1
                                                        EXHIBIT INDEX ON PAGE 53

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[x]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the Fiscal Year Ended:          DECEMBER 31, 2000

                                       or

[ ]      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:    001-14525

                            VORNADO OPERATING COMPANY

             (Exact name of Registrant as specified in its charter)

                DELAWARE                               22-3569068
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)              Identification Number)

 888 SEVENTH AVENUE, NEW YORK, NEW YORK                   10019
(Address of Principal Executive Offices)               (Zip Code)

Registrant's telephone number, including area code:  (212) 894-7000


                   210 ROUTE 4 EAST, PARAMUS, NEW JERSEY 07652
         (Former name, former address and former fiscal year, if changed
                               since last report)


           Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class                Name of Each Exchange on Which Registered
                                
   Common Stock,                   American Stock Exchange
par value $.01 per share


        Securities registered pursuant to Section 12(g) of the Act: None

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. YES [X]   NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting shares held by non-affiliates of the
registrant, i.e. by persons other than officers and directors of Vornado
Operating Company as reflected in the table in Item 12 of this Form 10-K, as of
February 16, 2001 was approximately $16,218,000.

As of February 16, 2001, there were 4,068,924 shares of the registrant's common
stock, par value $.01 per share, outstanding.

                       Documents Incorporated by Reference

PART III: Proxy Statement for Annual Meeting of Stockholders to be held on May
30, 2001.
   2
                                TABLE OF CONTENTS

ITEM



                                                                                                               Page
                                                                                                            
PART I............................................................................................................3
   ITEM 1.   BUSINESS.............................................................................................3
   ITEM 2.   PROPERTIES..........................................................................................10
   ITEM 3.   LEGAL PROCEEDINGS...................................................................................10
   ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................10
             EXECUTIVE OFFICERS OF THE COMPANY...................................................................11
PART II..........................................................................................................12
   ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................12
   ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA................................................................13
   ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............13
   ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................................18
   ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................19
   ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL
             DISCLOSURE..........................................................................................19
PART III.........................................................................................................35
   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (1)..............................................35
   ITEM 11.  EXECUTIVE COMPENSATION (1)..........................................................................35
   ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (1)..................................35
   ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (1)..................................................35
PART IV..........................................................................................................36
   ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................................36
SIGNATURES.......................................................................................................37


--------------------
(1)      These items are omitted because the Registrant will file a definitive
         Proxy Statement pursuant to Regulation 14A involving the election of
         directors with the Securities and Exchange Commission not later than
         120 days after December 31, 2000, which is incorporated by reference
         herein. Information relating to Executive Officers of the Registrant
         appears on page 11 of this Annual Report on Form 10-K.

         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"). Certain factors could cause actual
results to differ materially from those in the forward-looking statements.
Factors that might cause such a material difference include, but are not limited
to: (a) the Company's limited operating history; (b) restrictions on the
Company's business and future opportunities; (c) dependence upon Vornado Realty
Trust; (d) the substantial influence of the Company's controlling stockholders
and conflicts of interest; (e) risks associated with potential investments and
ability to manage those investments; (f) competition; (g) the Company's
obligations under the revolving credit facility; (h) AmeriCold Logistic's
obligations under the lease agreements with the Vornado/Crescent Partnership;
(i) the Company's limited financial resources; (j) dependence on key personnel;
(k) potential anti-takeover effects of the Company's charter documents and
applicable law; (l) dependence on dividends and distributions of subsidiaries;
(m) potential costs of compliance with environmental laws; (n) changes in the
general economic climate; and (o) government regulations.


                                      -2-
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                                     PART I.

ITEM 1.  BUSINESS

GENERAL

         On October 16, 1998, Vornado Realty L.P. (the "Operating Partnership"),
a subsidiary of Vornado Realty Trust together with its consolidated subsidiaries
and preferred stock affiliates, ("Vornado"), made a distribution of one share of
common stock, par value $.01 per share (the "Common Stock"), of Vornado
Operating Company, a Delaware corporation (the "Company"), for 20 units of
limited partnership interest of the Operating Partnership (including the units
owned by Vornado) held of record as of the close of business on October 9, 1998
(the "Record Date"), and Vornado in turn made a distribution of the Common Stock
it received to the holders of its common shares of beneficial interest.

         The Company was formed on October 30, 1997 as a wholly owned subsidiary
of Vornado. In order to maintain its status as a real estate investment trust
("REIT") for federal income tax purposes, Vornado is required to focus
principally on investments in real estate assets. Accordingly, Vornado is
prevented from owning certain assets and conducting certain activities that
would be inconsistent with its status as a REIT. The Company was formed to own
assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. The Company is intended to function principally as an
operating company, in contrast to Vornado's principal focus on investments in
real estate assets. The Company is able to do so because it is taxable as a
regular "C" corporation rather than a REIT.

         The Company operates businesses conducted at properties it leases from
Vornado, as contemplated by the agreement, dated as of October 16, 1998, between
the Company and Vornado (the "Vornado Agreement"), referred to below. The
Company expects to rely on Vornado to identify business opportunities for the
Company, and the Company currently expects that those opportunities will relate
in some manner to Vornado and its real estate investments rather than to
unrelated businesses.

         The principal executive offices of the Company are located at 888
Seventh Avenue, New York, New York 10019, and its telephone number at that
location is (212) 894-7000.

VORNADO AGREEMENT AND CHARTER PURPOSE CLAUSES

         Pursuant to the Vornado Agreement, among other things, (a) Vornado will
under certain circumstances offer the Company an opportunity to become the
lessee of certain real property owned now or in the future by Vornado (under
mutually satisfactory lease terms) and (b) the Company will not make any real
estate investment or other REIT-Qualified Investment unless it first offers
Vornado the opportunity to make such investment and Vornado has rejected that
opportunity.

         More specifically, the Vornado Agreement requires, subject to certain
terms, that Vornado provide the Company with an opportunity (a "Tenant
Opportunity") to become the lessee of any real property owned now or in the
future by Vornado if Vornado determines in its sole discretion that, consistent
with Vornado's status as a REIT, it is required to enter into a "master" lease
arrangement with respect to such property and that the Company is qualified to
act as lessee thereof. In general, a master lease arrangement is an arrangement
pursuant to which an entire property or project (or a group of related
properties or projects) are leased to a single lessee. Under the Vornado
Agreement, the Company and Vornado will negotiate with each other on an
exclusive basis for 30 days regarding the terms and conditions of the lease in
respect of each Tenant Opportunity. If a mutually satisfactory agreement cannot
be reached within the 30-day period, Vornado may for a period of one year
thereafter enter into a binding agreement with respect to such Tenant
Opportunity with any third party on terms no more favorable to the third party
than the terms last offered to the Company. If Vornado does not enter into a
binding agreement with respect to such Tenant Opportunity within such one-year
period, Vornado must again offer the Tenant Opportunity to the Company in
accordance with the procedures specified above prior to offering such Tenant
Opportunity to any other party.

         In addition, the Vornado Agreement prohibits the Company from making
(i) any investment in real estate (including the provision of services related
to real estate, real estate mortgages, real estate derivatives or entities that
invest in the foregoing) or (ii) any other REIT-Qualified Investment, unless it
has provided written notice to


                                      -3-
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Vornado of the material terms and conditions of the investment opportunity and
Vornado has determined not to pursue such investment either by providing written
notice to the Company rejecting the opportunity within 10 days from the date of
receipt of notice of the opportunity or by allowing such 10-day period to lapse.
As used herein, "REIT-Qualified Investment" means an investment, at least 95% of
the gross income from which would qualify under the 95% gross income test set
forth in Section 856(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") (or could be structured to so qualify), and the ownership of which would
not cause Vornado to violate the asset limitations set forth in Section
856(c)(4) of the Code (or could be structured not to cause Vornado to violate
the Section 856(c)(4) limitations); provided, however, that "REIT-Qualified
Investment" does not include an investment in government securities, cash or
cash items (as defined for purposes of Section 856(c)(4) of the Code), money
market funds, certificates of deposit, commercial paper having a maturity of not
more than 90 days, bankers' acceptances or the property transferred to the
Company by the Operating Partnership. The Vornado Agreement also requires the
Company to assist Vornado in structuring and consummating any such investment
which Vornado elects to pursue, on terms determined by Vornado. In addition, the
Company has agreed to notify Vornado of, and make available to Vornado,
investment opportunities developed by the Company or of which the Company
becomes aware but is unable or unwilling to pursue.

         Under the Vornado Agreement, Vornado provides the Company with certain
administrative, corporate, accounting, financial, insurance, legal, tax, data
processing, human resources and operational services. Also, Vornado makes
available to the Company, at Vornado's offices, space for the Company's
principal corporate office. For these services, the Company compensates Vornado
in an amount determined in good faith by Vornado as the amount an unaffiliated
third party would charge the Company for comparable services and reimburses
Vornado for certain costs incurred and paid to third parties on behalf of the
Company.

         Vornado and the Company each have the right to terminate the Vornado
Agreement if the other party is in material default of the Vornado Agreement or
upon 90 days written notice to the other party at any time after December 31,
2003. In addition, Vornado has the right to terminate the Vornado Agreement upon
a change in control of the Company.

         The Company's restated certificate of incorporation specifies that one
of its corporate purposes is to perform the Vornado Agreement and, for so long
as the Vornado Agreement remains in effect, prohibits the Company from making
any real estate investment or other REIT-Qualified Investment without first
offering the opportunity to Vornado in the manner specified in the Vornado
Agreement.

VORNADO OPERATING L.P. AND INTERSTATE PROPERTIES

         The Company holds its assets and conducts its business through Vornado
Operating L.P., a Delaware limited partnership ("Company L.P."). The Company is
the sole general partner of, and as of December 31, 2000, owns a 90.1%
partnership interest in Company L.P. All references to the Company refer to
Vornado Operating Company and its subsidiaries including Company L.P.

         Interstate Properties, a New Jersey general partnership ("Interstate"),
and its three partners -- Steven Roth (Chairman of the Board and Chief Executive
Officer of Vornado and the Company), David Mandelbaum (a trustee of Vornado) and
Russell B. Wight, Jr. (a trustee of Vornado and a director of the Company) --
beneficially own, in the aggregate, 7.9% of the Company's Common Stock
(excluding shares underlying stock appreciation rights ("SARs") and options held
by Messrs. Roth and Wight for this purpose) and a 9.9% limited partnership
interest in Company L.P. as of December 31, 2000. Interstate has the right to
have its limited partnership interest in Company L.P. redeemed by Company L.P.
either (a) for cash in an amount equal to the fair market value, at the time of
redemption, of 447,017 shares of Common Stock or (b) for 447,017 shares of
Common Stock, in each case as selected by the Company and subject to customary
anti-dilution adjustments.

TEMPERATURE CONTROLLED LOGISTICS BUSINESS ("AMERICOLD LOGISTICS")

         In October 1997, a partnership (the "Vornado/Crescent Partnership") in
which Vornado has a 60% interest and Crescent Real Estate Equities Company
("Crescent") has a 40% interest acquired each of AmeriCold Corporation
("AmeriCold") and URS Logistics, Inc. ("URS"). In June 1998, the
Vornado/Crescent Partnership acquired the assets of Freezer Services, Inc. and
in July 1998 acquired the Carmar Group.


                                      -4-
   5
         In March 1999, the Company and Crescent Operating Inc. ("Crescent
Operating") formed a new partnership - the "Vornado Crescent Logistics Operating
Partnership" (which does business under the name "AmeriCold Logistics") that
purchased all of the non-real estate assets of the Vornado/Crescent Partnership
(the "Landlord") for $48,700,000, of which the Company's 60% share was
$29,200,000. The purchase price was proposed by the Vornado/Crescent Partnership
(the Sellers). The Board of Directors of both the Company and Crescent Operating
reviewed and approved the transaction after concluding that the price was fair
market value at the time of the transaction. To fund its share of the purchase
price, the Company utilized $4,600,000 of cash, borrowed $18,600,000 under its
revolving credit facility with Vornado and paid the balance of $6,000,000 in
March 2000.

         AmeriCold Logistics, headquartered in Atlanta, Georgia, has 6,700
employees and operates 99 temperature controlled warehouse facilities nationwide
with an aggregate of approximately 518 million cubic feet of refrigerated,
frozen and dry storage space. Of the 99 warehouses, AmeriCold Logistics leases
88 temperature controlled warehouses with an aggregate of approximately 439
million cubic feet from the Vornado/Crescent Partnership, and manages 11
additional warehouses containing approximately 79 million cubic feet of space.
AmeriCold Logistics provides the frozen food industry with refrigerated
warehousing and transportation management services. Refrigerated warehouses are
comprised of production and distribution facilities. Production facilities
typically serve one or a small number of customers, generally food processors,
located nearby. These customers store large quantities of processed or partially
processed products in the facility until they are shipped to the next stage of
production or distribution. Distribution facilities primarily warehouse a wide
variety of customers' finished products until future shipment to end-users. Each
distribution facility generally services the surrounding regional market.
AmeriCold Logistics' transportation management services include freight routing,
dispatching, freight rate negotiation, backhaul coordination, freight bill
auditing, network flow management, order consolidation and distribution channel
assessment. AmeriCold Logistics' temperature controlled logistics expertise and
access to both frozen food warehouses and distribution channels enable its
customers to respond quickly and efficiently to time-sensitive orders from
distributors and retailers.

