”. Details of the operations are as follows:

     The decrease in revenues and expenses in 2003 were due to the sale of the Third Avenue property in August of 2002.

Liquidity and Capital Resources

     Alexander’s operating properties do not generate sufficient cash flow to pay all of its expenses. After the completion of the Lexington Avenue property, which is not expected until 2005, the Company expects that cash flow will become positive.

Development Plans

     The development plans at Lexington Avenue consist of approximately 1.3 million square foot multi-use building. The building will contain approximately 154,000 net rentable square feet of retail (45,000 square feet of which has been leased to Hennes & Mauritz), approximately 878,000 net rentable square feet of office (695,000 square feet of which has been leased to Bloomberg L.P.) and approximately 248,000 net saleable square feet of residential consisting of condominium units (through a taxable REIT subsidiary). Construction is expected to be completed in 2005. 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 has been provided by the Company. The Construction Loan has an interest rate of LIBOR plus 2.5% (currently 3.88%) and a term of forty-two months subject to two one-year extensions. The Company has received funding of $80,000,000 under the Construction Loan as of March 31, 2003. Of the total construction budget of $630,000,000, $246,000,000 has been expended through March 31, 2003 and an additional $143,000,000 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. If Vornado should advance any funds under the Completion Guarantee in excess of the $26,000,000 currently available under its line of credit with the Company, interest on those advance are at 15% per annum.

     The Company’s lease with Bloomberg L.P. has an initial term of 25 years, with a ten-year renewal option. Base annual net rent is $34,529,000 in each of the first four years and $38,533,000 in the fifth year with a similar percentage increase each four years thereafter.

     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.

Insurance

     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 since the Company’s current all risk insurance policies, differ from policies in effect prior to September 11, 2001 as to coverage for terrorist acts, there

14

Table of Contents

are breaches of these debt instruments that allow the lenders to declare an event of default and accelerate repayment of the debt. In addition, if lenders insist on coverage for these risks, as it existed prior to September 11, 2001, it could adversely affect the Company’s ability to finance and/or refinance its properties, including the construction of its Lexington Avenue development property.

Disposition of Property

     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 $1,875,000 from the purchaser. By Notice of Default dated August 16, 2002, the Landlord of the premises notified the Company of certain alleged defaults under the lease, including, but not limited to the fact that the purchaser performed unauthorized construction at the premises. The Company commenced an action for injunctive relief and a declaration of the rights and obligations of the parties under the lease. The Company has obtained an injunction which temporarily restrains the Landlord from terminating the lease. On September 6, 2002, the scheduled closing date, the Company notified the purchaser that the purchaser failed to close and is in default of its obligations under the purchase contract. While negotiations are in process with the parties to attempt to settle the disputes, there can be no assurance that the sale will be consummated, or that the dispute with the Landlord will be resolved favorably, or that the deposit will not be required to be returned. The Company continues to explore all of its options, including subleasing the property.

Debt

     At March 31, 2003, the Company was indebted to Vornado in the amount of $119,000,000 comprised of (i) $95,000,000 financing, and (ii) $24,000,000 under a $50,000,000 line of credit (which carries a 1% unused commitment fee). The interest rate on the loan and the line of credit which is currently 12.48%, will reset quarterly using a Treasury index (with a 3% floor) plus the same spread to treasuries.

     The Company has additional borrowing capacity of $26,000,000 under its line of credit with Vornado. The Company can also raise additional capital through mezzanine level borrowing (deeply subordinated debt which is not secured by a senior interest in assets) and through the sale of securities and assets (the Company estimates that the fair market value of its assets are substantially in excess of their historical cost). The Company continues to evaluate its financing alternatives.

     Although there can be no assurance, the Company believes that its cash sources as outlined above will be adequate to fund its cash requirements until its operations generate adequate cash flow.

     Cash Flows

Three Months Ended March 31, 2003

     Net cash provided by operating activities of $9,445,000 was comprised of (i) net income of $4,804,000 (ii) non-cash items of $2,014,000, offset by and (iii) the net change in operating assets and liabilities of $2,627,000. The adjustments for non-cash items are comprised of depreciation and amortization of $2,574,000, offset by the effect of straight-lining of rental income of $560,000.

     Net cash used in investing activities of $64,434,000, was comprised of capital expenditures of $61,574,000. The capital expenditures were primarily related to the Lexington Avenue development project.

     Net cash provided by financing activities of $23,801,000 resulted primarily from increase borrowings primarily to fund the Lexington Avenue development project of $24,518,000, offset by debt repayments of $717,000.

15

Table of Contents

Three Months Ended March 31, 2002

     Net cash provided by operating activities of $957,000 was comprised of (i) net income of $3,531,000, (ii) non-cash items of $1,098,000, offset by the net change in operating assets and liabilities of $3,672,000. The adjustments for non-cash items are comprised of depreciation and amortization of $1,842,000, offset by the effect of straight-lining of rental income of $744,000.

     Net cash used in investing activities of $14,212,000 was comprised of capital expenditures of $12,223,000 and increased in restricted cash of $1,989,000. The capital expenditures were primarily comprised of (i) capitalized interest and other carrying costs of $5,201,000, and (ii) excavation, foundation and predevelopment costs at the Lexington Avenue property of $6,799,000.

     Net cash used in financing activities of $706,000, resulted primarily from debt payments of $670,000.

Funds from Operations for the Three Months Ended March 31, 2003, and 2002

     Funds from operations (“FFO”) was $6,411,000 in the quarter ended March 31,2003, compared to $5,174,000 in the prior year’s quarter, an increase of $1,237,000. Effective with the Company’s filing of its 2003 first quarter Form 10-Q, the Company has revised its definition of FFO to include the effect of straight-lining of rent. This change was made in order to comply with the Securities and Exchange Commission’s recent Regulation G concerning non-GAAP financial measures, adhere to the National Association of Real Estate Investment Trusts (“NAREIT’s”) definition of FFO and to disclose FFO on a comparable basis with virtually all other companies in the industry. FFO for last year’s first quarter has been restated for comparability. Income from the straight-lining of rents amounted to $560,000 for the quarter ended March 31, 2003, and $744,000 for the quarter ended March 31, 2002. The following table reconciles net income to funds from operations:

     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. Funds from operations is computed in accordance with NAREIT’s standards, which may not be comparable to funds from operations reported by other REITs that do not define the term in accordance with NAREIT’s definition or that interpret NAREIT’s definition differently.

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

16

Table of Contents

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     The Company’s exposure to a change in interest rates is as follows:

     The fair value of the Company’s debt, based on discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt, exceeds the aggregate carrying amount by approximately $17,788,000 at March 31, 2003.

Item 4.   Controls and Procedures

     Within the 90-day period prior to the filing of this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of Alexander’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation

17

Table of Contents

PART II.   OTHER INFORMATION

Item 1.   Legal Proceedings

     For a discussion of the litigation concerning the sale of the Company’s subsidiary which owns the building and has the ground lease for its property in Flushing, New York, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.

     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.

Item 6. Exhibits and Reports on Form 8-K

             During the quarter ended March 31, 2003, the Company did not file any reports on Form 8-K.

Page 18

Table of Contents

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.

Page 19

Table of Contents

CERTIFICATION

I, Steven Roth, certify that:

        May 7, 2003

Page 20

Table of Contents

CERTIFICATION

I, Joseph Macnow, certify that:

        May 7, 2003

21

Table of Contents

EXHIBIT INDEX

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

22

Table of Contents

Page 23

Table of Contents

Page 24

Table of Contents

Page 25

Table of Contents