         AmeriCold Logistics' customers consist primarily of national, regional
and local frozen food manufacturers, distributors, retailers and food service
organizations. A breakdown of AmeriCold Logistics' largest customers include:



                                                   % of 2000 Revenue
                                                
         H.J. Heinz & Co.                                 18%
         ConAgra, Inc.                                     8
         Sara Lee Corp.                                    6
         Tyson Foods, Inc.                                 5
         McCain Foods, Inc.                                4
         Diageo Plc                                        4
         Pro-Fac Cooperative, Inc.                         4
         J.R. Simplot Co.                                  3
         Flowers Industries, Inc.                          1
         Norpac Foods, Inc.                                1
         Other                                            46


         AmeriCold Logistics faces national, regional and local competition.
Breadth of service, warehouse locations, customer mix, warehouse size, service
performance and price are major competitive factors.

         Leases for the temperature controlled logistics warehouse properties

         (Data in this section represents 100% of AmeriCold Logistics, of which
the Company's share is 60%)

         AmeriCold Logistics entered into leases covering the warehouses used in
this business. The leases, which commenced in March 1999, as amended, generally
have a 15-year term with two five-year renewal options and provide for the
payment of fixed base rent and percentage rent based on revenue AmeriCold
Logistics receives from its customers. Fixed base rent was approximately
$136,000,000 in 2000, $137,000,000 per annum from 2001


                                      -5-
   6
through 2003, $139,000,000 per annum from 2004 through 2008, and $141,000,000
per annum from 2009 through February 28, 2014. Percentage rent for each lease is
based on a specified percentage of revenues in excess of a specified base
amount. The aggregate base revenue amount under five of the six leases is
approximately $350,000,000, and the weighted average percentage rate is
approximately 36% through 2003, approximately 38% for the period from 2004
through 2008 and approximately 40% for the period from 2009 through February 28,
2014. The aggregate base revenue amount under the sixth lease is approximately
$32,000,000 through 2001, and approximately $26,000,000 for the period from 2002
through February 28, 2014, and the percentage rate is 24% through 2001, 37.5%
for the period from 2002 through 2006, 40% from 2007 through 2011 and 41% from
2012 through February 28, 2014. The fixed base rent for each of the two
five-year renewal options is equal, generally, to the greater of the then fair
market value rent and the fixed base rent for the immediately preceding lease
year plus 5%. See lease restructuring paragraph that follows.

         AmeriCold Logistics is required to pay for all costs arising from the
operation, maintenance and repair of the properties, including all real estate
taxes and assessments, utility charges, permit fees and insurance premiums, as
well as property capital expenditures in excess of $5,000,000 annually. See
lease restructuring paragraph that follows.

         AmeriCold Logistics has the right to defer the payment of 15% of fixed
base rent and all percentage rent for up to three years beginning on March 11,
1999 to the extent that available cash, as defined in the leases, is
insufficient to pay such rent. Pursuant thereto, $19,011,000 (of which the
Company's share is $11,406,600) was deferred for the year ended December 31,
2000 and $5,400,000 (of which the Company's share is $3,240,000) was deferred
for the period ended December 31, 1999. See lease restructuring paragraph that
follows.

         AmeriCold Logistics recognized $164,464,000 of rent expense for the
year ended December 31, 2000 and $133,093,000 of rent expense from March 11,
1999 (acquisition date) through December 31, 1999. See lease restructuring
paragraph that follows.

         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing by the following: (i) discussions
with the Landlord to restructure the Leases (see lease restructuring paragraph
that follows); (ii) sales of non-core assets; and (iii) capital infusion by new
investors.

         Lease Restructuring

         On February 22, 2001, the leases were restructured to, among other
things, (i) reduce 2001's contractual rent to $146,000,000 ($14,500,000 less
than 2000's contractual rent), (ii) reduce 2002's contractual rent to
$150,000,000 (plus contingent rent in certain circumstances), (iii) increase the
Landlord's share of annual maintenance capital expenditures by $4,500,000 to
$9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to
December 31, 2003 from March 11, 2002.

         Terms of the Vornado Crescent Logistics Operating Partnership

         Vornado is the day-to-day liaison to the management of AmeriCold
Logistics. AmeriCold Logistics pays Vornado an annual fee of $487,000, which is
based on the temperature controlled logistics operating assets acquired by
AmeriCold Logistics on March 11, 1999. The fee increases by an amount equal to
1% of the cost of new acquisitions, including transaction costs. AmeriCold
Logistics provides financial statement preparation, tax and similar services to
the Vornado/Crescent Partnerships for an annual fee of $255,000 in 2000,
increasing 2% each year.

         The Company must obtain Crescent Operating's approval for specified
matters involving AmeriCold Logistics, including approval of the annual budget,
requiring specified capital contributions, entering into specified new leases or
amending existing leases, selling or acquiring specified assets and any sale,
liquidation or merger of AmeriCold Logistics. If the partners fail to reach an
agreement on certain matters during the period from November 1, 2000 through
October 30, 2007, the Company may set a price at which it commits to either buy
Crescent Operating's investment, or sell its own, and Crescent Operating will
decide whether to buy or sell at that price. If the partners fail to reach
agreement on such matters after October 30, 2007, either party may set a price
at which it commits to either buy the other party's investment, or sell its own,
and the other party will decide whether to buy or sell at that price.


                                      -6-
   7
         Neither partner may transfer its rights or interest in the partnership
without the consent of the other partner. The partnership will continue for a
term through October 30, 2027, except as the partners may otherwise agree.

         The senior management of AmeriCold Logistics consists of the same
individuals who were the senior management of this business before the new
partnership acquired it. Daniel F. McNamara has been the Chief Executive Officer
of AmeriCold Logistics since October 1997, when the Vornado/Crescent Partnership
acquired the business. From March 1996 to October 1997, Mr. McNamara was Chief
Executive Officer of URS Logistics, Inc. (one of the predecessors to AmeriCold
Logistics). Before March 1996, Mr. McNamara was Executive Vice President and
Chief Operating Officer of Value Rent-A-Car, a wholly-owned subsidiary of
Mitsubishi Motors. On November 29, 2000, Mr. McNamara was appointed Vice
Chairman of AmeriCold Logistics and will relinquish his position as Chief
Executive Officer upon identification of a successor.

TRANSPORTAL NETWORK

         Pursuant to a plan announced to employees on September 28, 2000,
Transportal Network ("Transportal"), a 60% owned internet start-up, ceased
operations because of a failure to attract third party funding. As a result, the
Company recorded a charge of $4,983,000 for the year ended December 31, 2000,
representing the Company's share of Transportal's loss of $4,260,000 and the
estimated cost to cease Transportal's operations of $723,000. The Company's
share of losses (including costs to cease operations) from October 1999
(inception) to December 31, 2000 were $5,523,000 and are included in the
Company's consolidated statements of operations as "Loss from Transportal
Network".

EMPLOYEES

         Emanuel R. Pearlman became the Company's Chief Operating Officer,
effective June 15, 2000. In his capacity as COO, Mr. Pearlman is responsible for
sourcing and executing non-real estate investments on behalf of the Company.

         Mr. Pearlman has been actively investing in both private and public
companies over the course of the last 12 years through various investment
partnerships that he managed. In addition to making investments, he has been
actively involved in the financial advisory and strategic development roles for
such NYSE companies as Bally Entertainment, Bally Total Fitness Holding
Corporation and Jackpot Enterprises. He currently serves on the boards of Etrana
Corp. and Network-1 Security Solutions, Inc.

         Prior to June 15, 2000, the Company had no employees. The Company
expects that, when it acquires specific assets and business operations, the
subsidiaries of the Company making such acquisitions will have their own
employees. AmeriCold Logistics, in which the Company has a 60% interest, has
6,700 employees.

RISK FACTORS

         LIMITED OPERATING HISTORY AND LOSSES INCURRED TO DATE

         The Company commenced operations on October 16, 1998. The Company has
limited operating history upon which investors can evaluate its business. The
Company's operations have incurred losses to date and may continue to do so.
AmeriCold Logistics has agreed with the landlord of its temperature controlled
logistics warehouses to restructure the leases for 2001 and 2002 to, among other
things, reduce the rent and transfer to the landlord an additional portion of
maintenance capital requirements. However, AmeriCold Logistics may not generate
enough revenues to pay its reduced rents or its share of its capital
requirements. The Company is also exploring possible sales of non-core assets of
AmeriCold Logistics and possible capital investments in AmeriCold Logistics by
new investors. However, the Company may not succeed in selling any such assets
or obtaining such additional investments, and Crescent Operating may not grant
its consent to any such asset sales as required and may not agree to make any
such additional investments. AmeriCold Logistics and the Company may never
become profitable.

         RESTRICTIONS ON THE COMPANY'S BUSINESS AND FUTURE OPPORTUNITIES

         The Vornado Agreement and the Charter prohibit the Company from making
any real estate investment or other REIT-Qualified Investment unless it first
offers Vornado the opportunity to make such investment and


                                      -7-
   8
Vornado has rejected that opportunity. See "Item 1. Business -- Vornado
Agreement and Charter Purpose Clauses." Because of the provisions of the Vornado
Agreement and the Charter, the nature of the Company's business and the
opportunities it may pursue are significantly restricted.

         DEPENDENCE UPON VORNADO

         The Company expects to rely on Vornado to identify business
opportunities for the Company, and the Company currently expects that those
opportunities will relate in some manner to Vornado and its real estate
investments rather than to unrelated businesses. There is no assurance that
Vornado will identify opportunities for the Company or that any opportunities
that Vornado identifies will be within the Company's financial, operational or
management parameters. Vornado is required under the Vornado Agreement to
provide the Company with an opportunity to become the lessee of real property
acquired by Vornado only if Vornado determines in its sole discretion that,
consistent with Vornado's status as a REIT, it is required to enter into a
master lease arrangement with respect to such property and that the Company is
qualified to act as lessee thereof. Moreover, the Company is entitled to enter
into such a master lease arrangement with Vornado only if the Company and
Vornado are able to agree on mutually satisfactory lease terms.

         If in the future Vornado should fail to qualify as a REIT and
thereafter acquired a property, Vornado would have the right under the Vornado
Agreement to lease the property to any person or entity pursuant to any type of
lease (including a master lease arrangement) or to operate the property itself,
in either case without offering the Company an opportunity to become a lessee
thereof. The Company, however, would remain subject to all of the limitations on
its operations contained in the Charter and the Vornado Agreement. Accordingly,
if Vornado should fail to qualify as a REIT, that failure could have a material
adverse effect on the Company.

         If in the future Vornado should sell any property which is leased to
the Company, it is possible that the new owner might refuse to renew the lease
upon the expiration of its term.

         SUBSTANTIAL INFLUENCE OF CONTROLLING STOCKHOLDERS; CONFLICTS OF
INTEREST

         As of December 31, 2000, Interstate and its three partners -- Steven
Roth (Chairman of the Board and Chief Executive Officer of Vornado and the
Company), David Mandelbaum (a trustee of Vornado) and Russell B. Wight, Jr. (a
trustee of Vornado and a director of the Company) -- beneficially owned, in the
aggregate, 17.7% of the outstanding Vornado Common Shares (excluding shares
issuable on conversion of units of the Operating Partnership for this purpose)
and beneficially owned, in the aggregate, a 9.9% limited partnership interest in
Company L.P. and 7.9% of the Common Stock of the Company (excluding shares
underlying SARs and options held by Messrs. Roth and Wight for this purpose).
Because of the foregoing, Messrs. Roth, Mandelbaum and Wight and Interstate
(collectively, the "Interstate Parties") have substantial influence over the
Company and Vornado and on the outcome of any matters submitted to the Company's
stockholders or Vornado's shareholders for approval.

         Four of the members of the Company's Board of Directors (including
Messrs. Roth and Fascitelli) are members of Vornado's Board of Trustees, and
certain members of senior management of the Company hold corresponding positions
with Vornado. Members of the Company's Board and senior management may have
different percentage equity interests in the Company and in Vornado. Moreover,
the Interstate Parties engage in a wide variety of activities in the real estate
business. Thus, members of the Board and senior management of the Company and
Vornado and the Interstate Parties may be presented with conflicts of interest
with respect to certain matters affecting the Company, such as determinations of
which of such entities or persons, if any, may take advantage of potential
business opportunities, decisions concerning the business focus of such entities
(including decisions concerning the types of properties and geographic locations
in which such entities make investments), potential competition between business
activities conducted, or sought to be conducted, by such entities or persons
(including competition for properties and tenants), possible corporate
transactions (such as acquisitions) and other strategic decisions affecting the
future of such parties.

         RISKS ASSOCIATED WITH POTENTIAL INVESTMENTS AND ABILITY TO MANAGE THOSE
INVESTMENTS; COMPETITION

         Although the Company currently expects that the opportunities it
pursues will relate in some manner to Vornado and its real estate investments
rather than to unrelated businesses, it is possible that they will not. In
addition, whether or not such opportunities relate in some manner to Vornado and
its real estate investments, the businesses in which it engages may require a
wide range of skills and qualifications, and there is no assurance that


                                      -8-
   9
the Company's management or employees will have, or that the Company will be
able to hire and retain employees with, such skills and qualifications. There
also is no assurance that the opportunities the Company pursues will be
integrated, perform as expected or contribute significant revenues or profits to
the Company, and there is a risk that the Company may realize substantial losses
with respect thereto. The industries in which the Company will compete may be
subject to government regulation and restrictions, some of which may be
significant and burdensome. The businesses with which it will compete may be
better capitalized or have other features that will make it difficult for the
Company to compete effectively.

         OBLIGATIONS UNDER REVOLVING CREDIT FACILITY; LIMITED FINANCIAL
RESOURCES

         The Company has entered into a $75,000,000 Revolving Credit Agreement
with Vornado (the "Revolving Credit Agreement"). See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." Although only interest and commitment fees
will be payable under the Revolving Credit Agreement until it expires, there can
be no assurance that the Company will be able to satisfy all of its obligations
under the Revolving Credit Agreement.

         The Company expects that its cash on hand and borrowings under the
Revolving Credit Agreement will be used to support future acquisitions of assets
by the Company and other cash requirements including interest and fees under the
Revolving Credit Facility. There is no assurance that the Company will have
sufficient working capital to cover cash flow deficits, finance future
acquisitions or pursue additional opportunities. The Company expects to be able
to access capital markets or to seek other financing, including financing from
Vornado, but there is no assurance that it will be able to do so at all or in
amounts or on terms acceptable to the Company. Under certain circumstances it
may be deemed desirable by the Company and Vornado to offer and sell Common
Stock and Vornado Common Shares under a common plan of distribution. There is no
assurance that the timing, terms and manner of such an offering will be as
favorable to the Company as the timing, terms and manner of an offering of
Common Stock made independently of Vornado. Neither Vornado nor any other person
is obligated to provide any additional funds to the Company, to offer securities
under a common plan of distribution or to assist the Company in obtaining
additional financing.

         ABSENCE OF DIVIDENDS ON COMMON STOCK

         The Company intends to use its available funds to cover cash flow
deficits and to pursue investment and business opportunities and, therefore,
does not anticipate the payment of any cash dividends on the Common Stock in the
foreseeable future. Payment of dividends on the Common Stock is prohibited under
the Revolving Credit Agreement until all amounts outstanding thereunder have
been paid in full and the commitment thereunder is terminated, and will also be
subject to such limitations as may be imposed by any other credit facilities
that the Company may obtain from time to time.

         DEPENDENCE ON KEY PERSONNEL

         The Company is dependent on the efforts of Steven Roth, the Chairman
and Chief Executive Officer of the Company, Michael D. Fascitelli, the President
of the Company and Emanuel R. Pearlman, Chief Operating Officer of the Company.
While the Company believes that it could find replacements for these key
personnel, the loss of their services could have an adverse effect on the
operations of the Company.

         POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER DOCUMENTS AND APPLICABLE LAW

         The Charter and By-laws and applicable sections of the Delaware General
Corporation Law (the "DGCL") contain provisions that may make more difficult the
acquisition of control of the Company without the approval of the Company's
Board.

         DEPENDENCE ON DIVIDENDS AND DISTRIBUTIONS FROM SUBSIDIARIES

         Substantially all of the Company's assets consist of its partnership
interests in Company L.P., of which the Company is the sole general partner.
Substantially all of Company L.P.'s properties and assets are held through
subsidiaries. Any right of the Company's stockholders to participate in any
distribution of the assets of any indirect subsidiary of the Company upon the
liquidation, reorganization or insolvency of such subsidiary (and any consequent
right of the Company's securityholders to participate in those assets) will be
subject to the claims of the


                                      -9-
   10
creditors (including trade creditors) and preferred holders of equity, if any,
of Company L.P. and such subsidiary, except to the extent the Company has a
recognized claim against such subsidiary as a creditor of such subsidiary. In
addition, in the event that claims of the Company as a creditor of a subsidiary
are recognized, such claims would be subordinate to any security interest in the
assets of such subsidiary and any indebtedness of such subsidiary senior to that
held by the Company.

         POTENTIAL COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS

         Under various federal and state laws a current or previous owner or
operator of real estate (including, e.g., the Company as lessee of real estate)
may be required to investigate and clean up certain hazardous substances
released at a property, and may be held liable to a governmental entity or to
third parties for property damage or personal injuries and for investigation and
clean-up costs incurred in connection with the contamination. Such laws often
impose liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous substances. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral or the operator's ability to sell or finance the operations. Other
federal, state and local laws, ordinances and regulations require abatement or
removal of certain asbestos-containing materials in the event of demolition,
renovations or remodeling. The laws also govern emissions of and exposure to
asbestos fibers in the air. Air emissions and wastewater discharges and the
operation and removal of certain underground storage tanks are also regulated by
federal and state laws. In connection with the ownership, operation and
management of its properties, including the properties it leases from Vornado or
others, the Company could be held liable for the costs of remedial action, or
other compliance expenditures, with respect to such regulated substances or
tanks and related claims for personal injury, property damage or fines. Further,
properties that AmeriCold Logistics (the Company's investee) leases are subject
to a variety of environmental laws and regulations in each of the jurisdictions
in which it operates governing, among other things, soil and groundwater
contamination, the use, handling and disposal of hazardous substances, air
emissions, wastewater discharges, and employee health and safety.

ITEM 2.  PROPERTIES

         Under the Vornado Agreement, Vornado makes available to the Company, at
Vornado's offices, space for the Company's principal corporate offices, for
which the Company compensates Vornado in an amount determined in good faith by
Vornado as the amount an unaffiliated third party would charge the Company for
comparable space. The Company believes that such facilities will be adequate to
meet its expected requirements for the coming year.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is from time to time involved in legal actions arising in
the ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2000.


                                      -10-
   11
EXECUTIVE OFFICERS OF THE REGISTRANT

         The following is a list of the names, ages, principal occupations and
positions with the Company of the executive officers of the Company and the
position held by such officers since the Company was incorporated. Officers are
appointed by and serve at the discretion of the Board of Directors.

         Steven Roth, age 59, is Chairman of the Board and Chief Executive
Officer of the Company since incorporation. Mr. Roth has been Chairman of the
Board and Chief Executive Officer of Vornado since May 1989 and Chairman of the
Executive Committee of the Board of Vornado since April 1988. Since 1968, he has
been the managing general partner of Interstate. On March 2, 1995, he became
Chief Executive Officer of Alexander's, Inc. ("Alexander's"). Mr. Roth is also a
director of Alexander's and of Capital Trust.

         Michael D. Fascitelli, age 44, is President and a director of the
Company since incorporation. Mr. Fascitelli has been President and a trustee of
Vornado, and a director of Alexander's, since December 2, 1996. From December
1992 to December 1996, Mr. Fascitelli was a partner at Goldman, Sachs & Co. in
charge of its real estate practice.

         Joseph Macnow, age 55, is Executive Vice President - Finance and
Administration of the Company since incorporation. Mr. Macnow has been Executive
Vice President - Finance and Administration of Vornado since January 1998. From
1985 to January 1998, Mr. Macnow was Vice President and Chief Financial Officer
of Vornado.

         Emanuel R. Pearlman, age 40, is Chief Operating Officer of the Company
since June 2000. Mr. Pearlman has been actively investing in both private and
public companies over the course of the last 12 years through various investment
partnerships that he managed. In addition to making investments, he has been
actively involved in the financial advisory and strategic development roles for
such NYSE companies as Bally Entertainment, Bally Total Fitness Holding
Corporation and Jackpot Enterprises. He currently serves on the boards of Etrana
Corp. and Network-1 Security Solutions, Inc.

         Patrick T. Hogan, age 33, is Vice President - Chief Financial Officer
since March 1, 2001. Mr. Hogan served as Chief Financial Officer and Treasurer
for Correctional Properties Trust, a Maryland UPREIT, from February 1998 to
February 2001; from June 1996 to February 1998, Mr. Hogan worked for the
Wackenhut Corporation and Subsidiaries managing treasury and financial reporting
functions while also assisting in the formation of Correctional Properties
Trust.

         Irwin Goldberg, age 56, was Vice President - Chief Financial Officer of
the Company from January 1998 to February 2001. Mr. Goldberg was Vice President
- Chief Financial Officer of Vornado from January 1998 to February 2001. From
1978 to January 1998, Mr. Goldberg was a partner at Deloitte & Touche LLP.

         Neither Mr. Roth nor any other member of management is committed to
spending a particular amount of time on the Company's affairs, nor will any of
them devote their full time to the Company. Because of their other time
commitments and because the Company does not yet own any operating assets, Mr.
Roth and the other members of management anticipate that they will initially not
be devoting a significant amount of time to the activities of the Company. Once
the Company acquires material operating assets, Mr. Roth and the other members
of management anticipate that they will devote such time and efforts as they
deem reasonably necessary to conduct the operations of the Company while
continuing to devote a material amount of their time and efforts to the
management and properties of Vornado.


                                      -11-
   12
                                    PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock of the Company is listed on the American Stock
Exchange under the symbol "VOO". The Transfer Agent and Registrar for the Common
Stock is First Union National Bank, Charlotte, North Carolina.

         Quarterly price ranges of the Common Stock for the years ended December
31, 2000 and 1999 were as follows:



                                                   YEAR ENDED                       YEAR ENDED
                                                DECEMBER 31, 2000               DECEMBER 31, 1999
                                              ----------------------          ---------------------
           QUARTER                              HIGH           LOW              HIGH         LOW
           -------                            --------      --------          --------     --------
                                                                            
           1st........................        $  14.25      $   5.31          $  10.00     $   5.88
           2nd........................           13.25          5.75              9.13         5.75
           3rd........................            7.88          5.38              8.38         6.00
           4th........................            5.56          1.38              6.94         5.38


         The approximate number of record holders of Common Stock of the Company
at December 31, 2000 was 1,100.

         No cash dividends have been declared or paid in respect of the Common
Stock. The Company intends to use its available funds to cover cash flow
deficits and to pursue investment and business opportunities and, therefore,
does not anticipate the payment of any cash dividends on the Common Stock in the
foreseeable future. Payment of any dividends on the Common Stock is prohibited
under the Revolving Credit Agreement until all amounts outstanding thereunder
are paid in full and the commitment thereunder is terminated, and will also be
subject to such limitations as may be imposed by any other credit facilities
that the Company may obtain from time to time. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." The declaration of dividends is subject to the
discretion of the Board.


                                      -12-
   13
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA



                                                                                                          For the Period
                                                                                                          October 16, 1998
                                                                                                         (Commencement of
                                                                    Year Ended          Year Ended        Operations) to
                                                                 December 31, 2000   December 31, 1999   December 31, 1998
                                                                 -----------------   -----------------   -----------------
                                                                                                
Revenues:
     Interest income .......................................        $     85,441       $    421,690        $    261,948
                                                                    ------------       ------------        ------------
Expenses:
     General and administrative ............................           1,574,963          1,094,773             271,698
     Organization costs ....................................                  --            359,643             971,959
                                                                    ------------       ------------        ------------
Total expenses .............................................           1,574,963          1,454,416           1,243,657
                                                                    ------------       ------------        ------------
                                                                      (1,489,522)        (1,032,726)           (981,709)

Loss from AmeriCold Logistics ..............................         (10,890,600)        (5,546,400)                 --
Loss from Transportal Network ..............................          (4,982,576)          (540,000)                 --
Gain on sale of investment in Charles E. Smith
     Commercial Realty L.P. ................................                  --            280,000                  --
Interest and debt expense to Vornado Realty Trust ..........          (1,904,580)        (1,216,628)                 --
                                                                    ------------       ------------        ------------

Loss before minority interest ..............................         (19,267,278)        (8,055,754)           (981,709)
Minority interest ..........................................           1,581,765            797,520              97,189
                                                                    ------------       ------------        ------------
Net loss ...................................................        $(17,685,513)      $ (7,258,234)       $   (884,520)
                                                                    ============       ============        ============

Net loss per share - basic and diluted .....................        $      (4.35)      $      (1.78)       $       (.22)
                                                                    ============       ============        ============




                                                                December 31, 2000       December 31, 1999       December 31, 1998
                                                                -----------------       -----------------       -----------------
                                                                                                       
Balance Sheet Data:
     Total assets...........................................      $ 16,729,358            $  21,372,706           $25,226,674
     Note Payable to Vornado Realty Trust...................        19,781,538                4,586,896                    --
     Stockholders' equity (deficit).........................        (4,045,149)              14,357,089            21,653,923


         AmeriCold, URS, Freezer Services, Inc. and the Carmar Group,
collectively, are considered predecessors of the Company. The net equity in
income (loss) of the predecessors was $2,922,000 from January 1, 1999 to March
11, 1999 (acquisition date), $10,193,000 in 1998, $(11,209,000) in 1997 and
$(2,206,000) in 1996.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS

Years Ended December 31, 2000 and December 31, 1999

         The Company had a net loss of $17,685,513 for the year ended December
31, 2000 compared to $7,258,234 for the prior year, an increase of $10,427,279.

         Revenues were $85,441 for the year ended December 31, 2000, compared to
$421,690 for the prior year, a decrease of $336,249, which resulted from lower
average invested balances.

         General and administrative expenses were $1,574,963 for the year ended
December 31, 2000, compared to $1,094,773 for the prior year, an increase of
$480,190. This increase results from (i) an increase in payroll costs associated
with the Company's Chief Operating Officer hired on June 15, 2000 and (ii) an
increase in franchise taxes.

         No organization costs were incurred in the year ended December 31,
2000, whereas $359,643 were


                                      -13-
   14
incurred in the prior year.

         The Company's loss from AmeriCold Logistics was $10,891,000 for the
year ended December 31, 2000, compared to $5,546,000 for the period from March
11, 1999 (acquisition date) to December 31, 1999, an increase of $5,345,000.
Included in the loss for the year ended December 31, 2000 is interest income of
$171,000 earned on the $3,000,000 promissory note advanced to AmeriCold
Logistics by the Company in the third quarter of 2000. Excluding interest
income, the loss from AmeriCold Logistics was $11,062,000 for the year ended
December 31, 2000.

         On February 22, 2001, AmeriCold Logistics' leases with the Vornado
REIT/Crescent REIT Partnership (the "Landlord") were restructured to, among
other things, (i) reduce 2001's contractual rent to $146,000,000 ($14,500,000
less than 2000's contractual rent), (ii) reduce 2002's contractual rent to
$150,000,000 (plus contingent rent in certain circumstances), (iii) increase the
Landlord's share of annual maintenance capital expenditures by $4,500,000 to
$9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to
December 31, 2003 from March 11, 2002.

         Had the rent under the lease restructuring discussed above been
effective for the year ended December 31, 2000, the Company's loss from
AmeriCold Logistics would have been $2,365,000.

         On a pro forma basis, assuming that the acquisition of AmeriCold
Logistics had occurred on January 1, 1999, the Company's loss from investment in
AmeriCold Logistics increased $4,168,600 compared to the pro forma loss of
$6,893,400 for the year ended December 31, 1999. This increase is discussed
below:

     AMERICOLD LOGISTICS RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
     2000 AND 1999

                 The following are discussions of the results of operations of
     AmeriCold Logistics, the Company's Temperature Controlled Logistics
     business - see page 4 for a discussion of this business. The data below
     represents 100% of this business of which the Company owns 60%. For the
     purpose of the discussions below, "Leased Operations" refer to operations
     at warehouses leased by AmeriCold Logistics and "Other Operations" refer to
     (i) warehouses managed by AmeriCold Logistics for the accounts of
     customers, (ii) Transportation Management Services, which includes freight
     routing, dispatching, freight rate negotiation, backhaul coordination, and
     distribution channel assessment, and (iii) Quarry Operations. The data for
     the year ended December 31, 1999 is pro forma because the acquisition of
     AmeriCold Logistics occurred on March 11, 1999.

                    Revenues were $676,158,000 for the year ended December 31,
           2000, compared to $679,807,000 for the prior year, a decrease of
           $3,649,000. Revenues from Leased Operations were $460,973,000 for the
           year ended December 31, 2000, compared to $448,449,000 for the prior
           year, an increase of $12,524,000. Revenues from Other Operations were
           $215,185,000 for the year ended December 31, 2000, compared to
           $231,358,000 for the prior year, a decrease of $16,173,000.

                    The revenue increase in Leased Operations for the year
           results from (i) an increase in revenue from new warehouses of
           $10,912,000, and (ii) an increase in revenue at comparable warehouses
           (operations at warehouses that were leased for each year) of
           $1,612,000. The decrease in revenue from Other Operations is
           primarily the result of a decline in Transportation Management
           Services revenue due to the expiration of a contract with a customer.

                    The gross margin for Leased Operations at comparable
           warehouses was $181,022,000, or 40.5% for the year ended December 31,
           2000, compared to $179,791,000, or 40.4% for the prior year, an
           increase of $1,231,000. In addition, the increase in gross margin
           from newly built warehouses was $5,241,000.

                    Operating income from Other Operations was $11,178,000 for
           the year ended December 31, 2000, compared to $15,015,000 for the
           prior year, a decrease of $3,837,000. This decrease was due to the
           expiration of a contract in the Transportation Management Services
           operation and a decline in the volumes and margins of the Quarry
           Operations.

                    Rent expense was $170,640,000 for the year ended December
           31, 2000, compared to $167,580,000 for the prior year, an increase of
           $3,060,000. This increase was primarily due to new


                                      -14-
   15
           warehouses. See above for the effect of the lease restructuring on
           contractual rent.

                    General and administrative expenses were $35,933,000 for the
           year ended December 31, 2000, compared to $32,588,000 for the prior
           year, an increase of $3,345,000. This increase resulted primarily
           from (i) an increase in severance pay of $2,154,000, and (ii) higher
           corporate office expenses.

                    Depreciation and amortization expense was $7,803,000 for the
           year ended December 31, 2000, compared to $5,964,000 for the prior
           year, an increase of $1,839,000. This increase resulted primarily
           from changes in the purchase price allocation in the fourth quarter
           of 1999, and an increase in the depreciable asset base.

                    Interest expense was $2,136,000 for the year ended December
           31, 2000, compared to $663,000 for the prior year, an increase of
           $1,473,000. This increase resulted from borrowings and interest on
           deferred rent balances in 2000.

                    Other income was $727,000 for the year ended December 31,
           2000, compared to $592,000 for the prior year, an increase of
           $135,000.

                    As a result of the aforementioned factors, AmeriCold
           Logistics' net loss for the year ended December 31, 2000 increased by
           $6,947,000 to $18,436,000 when compared to the prior year's pro forma
           loss. The Company's share of this loss is $11,062,000.

-----------------------------------

         Loss from Transportal Network was $4,982,576 for the year ended
December 31, 2000, compared to $540,000 for the prior year, an increase of
$4,442,576. As discussed below, Transportal Network ceased operations during
2000 and the loss for the current year includes $723,000 relating to shutting
down the operation.

         Interest and debt expense to Vornado Realty Trust was $1,904,580 for
the year ended December 31, 2000, compared to $1,216,628 for the prior year, an
increase of $687,952, which resulted from higher average outstanding balances
under the revolving credit facility with Vornado Realty Trust.

         Gain on sale of investment in partnership of $280,000 for the year
ended December 31, 1999 results from the exercise of the Company's option to
require Vornado to repurchase its investment in Charles E. Smith Commercial
Realty L.P.

Years Ended December 31, 1999 and December 31, 1998

         The Company had a net loss of $7,258,234 for the year ended December
31, 1999 and a net loss of $884,520 for the period from October 16, 1998
(commencement of operations) to December 31, 1998.

         Revenues of $421,690 and $261,948 for the year ended December 31, 1999
and the period October 16, 1998 (commencement of operations) to December 31,
1998 consisted solely of interest income, which decreased on an annualized basis
as a result of lower average invested balances.

         Expenses were comprised of (i) general and administrative expenses of
$1,094,773 and $271,698 for the year ended December 31, 1999 and the period
October 16, 1998 (commencement of operations) to December 31, 1998, including
reimbursements paid to Vornado for certain administrative and other services
provided to the Company, directors fees, insurance, legal and accounting fees
and (ii) additional organization costs of $359,643 for the year ended December
31, 1999.

         The Company owned AmeriCold Logistics from March 11, 1999. The
Company's loss from this investment in 1999 was $5,546,400 as compared to the
full year pro forma loss of $6,893,400 discussed below.


                                      -15-
   16
     AMERICOLD LOGISTICS PRO FORMA RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998

                  The following are discussions of the pro forma results of
     operations of AmeriCold Logistics, the Company's Temperature Controlled
     Logistics business - see page 4 for a discussion of this business. The data
     below represents 100% of this business of which the Company owns 60%. For
     the purpose of the discussions below, "Leased Operations" refer to
     operations at warehouses leased by AmeriCold Logistics and "Other
     Operations" refer to (i) warehouses managed by AmeriCold Logistics for the
     accounts of customers, (II) Transportation Management Services , which
     includes freight routing, dispatching, freight rate negotiation, backhaul
     coordination, and distribution channel assessment, and (iii) Quarry
     Operations. The data below is pro forma because (i) certain of the
     businesses were acquired in 1998 and (ii) the real estate assets were
     separated from the remainder of the business in March 1999.

                  In 1999, revenue increased $78,614,000, or 13.1%, to
             $679,807,000. Revenue from Leased Operations increased $29,548,000,
             or 7.1%, to $448,449,000 while revenue from Other Operations
             increased $49,066,000, or 26.9%, to $231,358,000.

                  Margin percentage for Leased Operations declined by 0.6%
             resulting in a decline in operating income of approximately
             $2,513,000. As a result of the increased volume, offset by the
             margin percentage decline, margin dollars increased by $13,581,000.

                  Operating income from Other Operations was $15,015,000, an
             increase of $1,705,000 from the prior year.

                  Rent expense increased by $14,932,000, to $167,580,000,
             resulting from percentage rent caused by the increase in revenue
             from Leased Operations.

                  General and administrative expenses increased by $3,307,000
             resulting from increased staffing for long-term growth strategies.

                  Depreciation and amortization expense declined by $2,002,000.
             Interest expense, net of other income, decreased by $1,178,000.
             These decreases were the result of changes in purchase price
             allocation and related financing.

                  As a result of the aforementioned factors, the pro forma net
             loss for 1999 decreased approximately $227,000 to $11,489,000. The
             Company's share of this loss would have been $6,893,400.

--------------------------

         Loss from investment in Transportal Network was $540,000, which
consisted of initial start-up and organization costs for the period ended
December 31, 1999.

         Interest and debt expense of $1,216,628 for the year ended December 31,
1999 is comprised of interest on the outstanding balance on the Company's
revolving credit facility from Vornado and the fee on the unused portion of the
facility.

         Gain on sale of investment in partnership of $280,000 for the year
ended December 31, 1999 results from the exercise of the Company's option to
require Vornado to repurchase its investment in Charles E. Smith Commercial
Realty L.P.

LIQUIDITY AND CAPITAL RESOURCES

         As part of its formation, the Company obtained a $75,000,000 unsecured
revolving credit facility from Vornado which expires on December 31, 2004.
Borrowings under the Revolving Credit Agreement bear interest at LIBOR plus 3%
(9.56% at December 31, 2000). The Company pays Vornado a commitment fee equal to
1% per annum on the average daily unused portion of the facility pursuant
thereto; for the years ended December 31, 2000 and 1999 the Company paid
$629,833 and $697,425 to Vornado. Amounts may be borrowed under the Revolving


                                      -16-
   17
Credit Agreement, repaid and reborrowed from time to time on a revolving basis
(so long as the principal amount outstanding at any time does not exceed
$75,000,000). At December 31, 2000 and 1999, $19,781,538 and $4,586,896 were
outstanding, respectively. Principal payments are not required under the
Revolving Credit Agreement during its term. The Revolving Credit Agreement
prohibits the Company from incurring indebtedness to third parties (other than
certain purchase money debt and certain other exceptions) and prohibits the
Company from paying any dividends. Debt under the Revolving Credit Agreement is
fully recourse against the Company. The Company expects that borrowings under
the Revolving Credit Agreement will be used to support future acquisitions of
assets by the Company and other cash requirements including interest and fees
under the Revolving Credit Agreement. The Company has no external sources of
financing except for the Revolving Credit Agreement.

         During the year ended December 31, 2000 the Company funded $9,000,000
to AmeriCold Logistics. In the first quarter, $6,000,000 was funded representing
the Company's contribution to complete its share of the March 1999 purchase by
AmeriCold Logistics of its non-real estate assets from the Vornado/Crescent
Partnership. In the third quarter, $3,000,000 was advanced under a promissory
note bearing interest at 12%.

         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing by the following: (i) discussions
with the Landlord to restructure the Leases (see lease restructuring paragraph
that follows); (ii) sales of non-core assets; and (iii) capital infusion by new
investors.

         Lease Restructuring

         On February 22, 2001, the leases were restructured to, among other
things, (i) reduce 2001's contractual rent to $146,000,000 ($14,500,000 less
than 2000's contractual rent), (ii) reduce 2002's contractual rent to
$150,000,000 (plus contingent rent in certain circumstances), (iii) increase the
Landlord's share of annual maintenance capital expenditures by $4,500,000 to
$9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to
December 31, 2003 from March 11, 2002.

         Total rent expense was $164,494,000 and $133,093,000 for the year ended
December 31, 2000 and the period March 11, 1999 (acquisition date) to December
31, 1999, respectively, of which AmeriCold Logistics deferred $19,011,000 and
$5,400,000. As at December 31, 2000, the balance of AmeriCold Logistics deferred
rent is as follows:



                                                                 The Company's
                                                  Total              Share
                                                -----------      -------------
                                                           
           2000:

             Quarter ended December 31          $ 7,511,000      $   4,506,600
             Quarter ended September 30           4,800,000          2,880,000
             Quarter ended June 30                6,700,000          4,020,000
                                                -----------      -------------
                                                 19,011,000         11,406,600

           1999:

             Quarter ended December 31            5,400,000          3,240,000
                                                -----------      -------------
                                                $24,411,000      $  14,646,600
                                                ===========      =============



         In the aggregate, the Company's investments do not generate sufficient
cash flow to pay all of its expenses. The Company estimates that it has adequate
borrowing capacity under its credit facility to meet its cash requirements.

Cash Flows Year Ended December 31, 2000

         Cash flows used in operating activities of $3,148,337 were comprised of
net loss of $17,685,513 offset by: (i) the net change in operating assets and
liabilities of $137,630, and (ii) adjustments for non-cash and non-operating
items of $14,399,546. The adjustments for non-cash and non-operating items are
comprised of (i) loss from AmeriCold Logistics of $11,046,600 and (ii) loss from
Transportal Network of $4,982,576, offset by (i) minority interest of $1,581,765
and (ii) non-cash compensation of $47,865.


                                      -17-
   18
         Net cash used in investing activities of $14,718,012 was comprised of
investment in and advances to AmeriCold Logistics of $9,000,000, investment in
Transportal Network of $4,940,382, and purchases of securities available for
sale of $777,630.

         Net cash provided by financing activities of $15,198,043 was comprised
primarily of proceeds from borrowings of $17,100,000, offset by repayments of
borrowings under the Company's revolving credit facility with Vornado of
$1,905,358.

Cash Flows Year Ended December 31, 1999

         Cash flows used in operating activities of $2,963,096 were comprised of
(i) net loss of $7,258,234 and (ii) the net change in operating assets and
liabilities of $719,592, offset by adjustments for non-cash and non-operating
items of $5,014,730. The adjustment for non-cash and non-operating items are
comprised of (i) loss from investment in AmeriCold Logistics of $5,546,400, (ii)
loss from investment in Transportal Network of $540,000 and (iii) stock
appreciation rights compensation expense of $5,850, offset by (i) minority
interest of $797,520 and (ii) gain on the sale of investment in Charles E. Smith
Commercial Realty L.P. of $280,000.

         Net cash used in investing activities of $10,158,891 was comprised of
investment in AmeriCold Logistics of $23,358,891, offset by proceeds from the
sale of investment in Charles E. Smith Commercial Realty L.P. of $13,200,000.

         Net cash provided by financing activities of $4,548,296 was comprised
primarily of proceeds from borrowing of $18,586,896, offset by repayments of
borrowings under the Company's revolving credit facility with Vornado of
$14,000,000.

Recently Issued Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133") which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The Company is required to adopt SFAS No. 133, as amended by SFAS No. 138,
effective January 1, 2001. Because the Company does not currently utilize
derivative instruments or engage in hedging activities, management does not
anticipate that implementation of this statement will have a material effect on
the Company's financial statements.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         At December 31, 2000 and 1999, the Company had $19,781,538 and
$4,586,896 of variable rate debt outstanding bearing interest at LIBOR plus
3.00% (9.56% at December 31, 2000). A one percent increase for one year in the
base used to determine the interest rate of the variable rate debt would result
in a $197,815 increase in the Company's annual net loss for the year ended
December 31, 2000 ($0.05 per basic and diluted share).


                                      -18-
   19
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS



                                                                                                               PAGE
                                                                                                            
Independent Auditors' Report..............................................................................       20
Consolidated Balance Sheets at December 31, 2000 and 1999.................................................       21
Consolidated Statements of Operations for the years ended December 31, 2000 and 1999 and the period
    October 16, 1998 (Commencement of Operations) to December 31, 1998....................................       22
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2000 and
     1999 and the period October 16, 1998 (Commencement of Operations) to December 31, 1998...............       23
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999 and the period
    October 16, 1998 (Commencement of Operations) to December 31, 1998....................................       24
Notes to Consolidated Financial Statements................................................................       25


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE

         Not applicable.


                                      -19-
   20
                          INDEPENDENT AUDITORS' REPORT

Stockholders and Board of Directors
Vornado Operating Company
New York, New York

         We have audited the accompanying consolidated balance sheets of Vornado
Operating Company as of December 31, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 2000 and 1999 and for the period October 16, 1998
(commencement of operations) to December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the Unites States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Vornado Operating Company at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for the years ended December 31, 2000 and 1999 and for the period October
16, 1998 (commencement of operations) to December 31, 1998 in conformity with
accounting principles generally accepted in the Unites States of America.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 1, 2001


                                      -20-
   21

                            VORNADO OPERATING COMPANY

                           CONSOLIDATED BALANCE SHEETS






                                                                                              DECEMBER 31,
                                                                                              ------------
                                                                                       2000                 1999
                                                                                       ----                 ----
                                                                                                  
                                     ASSETS

Cash and cash equivalents                                                          $    589,564         $  3,257,870
Marketable securities                                                                    57,504                 --
Investment in and advances to AmeriCold Logistics                                    15,765,891           17,812,491
Prepaid expenses and other assets                                                       316,399              302,345
                                                                                   ------------         ------------
                                                                                   $ 16,729,358         $ 21,372,706
                                                                                   ============         ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Note payable to Vornado Realty Trust                                               $ 19,781,538         $  4,586,896
Due to Transportal Network                                                              582,194              540,000
Due to Vornado Realty Trust                                                              73,359               90,000
Accrued expenses                                                                        337,416              216,956
                                                                                   ------------         ------------
     Total liabilities                                                               20,774,507            5,433,852
                                                                                   ------------         ------------
Minority interest                                                                          --              1,581,765
                                                                                   ------------         ------------

Commitments and contingencies

Stockholders' equity:
     Common stock: par value $.01 per share; authorized, 40,000,000 shares;
       issued and outstanding, 4,068,924 and 4,068,310 shares                            40,689               40,683
Additional paid-in capital                                                           22,462,555           22,459,160
Deficit                                                                             (25,828,267)          (8,142,754)
                                                                                   ------------         ------------
                                                                                     (3,325,023)          14,357,089
Accumulated other comprehensive loss                                                   (720,126)                --
                                                                                   ------------         ------------
     Total stockholders' equity (deficit)                                            (4,045,149)          14,357,089
                                                                                   ------------         ------------
                                                                                   $ 16,729,358         $ 21,372,706
                                                                                   ============         ============




                See notes to consolidated financial statements.

                                      -21-
   22
                            VORNADO OPERATING COMPANY

                      CONSOLIDATED STATEMENTS OF OPERATIONS






                                                                                                          FOR THE PERIOD OCTOBER
                                                                                                          16, 1998 (COMMENCEMENT
                                                         YEAR ENDED DECEMBER       YEAR ENDED DECEMBER       OF OPERATIONS) TO
                                                               31, 2000                 31, 1999             DECEMBER 31, 1998
                                                               --------                 --------             -----------------
                                                                                                 
Revenues:
     Interest income                                         $     85,441             $    421,690             $    261,948
                                                             ------------             ------------             ------------

Expenses:
     General and administrative                                 1,574,963                1,094,773                  271,698
     Organization costs                                              --                    359,643                  971,959
                                                             ------------             ------------             ------------
Total expenses                                                  1,574,963                1,454,416                1,243,657
                                                             ------------             ------------             ------------
                                                               (1,489,522)              (1,032,726)                (981,709)

Loss from AmeriCold Logistics                                 (10,890,600)              (5,546,400)                    --
Loss from Transportal Network                                  (4,982,576)                (540,000)                    --
Interest and debt expense to Vornado Realty Trust              (1,904,580)              (1,216,628)                    --
Gain on sale of investment in Charles E. Smith
         Commercial Realty L.P.                                      --                    280,000                     --
                                                             ------------             ------------             ------------
Loss before income tax benefit and
         minority interest                                    (19,267,278)              (8,055,754)                (981,709)

Income tax benefit                                                   --                       --                       --
                                                             ------------             ------------             ------------

Loss before minority interest                                 (19,267,278)              (8,055,754)                (981,709)

Minority interest                                               1,581,765                  797,520                   97,189
                                                             ------------             ------------             ------------

Net loss                                                     $(17,685,513)            $ (7,258,234)            $   (884,520)
                                                             ============             ============             ============

Net loss per share -- basic and diluted                      $      (4.35)            $      (1.78)            $       (.22)
                                                             ============             ============             ============







See notes to consolidated financial statements.

                                      -22-
   23
                            VORNADO OPERATING COMPANY

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)




                                                                                     ACCUMULATED        TOTAL
                                                      ADDITIONAL                        OTHER        STOCKHOLDERS'
                                            COMMON     PAID-IN                      COMPREHENSIVE       EQUITY        COMPREHENSIVE
                                            STOCK      CAPITAL         DEFICIT          LOSS          (DEFICIT)            LOSS
                                            -----      -------         -------          ----          ---------            ----
                                                                                                    
Cash contribution for 1,000 shares on
    October 16, 1998                           $10   $24,999,990    $          --    $      --       $25,000,000       $        --
Additional stock issued in connection
    with the distribution, 4,514,327
    shares                                  45,143       (45,143)              --            --               --                --
Additional equity contribution                  --        14,917               --            --           14,917                --
Exchange with Interstate Properties,
    447,017 shares                         (4,470)    (2,472,004)              --            --       (2,476,474)               --
Net loss                                        --            --         (884,520)           --         (884,520)         (884,520)
                                           -------   -----------     ------------    ----------     ------------      ------------
BALANCE, DECEMBER 31, 1998                  40,683    22,497,760         (884,520)           --       21,653,923       $  (884,520)
                                                                                                                         =========
Costs incurred to register securities
         for stock option plan                  --       (38,600)              --            --          (38,600)               --
Net loss                                        --            --       (7,258,234)           --       (7,258,234)      $(7,258,234)
                                           -------   -----------     ------------    ----------     ------------      ------------
BALANCE, DECEMBER 31, 1999                  40,683    22,459,160       (8,142,754)           --       14,357,089       $(7,258,234)
                                                                                                                       ===========
Common Stock issued under employees'
    stock plan                                   6         3,395               --            --            3,401                --
Unrealized loss on securities available
    for sale                                    --            --               --      (720,126)        (720,126)        $(720,126)
Net loss                                        --            --     (17,685,513)            --      (17,685,513)      (17,685,513)
                                           -------   -----------     ------------    ----------     ------------      ------------
BALANCE, DECEMBER 31, 2000                 $40,689   $22,462,555    $(25,828,267)    $ (720,126)     $(4,045,149)     $(18,405,639)
                                           =======   ===========    =============    ==========     ============      ============




See notes to consolidated financial statements.

                                      -23-
   24
                            VORNADO OPERATING COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                                              FOR THE PERIOD OCTOBER
                                                                                                              16, 1998 (COMMENCEMENT
                                                                   YEAR ENDED DECEMBER   YEAR ENDED DECEMBER     OF OPERATIONS) TO
                                                                        31, 2000              31, 1999           DECEMBER 31, 1998
                                                                        --------              --------           -----------------
                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                         $(17,685,513)          $(7,258,234)            $ (884,520)
     Adjustments to reconcile net loss to net cash used in
         operations:
         Minority interest                                              (1,581,765)             (797,520)               (97,189)
        Equity in loss from AmeriCold Logistics (net of interest
            receivable of $15,000)                                      11,046,600             5,546,400                     --
         Loss from Transportal Network                                   4,982,576               540,000                     --
         Stock appreciation rights compensation (income)
            expense                                                        (47,865)                5,850                 42,015
         Gain on sale of investment in Charles E. Smith
         Commercial Realty L.P.                                                 --              (280,000)                    --
     Changes in operating assets and liabilities:
         Prepaid expenses and other assets                                 (14,054)              172,768               (475,113)
         Accrued expenses                                                  168,325                84,091                 85,000
         Due to Vornado Realty Trust                                       (16,641)             (976,451)             1,066,451
                                                                        ----------            ----------            -----------
Net cash used in operating activities                                   (3,148,337)           (2,963,096)              (263,356)
                                                                        ----------            ----------            -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in and advances to AmeriCold Logistics                  (9,000,000)          (23,358,891)                    --
     Investment in Transportal Network                                  (4,940,382)                   --                     --
     Proceeds from sale of (investment in) Charles E. Smith
         Commercial Realty L.P.                                                 --            13,200,000            (12,920,000)
     Purchases of securities available for sale                           (777,630)                   --                     --
                                                                        ----------            ----------            -----------
Net cash used in investing activities                                  (14,718,012)          (10,158,891)           (12,920,000)
                                                                        ----------            ----------            -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from borrowings                                           17,100,000            18,586,896                     --
     Repayments on borrowings                                           (1,905,358)          (14,000,000)                    --
     Other                                                                   3,401               (38,600)                    --
     Initial capital contribution                                               --                    --             25,000,000
     Additional equity contribution                                             --                    --                 14,917
                                                                        ----------            ----------            -----------
Net cash provided by financing activities                               15,198,043             4,548,296             25,014,917
                                                                        ----------            ----------            -----------

Net (decrease) increase in cash and cash equivalents                    (2,668,306)           (8,573,691)            11,831,561
Cash and cash equivalents at beginning of period                         3,257,870            11,831,561                     --
                                                                        ----------            ----------            -----------

Cash and cash equivalents at end of period                                $589,564            $3,257,870            $11,831,561
                                                                        ==========            ==========            ===========

SUPPLEMENTAL INFORMATION:
     Cash payments for interest                                         $1,904,580            $1,216,628            $        --
                                                                        ==========            ==========            ===========

NON-CASH TRANSACTIONS:
     Exchange with Interstate Properties                                $       --            $       --            $ 2,476,474
                                                                        ==========            ==========            ===========
     Unrealized loss on securities available for sale                   $ (720,126)           $       --            $        --
                                                                        ==========            ==========            ===========


See notes to consolidated financial statements.

                                      -24-
   25
                            VORNADO OPERATING COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BUSINESS

         Vornado Operating Company, a Delaware Corporation, was incorporated on
October 30, 1997, as a wholly owned subsidiary of Vornado Realty Trust together
with its consolidated subsidiaries and preferred stock affiliates ("Vornado")
and commenced Operations on October 16, 1998. In order to maintain its status as
a real estate investment trust ("REIT") for federal income tax purposes, Vornado
is required to focus principally on investments in real estate assets.
Accordingly, Vornado is prevented from owning certain assets and conducting
certain activities that would be inconsistent with its status as a REIT. Vornado
Operating Company was formed to own assets that Vornado could not itself own and
conduct activities that Vornado could not itself conduct. Vornado Operating
Company is intended to function principally as an operating company, in contrast
to Vornado's principal focus of investment in real estate assets. Vornado
Operating Company is able to do so because it is taxable as a regular "C"
corporation rather than a REIT.

         On October 16, 1998, Vornado Realty L.P. (the "Operating Partnership"),
a subsidiary of Vornado, made a distribution (the "Distribution") of one share
of common stock, par value $.01 per share ("Common Stock"), of Vornado Operating
Company (the "Company") for 20 units of limited partnership interest of the
Operating Partnership (including the units owned by Vornado) held of record as
of the close of business on October 9, 1998 (the "Record Date"), and Vornado in
turn made a distribution of the Common Stock it received to the holders of its
common shares of beneficial interest.

         The Company holds its assets and conducts its business through Vornado
Operating L.P., a Delaware limited partnership ("Company L.P."). The Company is
the sole general partner of, and as of December 31, 2000 owned a 90.1%
partnership interest in, Company L.P. All references to the "Company" refer to
Vornado Operating Company and its subsidiaries including Company L.P.

         In the aggregate, the Company's investments do not generate sufficient
cash flow to pay all of its expenses. The Company estimates that it has adequate
borrowing capacity under its credit facility to meet its cash requirements.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION: The accompanying consolidated financial
statements include the accounts of the Company and Company L.P. All significant
intercompany amounts have been eliminated. Certain reclassifications to prior
year amounts have been made to conform with the current year's presentation.
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.

         CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly
liquid investments purchased with original maturities of three months or less.

         MARKETABLE SECURITIES: During the year ended December 31, 2000, the
Company purchased marketable securities which it intends to hold for an
indefinite period of time and therefore has classified them as securities
available for sale. Unrealized gains and losses are included as a component of
stockholders' equity (deficit) and other comprehensive loss. Realized gains or
losses on the sale of securities are recorded based on average cost.

         At December 31, 2000, marketable securities had an aggregate market
value of $57,504, resulting in gross unrealized losses of $720,126.

         EQUITY INVESTEES: Equity interests in partially-owned entities include
partnerships and joint ventures and are accounted for under the equity method of
accounting as the Company exercises significant influence. These investments are
recorded initially at cost and subsequently adjusted for net equity in income
(loss) and cash contributions and distributions.

                                      -25-
   26
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         FAIR VALUE OF FINANCIAL INSTRUMENTS: All financial instruments of the
Company are reflected in the accompanying consolidated balance sheets at
historical cost which, in management's estimation, based upon an interpretation
of available market information and valuation methodologies, reasonably
approximates their fair values. Such fair value estimates are not necessarily
indicative of the amounts that would be realized upon disposition of the
Company's financial instruments.

         INCOME TAXES: Income taxes are provided for the tax effects of
transactions reported in the consolidated financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences between
the treatment of certain items for financial statement purposes and the
treatment of those items for corporation tax purposes. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.

         The net basis of the Company's assets and liabilities for tax purposes
approximates the amount reported for financial statement purposes.

         AMOUNTS PER SHARE: Basic and diluted loss per share exclude the effects
of options. Stock options outstanding were not dilutive in any period.

         STOCK OPTIONS: The Company accounts for stock-based compensation using
the intrinsic value method. Under the intrinsic value method compensation cost
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the exercise price of the option granted.
Compensation cost for stock options, if any, is recognized ratably over the
vesting period. The Company's policy is to grant options with an exercise price
equal to the quoted market price of the Company's stock on the grant date.
Accordingly, no compensation cost has been recognized for the Company's stock
option plans. In addition, costs incurred in connection with registering such
securities that would be issued upon exercise are a reduction of stockholders'
equity.

         ORGANIZATION COSTS: Costs incurred in connection with the organization
of Company were expensed in accordance with the American Institute of Certified
Public Accountant's Statement of Position 98-5 -- "Reporting on the Costs of
Start-up Activities" which the Company adopted in December 1998.

         RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133") which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Company is required to adopt SFAS No.
133, as amended by SFAS No. 138, effective January 1, 2001. Because the Company
does not currently utilize derivative instruments or engage in hedging
activities, management does not anticipate that implementation of this statement
will have a material effect on the Company's financial statements.

3.   ACQUISITION AND DISPOSITION

Temperature Controlled Logistics Business ("AmeriCold Logistics")

         In October 1997, a partnership (the "Vornado/Crescent Partnership") in
which Vornado has a 60% interest and Crescent Real Estate Equities Company has a
40% interest acquired each of AmeriCold Corporation and URS Logistics, Inc. In
June 1998, the Vornado/Crescent Partnership acquired the assets of Freezer
Services, Inc. and in July 1998 acquired the Carmar Group.

         In March 1999, the Company and Crescent Operating Inc. ("Crescent
Operating") formed a new partnership - the "Vornado Crescent Logistics Operating
Partnership" (which does business under the name "AmeriCold Logistics") that
purchased all of the non-real estate assets of the Vornado/Crescent Partnership
(the

                                      -26-
   27
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


"Landlord") for $48,700,000, of which the Company's 60% share was $29,200,000.
AmeriCold Logistics leases 88 temperature controlled warehouses from the
Vornado/Crescent Partnership, which continues to own the real estate. The
leases, which commenced in March 1999, as amended, generally have a 15-year term
with two five-year renewal options and provide for the payment of fixed base
rent and percentage rent based on customer revenues. AmeriCold Logistics is
required to pay for all costs arising from the operation, maintenance and repair
of the properties, as well as property capital expenditures in excess of
$5,000,000 annually. AmeriCold Logistics has the right to defer the payment of
15% of fixed base rent and all percentage rent for up to three years beginning
on March 11, 1999 to the extent that available cash, as defined in the leases,
is insufficient to pay such rent. (On February 22, 2001 the leases were
restructured, see discussion in Note 4 `Investments in Partnerships'.) In
addition to the leased warehouses, AmeriCold Logistics manages 11 additional
warehouses.

         The Company owns 60% of AmeriCold Logistics through Company L.P., and
Crescent Operating indirectly owns 40% of the Partnership. The Company accounts
for this investment under the equity method of accounting as Crescent Operating
has "substantive participating rights" as defined in accounting literature.

         To fund its share of the purchase price, the Company utilized
$4,600,000 of cash, borrowed $18,600,000 under its revolving credit facility
with Vornado and paid the balance of $6,000,000 in March 2000.

Charles E. Smith Commercial Realty L.P. ("CESCR").

         On December 31, 1998, the Company purchased approximately 1.7% of the
outstanding partnership units of CESCR for an aggregate price of approximately
$12,900,000, or $34 per unit from Vornado. No distributions were received by the
Company on this investment in 1999. CESCR owns interests in and manages office
properties in Crystal City, Arlington, Virginia, a suburb of Washington, D.C.,
and manages additional office and other commercial properties in the Washington,
D.C. area. In connection with this purchase, the Company was granted an option
to require Vornado to repurchase all of the CESCR units at the price at which
the Company purchased the CESCR units from Vornado, plus a cumulative return on
such amount at a rate of 10% per annum. In March 1999, the Company exercised its
option and Vornado acquired the CESCR units from the Company for $13,200,000.

         PRO FORMA INFORMATION

         The unaudited pro forma condensed consolidated operating results for
the Company for the twelve months ended December 31, 1999 are presented as if
the acquisitions and dispositions described above and the financing attributable
thereto had occurred on January 1, 1999.

                                      -27-
   28
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Condensed Consolidated Pro Forma Operating Results



                                                                                      Pro Forma
                                                                                 Twelve Months Ended
                                                                                  December 31, 1999
                                                                                  -----------------
                                                                              
Revenues                                                                             $   422,000
Expenses                                                                              (1,454,000)
                                                                                     -----------
                                                                                      (1,032,000)

Loss from investment in AmeriCold Logistics                                           (6,893,000)
Loss from investment in Transportal Network                                             (540,000)
Interest and debt expense                                                             (1,467,000)
Gain on sale of investment in Charles E. Smith Commercial Realty LP Realty               280,000
Minority interest                                                                        956,000
                                                                                     -----------

Net loss                                                                             $(8,696,000)
                                                                                     ===========

Net loss per share - basic and diluted                                               $     (2.14)
                                                                                     ===========



4.       INVESTMENTS IN PARTNERSHIPS

         The Company's investments in and advances to partnership and loss
recognized from such investments are as follows:



         (amounts in thousands)
                                      Investments in and Advances to                                              Total Partners'
                                                Partnership            Total Assets           Total Debt              Capital
                                                -----------            ------------           ----------              -------
                                       December 31,  December 31,
                                          2000          1999          2000       1999       2000       1999       2000       1999
                                          ----          ----          ----       ----       ----       ----       ----       ----
                                                                                                   
AmeriCold Logistics (60% interest)      $ 15,766      $ 17,812      $161,680   $153,512   $  6,937        $--   $ 16,213   $ 29,479
                                        ========      ========      ========   ========   ========   ========   ========   ========


         During the year ended December 31, 2000 the Company funded $9,000,000
to AmeriCold Logistics. In the first quarter $6,000,000 was funded representing
the Company's contribution to complete its share of the March 1999 purchase by
AmeriCold Logistics of its non-real estate assets from the Vornado/Crescent
Partnership. In the third quarter, $3,000,000 was advanced under a promissory
note bearing interest at 12%.



            (amounts in thousands)        Loss from Investments in Partnerships
                                          -------------------------------------
                                                    For The Year Ended
                                                    ------------------
                                          December 31, 2000    December 31, 1999
                                          -----------------    -----------------
                                                         
AmeriCold Logistics (60% interest)            $(10,891)            $ (5,546)
Transportal Network (60% interest)              (4,983)                (540)
                                              --------             --------
                                              $(15,874)            $ (6,086)
                                              ========             ========


                                      -28-
   29
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         The following condensed operating data represents 100% of AmeriCold
Logistics of which the Company's share is 60%:



         (amounts in thousands)
                                                            For the Period
                                                            March 11, 1999
                                    For the Year Ended   (Acquisition Date) to
                                     December 31, 2000      December 31,1999
                                                   
Revenues                                 $ 676,158             $ 557,708
                                         =========             =========

Costs other than depreciation
    applicable to revenues               $ 649,449             $ 535,426
                                         =========             =========

Net loss                                 $ (18,436)            $  (9,244)
                                         =========             =========


         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing by the following: (i) discussions
with the Landlord to restructure the Leases (see lease restructuring paragraph
that follows); (ii) sales of non-core assets; and (iii) capital infusion by new
investors.

         Lease Restructuring

         On February 22, 2001, the leases were restructured to, among other
things, (i) reduce 2001's contractual rent to $146,000,000 ($14,500,000 less
than 2000's contractual rent), (ii) reduce 2002's contractual rent to
$150,000,000 (plus contingent rent in certain circumstances), (iii) increase the
Landlord's share of annual maintenance capital expenditures by $4,500,000 to
$9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to
December 31, 2003 from March 11, 2002.


         Total rent expense was $164,494,000 and $133,093,000 for the year ended
December 31, 2000 and the period March 11, 1999 (acquisition date) to December
31, 1999, respectively, of which AmeriCold Logistics deferred $19,011,000 and
$5,400,000. As at December 31, 2000, the balance of AmeriCold Logistics deferred
rent is as follows:



                                                                   The Company's
                                                    Total              Share
                                                             
           2000:
             Quarter ended December 31            $7,511,000         $4,506,600
             Quarter ended September 30            4,800,000          2,880,000
             Quarter ended June 30                 6,700,000          4,020,000
                                                   ---------          ---------
                                                  19,011,000         11,406,600
           1999:
             Quarter ended December 31             5,400,000          3,240,000
                                                   ---------          ---------
                                                 $24,411,000        $14,646,600
                                                 ===========        ===========


         The following discussion relates to the Company's 60% investment in
Transportal Network ("Transportal"):

         Pursuant to a plan announced to employees on September 28, 2000,
Transportal, a 60% owned internet start-up, ceased operations because of a
failure to attract third party funding. As a result, the Company recorded a
charge of $4,983,000 for the year ended December 31, 2000, representing the
Company's share of Transportal's loss of $4,260,000 and the estimated cost to
cease Transportal's operations of $723,000. The Company's share of losses
(including costs to cease operations) from October 1999 (inception) to December
31, 2000 were $5,523,000 and are included in the Company's consolidated
statements of operations as "Loss from Transportal Network".

                                      -29-
   30
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


5.   INCOME TAXES

         Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, specifically (i) the 2000
net operating loss carryforward as reflected on the Company's tax return, (ii)
the book to tax differences arising from the Company's investment in AmeriCold
Logistics and (iii) the write-off of organization costs in 1999 and 1998 for
financial reporting purposes and the amortization of such costs over 60 months
for tax reporting purposes. The tax effects of significant items comprising the
Company's net deferred tax asset as of December 31, 2000, and 1999 are as
follows:




                                                                  December 31, 2000        December 31, 1999
                                                                  -----------------        -----------------
                                                                                     
Deferred assets (liabilities):
   Organization costs                                                $    308,700             $    415,200
   Accrued compensation                                                      --                     19,100
   Minority interest (taxed directly to Limited Partners)               1,049,400                  319,000
   Net operating loss carryforward                                      9,550,500                2,847,000
   Loss on Transportal Network                                               --                    216,000
   Equity interest in AmeriCold Logistics                                 427,900                 (186,700)
                                                                     ------------             ------------
                                                                       11,336,500                3,629,600
Valuation allowance                                                   (11,336,500)              (3,629,600)
                                                                     ------------             ------------
Net deferred tax asset                                               $         --             $         --
                                                                     ============             ============


         Because the Company has only a limited operating history, a valuation
allowance has been established for its deferred tax assets. The need for this
allowance will be reassessed periodically based upon the operating results of
the Company.


         A reconciliation of income taxes to the expected income tax benefit is
as follows:



                                                                                                             For the Period
                                                                                                            October 16, 1998
                                                                                                            (Commencement of
                                                       Year Ended December       Year Ended December         Operations) to
                                                            31, 2000                  31, 1999              December 31, 1998
                                                            --------                  --------              -----------------
                                                                                                     
Loss before income taxes and minority interest            $ 19,267,300              $  8,055,800              $    981,700
Statutory federal income tax rate                                   34%                       34%                       34%
                                                          ------------              ------------              ------------
                                                             6,550,900                 2,739,000                   333,800
Expected state income tax benefit                            1,156,000                   483,300                    58,900
                                                          ------------              ------------              ------------
                                                             7,706,900                 3,222,300                   392,700
Valuation allowance                                         (7,706,900)               (3,222,300)                 (392,700)
                                                          ------------              ------------              ------------
Income taxes                                              $         --              $         --              $         --
                                                          ============              ============              ============


6.   REVOLVING CREDIT FACILITY

         As part of its formation, the Company obtained a $75,000,000 unsecured
revolving credit facility from Vornado which expires on December 31, 2004.
Borrowings under the Revolving Credit Agreement bear interest at LIBOR plus 3%
(9.56% at December 31, 2000). The Company pays Vornado a commitment fee equal to
1% per annum on the average daily unused portion of the facility pursuant
thereto; for the years ended December 31, 2000 and 1999 the Company paid
$629,833 and $697,425 to Vornado. Amounts may be borrowed under the Revolving
Credit Agreement, repaid and reborrowed from time to time on a revolving basis
(so long as the principal amount outstanding at any time does not exceed
$75,000,000). At December 31, 2000 and 1999, $19,781,538 and $4,586,896 were
outstanding, respectively. Principal payments are not required under the
Revolving Credit Agreement during its term. The Revolving Credit Agreement
prohibits the Company from incurring indebtedness

                                      -30-
   31
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


to third parties (other than certain purchase money debt and certain other
exceptions) and prohibits the Company from paying any dividends.

7.   EMPLOYEES' STOCK OPTION PLAN AND STOCK APPRECIATION RIGHTS

         Under the 1998 Omnibus Stock Plan (the "Plan"), various officers and
key employees of Vornado were granted incentive stock options and non-qualified
options to purchase Common Stock of the Company prior to the Distribution.
Options granted are at prices equal to 100% of the market price of the Common
Stock at the date of grant. Shares vest ratably, becoming fully vested 36 months
after grant. All options expire ten years after grant.

         If compensation cost for Plan awards had been determined based on fair
value at the grant dates, net loss and loss per share would have been reduced to
the pro forma amounts below:



                                                                                        For the Period
                                                                                        October 16, 1998
                                                                                        (Commencement of
                                  Year Ended December       Year Ended December          Operations) to
                                       31, 2000                  31, 1999               December 31, 1998
                                       --------                  --------               -----------------
                                                                               
Net loss:
As reported                        $  (17,685,513)            $   (7,258,234)            $     (884,520)
Pro forma                          $  (18,421,033)            $   (7,806,539)            $   (1,002,772)
Net loss per share:
     Basic and diluted:
         As reported               $        (4.35)            $        (1.78)            $         (.22)
         Pro forma                 $        (4.53)            $        (1.92)            $         (.25)


         The fair value of each option grant is estimated on the date of grant
using an option-pricing model with the following weighted-average assumptions
used for grants in the periods ended December 31, 2000 and 1998 (no options were
granted in the year ended December 31, 1999):



                                                                     For the Period
                                                                    October 16, 1998
                                                                    (Commencement of
                                          Year Ended December        Operations) to
                                                31, 2000           December 31, 1998
                                                --------           -----------------
                                                             
          Expected volatility                     194%                     71%
          Expected life                           5 Years                  5 Years
          Risk-free interest rate                 5.0%                     4.6%
          Expected dividend yield                   --                      --


                                      -31-
   32
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         A summary of the Plan's status and changes are presented below:



                                                                                                  For the Period October 9,
                                                                                                    1998 (Grant Date) to
                                              December 31, 2000          December 31, 1999            December 31, 1998
                                                          Exercise                 Exercise                       Exercise
                                            Shares         Price        Shares       Price         Shares          Price
                                            ------         -----        ------       -----         ------          -----
                                                                                                
Outstanding at January 1                    479,319      $    5.54     486,599     $    5.54            --        $    --

Granted                                     175,000           6.72          --            --       486,809           5.54

Exercised                                      (614)          5.54          --            --            --             --

Cancelled                                    (2,230)          5.54      (7,280)         5.54          (210)          5.54
                                           --------                   --------                    --------

Outstanding at December 31                  651,475      $    5.86     479,319     $    5.54       486,599        $  5.54
                                           ========                   ========                    ========

Options exercisable at December 31          319,414                    162,868                          --
                                           ========                   ========                    ========

Fair value of options granted during
the year ended December 31 (per option)    $   6.54                   $     --                    $   3.43
                                           ========                   ========                    ========


         The following table summarizes information about options outstanding
under the Plan at December 31, 2000:



               Options Outstanding                                     Options Exercisable
               -------------------                                     -------------------
                     Number
                 Outstanding at          Remaining                 Number
  Exercise        December 31,          Contractual             Exercisable at
   Price             2000                  Life               December 31, 2000     Exercise Price
                                                                        
$      5.54         476,475              7.8 Years                319,414            $      5.54
       6.72         175,000              9.4 Years                     --                     --
                    -------                                       -------
                    651,475                                       319,414
                    =======                                       =======


         Shares available for future grant at December 31, 2000 were 463,451.


         Stock appreciation rights ("SARs") were granted to an officer of the
Company prior to the Distribution. SARs are granted at 100% of the market price
of the Common Stock at the date of grant. SARs vest ratably, becoming fully
vested 36 months after grant. SARs issued at the Distribution and outstanding at
December 31, 2000 were 130,000, with an exercise price of $5.54. 86,700 SARs
were exercisable at December 31, 2000. The Company reversed all of the previous
year's compensation expense relating to SARs in the amount of $47,865 in the
year ended December 31, 2000, of which $5,850 and $42,015 was recognized as
expense for the years ended December 31, 1999 and 1998, respectively.

8.   VORNADO AGREEMENT

         The Company and Vornado have entered into an agreement ("Vornado
Agreement") pursuant to which, among other things, (a) Vornado will under
certain circumstances offer the Company an opportunity to become the lessee of
certain real property owned now or in the future by Vornado (under mutually
satisfactory lease terms) and

                                      -32-
   33
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(b) the Company will not make any real estate investment or other REIT-Qualified
Investment unless it first offers Vornado the opportunity to make such
investment and Vornado has rejected that opportunity.

         Under the Vornado Agreement, Vornado provides the Company with certain
administrative, corporate, accounting, financial, insurance, legal, tax, data
processing, human resources and operational services. Also, Vornado makes
available to the Company, at Vornado's offices, space for the Company's
principal corporate office. For these services, the Company compensates Vornado
in an amount determined in good faith by Vornado as the amount an unaffiliated
third party would charge the Company for comparable services and reimburses
Vornado for certain costs incurred and paid to third parties on behalf of the
Company. For the years ended December 31, 2000 and 1999, the Company incurred
approximately $330,000 and for the period October 16, 1998 (commencement of
operations) to December 31, 1998, the Company incurred approximately $50,000,
for such services.

         Vornado and the Company each have the right to terminate the Vornado
Agreement if the other party is in material default of the Vornado Agreement or
upon 90 days written notice to the other party at any time after December 31,
2003. In addition, Vornado has the right to terminate the Vornado Agreement upon
a change in control of the Company.

9.   MINORITY INTEREST

         Minority interest represents limited partnership interests in Company
L.P. not owned by the Company. On October 16, 1998, (i) Interstate Properties, a
New Jersey general partnership ("Interstate"), exchanged 447,017 shares of
Common Stock for a 9.9% undivided interest in all of the Company's assets and
(ii) Interstate and the Company contributed all of their interests in such
assets to Company L.P. and in return Interstate received a 9.9% limited
partnership interest and the Company received the 90.1% sole general partnership
interest therein. At any time after October 16, 1999, Interstate has the right
to have its limited partnership interest in Company L.P. redeemed by Company
L.P. either (a) for cash in an amount equal to the fair market value, at the
time of redemption, of 447,017 shares of Common Stock or (b) for 447,017 shares
of Common Stock, in each case as selected by the Company and subject to
customary anti-dilution adjustments.

         During the year ended December 31, 2000, the investment in Company L.P.
by minority holders was fully absorbed by losses. The minority interest's 9.9%
share of future losses will be recognized by the Company.

         No distributions were made to Interstate for the years ended December
31, 2000 and 1999 and the period October 16, 1998 (commencement of operations)
to December 31, 1998.

                                      -33-
   34
                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


10.  LOSS PER SHARE

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



                                                                                                                    For the Period
                                                                                                                   October 16, 1998
                                                                                               Year Ended          (Commencement of
                                                                        Year Ended            December 31,          Operations) to
                                                                     December 31, 2000           1999              December 31, 1998
                                                                     -----------------           ----              -----------------
                                                                                                          
Numerator:
     Net loss                                                          $(17,685,513)          $ (7,258,234)          $   (884,520)
                                                                       ============           ============           ============

Denominator:
     Denominator for basic loss per share-weighted average                4,068,727              4,068,310              4,068,310

     Effect of dilutive securities:
         Employee stock options                                                --                     --                     --
                                                                       ------------           ------------           ------------
     Denominator for diluted loss per share-adjusted weighted             4,068,727              4,068,310              4,068,310
                                                                       ============           ============           ============

Net loss per share-basic and diluted                                   $      (4.35)          $      (1.78)          $       (.22)
                                                                       ============           ============           ============


11.      CONTINGENCIES

         The Company is from time to time involved in legal actions arising in
the ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.

12.      SUMMARY OF QUARTERLY RESULTS (UNAUDITED):



                                                                                                 NET LOSS
                                                                                                 PER SHARE
                                                      REVENUE              NET LOSS       (BASIC AND DILUTED) (1)
                                                      -------              --------       -----------------------
                                                                                      
(amounts in thousands, except share amounts)

2000
   March 31                                         $    41,778          $(5,527,628)          $     (1.36)
   June 30                                               36,865           (5,288,474)                (1.30)
   September 30                                           2,875           (4,288,513)                (1.05)
   December 31                                            3,923           (2,580,898)                 (.63)

1999
   March 31                                         $   178,804          $  (147,397)          $      (.04)
   June 30                                              145,748           (2,065,188)                 (.51)
   September 30                                          48,316           (2,579,313)                 (.63)
   December 31                                           48,822           (2,466,336)                 (.61)



   (1) The total for the year may differ from the sum of the quarters as a
       result of weighting.


                                      -34-
   35


                                    PART III.


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information relating to directors of the Company will be contained in a
definitive Proxy Statement involving the election of directors which the Company
will file with the Securities and Exchange Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than 120 days after December
31, 2000, and such information is incorporated herein by reference. For
information on the executive officers of the Company, see "Item 4. Submission of
Matters to a Vote of Security Holders - Executive Officers of the Registrant" in
Part I of this Annual Report on Form 10-K.


ITEM 11.  EXECUTIVE COMPENSATION

         Information relating to executive compensation will be contained in the
Proxy Statement referred to above in "Item 10. Directors and Executive Officers
of the Registrant," and such information is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information relating to security ownership of certain beneficial owners
and management will be contained in the Proxy Statement referred to in "Item 10.
Directors and Executive Officers of the Registrant," and such information is
incorporated herein by reference.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information relating to certain relationships and related transactions
will be contained in the Proxy Statement referred to in "Item 10. Directors and
Executive Officers of the Registrant," and such information is incorporated
herein by reference.

                                      -35-
   36
                                    PART IV.


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)      The following documents are filed as part of this report:

                  1.       The consolidated financial statements are set forth
                           in Item 8 of this Annual Report on Form 10-K.

                  2.       Financial Statement Schedules.

                  The following financial statement schedules should be read in
conjunction with the financial statements included in Item 8 of this Annual
Report on Form 10-K.



                                                                                     Pages in this
                                                                                     Annual Report
                                                                                     on Form 10-K
                                                                                     ------------
                                                                                  
Vornado Crescent Logistics Operating Partnership and Subsidiary:

     Independent Auditors' Report                                                          38

     Consolidated Balance Sheets at December 31, 2000 and 1999                             39

     Consolidated Statements of Operations for the Year Ended December 31,
     2000 and the Period from March 11,1999 (Date of Inception) to
     December 31, 1999                                                                     41

     Consolidated Statements of Partners' Capital for the Year
     Ended December 31, 2000 and 1999                                                      43

     Consolidated Statements of Cash Flows for the Year Ended December 31, 2000
     and the Period from March 11, 1999 (Date of Inception) to December 31, 1999

     Notes to Financial Statements                                                         45


         Schedules other than those listed above are omitted because they are
not applicable or the information required is included in the consolidated
financial statements or the notes thereto.

                  3.       Exhibits

                           See Exhibit Index on page 53.

         (b)      Reports on Form 8-K.

                  During the last quarter of the period covered by this Annual
Report on Form 10-K, the following report on From 8-K was filed:



           Period Covered (Date of Event
                     Reported)                        Items Reported                    Date Filed
                     ---------                        --------------                    ----------
                                                                                
                  October 6, 2000           Press release regarding Transportal       October 6, 2000
                                                Network ceasing operations


                                      -36-
   37
                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15 (d) 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.


                                 VORNADO OPERATING COMPANY



                                 By: /s/ Joseph Macnow
                                     -------------------------------
                                     Joseph Macnow, Executive Vice President
                                          - Finance and Administration


Date:  March 1, 2001


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



                     SIGNATURE                                     TITLE                       DATE
                     ---------                                     -----                       ----
                                                                                      
By:   /s/ Steven Roth                                     Chairman of the Board of          March 1, 2001
    ----------------------------------------                Directors (Principal
          (Steven Roth)                                     Executive Officer)

By:   /s/ Michael D. Fascitelli                           President and Director            March 1, 2001
    ----------------------------------------
          (Michael D. Fascitelli)

By:   /s/ Douglas H. Dittrick                             Director                          March 1, 2001
    ----------------------------------------
          (Douglas H. Dittrick)

By:   /s/ Martin N. Rosen                                 Director                          March 1, 2001
    ----------------------------------------
          (Martin N. Rosen)

By:   /s/ Richard R. West                                 Director                          March 1, 2001
    ----------------------------------------
          (Richard R. West)

By:   /s/ Russell B. Wight, Jr.                           Director                          March 1, 2001
    ----------------------------------------
          (Russell B. Wight, Jr.)



                                      -37-
   38
INDEPENDENT AUDITORS' REPORT


To the Partners
Vornado Crescent Logistics Operating Partnership and Subsidiary:

We have audited the accompanying consolidated balance sheets of Vornado Crescent
Logistics Operating Partnership and Subsidiary (the "Partnership") as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, partners' capital, and cash flows for the year ended December 31,
2000 and for the period from March 11, 1999 (date of inception) to December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Vornado Crescent Logistics
Operating Partnership and Subsidiary at December 31, 2000 and 1999, and their
consolidated results of operations and cash flows for the year ended December
31, 2000 and for the period from March 11, 1999 (date of inception) to December
31, 1999 in conformity with accounting principles generally accepted in the
United States of America.


Deloitte & Touche LLP
Atlanta, Georgia

February 27, 2001


                                      -38-
   39
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(AMOUNTS IN THOUSANDS)



ASSETS                                                                            2000                1999
------                                                                            ----                ----
                                                                                              
CURRENT ASSETS:
  Cash and cash equivalents                                                     $   6,215           $   7,988
  Restricted cash                                                                  14,736              16,887
  Trade accounts receivable, net of allowance for doubtful
     accounts of $3,502 and $2,036, respectively                                   77,889              77,010
  Other current assets                                                              6,821               7,891
  Working capital to be collected on behalf of Real Estate Companies               (7,507)            (12,951)
                                                                                ---------           ---------

                                                                                   98,154              96,825

PROPERTY, PLANT, AND EQUIPMENT:
  Land                                                                             18,533              18,442
  Buildings and improvements                                                        2,476               1,517
  Machinery and equipment                                                          44,131              33,127
                                                                                ---------           ---------

                                                                                   65,140              53,086

  Less accumulated depreciation                                                   (10,722)             (4,230)
                                                                                ---------           ---------

      Property, plant, and equipment, net                                          54,418              48,856

OTHER ASSETS                                                                        9,108               7,831
                                                                                ---------           ---------

                                                                                $ 161,680           $ 153,512
                                                                                =========           =========


                                                                     (Continued)

                                      -39-
   40
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(AMOUNTS IN THOUSANDS)



                                                                                   2000                1999
                                                                                   ----                ----
                                                                                              
LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Accounts payable                                                              $  23,277           $  28,350
  Accrued expenses                                                                 43,653              44,570
  Current portion of long-term debt                                                   577                --
  Unearned revenue                                                                  9,242               9,630
  Due to Real Estate Companies                                                     27,074              29,232
                                                                                ---------           ---------

      Total current liabilities                                                   103,823             111,782
                                                                                ---------           ---------

LONG-TERM DEBT                                                                      6,360                --

DEFERRED RENT OBLIGATIONS TO REAL ESTATE
  COMPANIES                                                                        24,411               5,400

STRAIGHT-LINE RENT LIABILITY                                                        6,762               3,089

OTHER LIABILITIES                                                                   4,111               3,762
                                                                                ---------           ---------

        Total liabilities                                                         145,467             124,033

COMMITMENTS

PARTNERS' CAPITAL:
  Partners' capital                                                                48,723              38,723
  Accumulated deficit                                                             (27,680)             (9,244)
  Accumulated other comprehensive loss - minimum pension charge                      (830)               --
                                                                                ---------           ---------

Less: capital contribution receivable                                              (4,000)               --
                                                                                ---------           ---------

        Total partners' capital                                                    16,213              29,479
                                                                                ---------           ---------

                                                                                $ 161,680           $ 153,512
                                                                                =========           =========


                                                                     (Concluded)

See notes to consolidated financial statements.



                                  -40-
   41
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD
FROM MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------



                                                            2000            1999

                                                                   
REVENUES                                                 $ 676,158       $ 557,708

OPERATING EXPENSES:
  Cost of operations                                       478,809         399,615
  Rent expense on leases with Real Estate Companies        170,640         135,811
  General and administrative                                35,933          26,542
  Depreciation and amortization                              7,803           4,789
                                                         ---------       ---------

      Total operating expenses                             693,185         566,757
                                                         ---------       ---------

OPERATING LOSS                                             (17,027)         (9,049)

OTHER INCOME (EXPENSE):
  Interest expense                                          (2,136)           (534)
  Other income                                                 727             339
                                                         ---------       ---------

NET LOSS                                                 $ (18,436)      $  (9,244)
                                                         =========       =========


See notes to consolidated financial statements.



                                      -41-
   42
VORNADO CRESCENT LOGISTICS OPERATING PARTNERSHIP
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM
MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------



                                                                              ACCUMULATED
                                                                                 OTHER
                                                                             COMPREHENSIVE        CAPITAL
                                               PARTNERS'     ACCUMULATED     LOSS - MINIMUM     CONTRIBUTION
                                               CAPITAL        DEFICIT        PENSION CHARGE      RECEIVABLE       TOTAL

                                                                                                  
Capital contribution                           $ 38,723       $     --          $     --          $     --       $ 38,723

  Net loss                                           --         (9,244)               --                --         (9,244)
                                               --------       --------          --------          --------       --------

BALANCE - December 31, 1999                      38,723         (9,244)               --                --         29,479

Capital contribution                             10,000             --                --            (4,000)         6,000

COMPREHENSIVE LOSS:

  Net loss                                           --        (18,436)               --                --        (18,436)

  Adjustment for minimum pension liability           --             --              (830)               --           (830)
                                               --------       --------          --------          --------       --------
                                                                                                                  (19,266)
                                                                                                                 --------
BALANCE - December 31, 2000                    $ 48,723       $(27,680)         $   (830)         $ (4,000)      $ 16,213
                                               ========       ========          ========          ========       ========



See notes to consolidated financial statements.



                                      -42-
   43
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM
 MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------



                                                                   2000           1999

                                                                          
OPERATING ACTIVITIES:
  Net loss                                                       $(18,436)      $ (9,244)
  Adjustments to reconcile net loss
    to net cash provided by operating activities:
    Provision for bad debts                                         1,645          1,685
    Depreciation and amortization                                   7,803          4,789
    Straight lining of rent expense                                 3,673          3,089
    Gain on settlement and curtailment of benefit plan                 --         (1,363)
    Changes in assets and liabilities, net of acquisitions:
      Restricted cash                                               2,151             --
      Trade accounts receivable                                    (2,524)           239
      Other assets                                                     (9)        (6,420)
      Accounts payable and accrued expenses                        (8,081)        (1,493)
      Due to Real Estate Companies                                 (2,158)        29,232
      Deferred Rent Obligations                                    19,011          5,400
      Other liabilities                                               (69)           (11)
                                                                 --------       --------

        Net cash provided by operating activities                   3,006         25,903

INVESTING ACTIVITIES:
  Purchase of non-real estate assets                                   --        (38,723)
  Additions to property, plant, and equipment                     (12,302)        (9,666)
                                                                 --------       --------

        Net cash used in investing activities                     (12,302)       (48,389)

FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                          7,014             --
  Repayment of long-term debt                                         (47)            --
  Repayment of due to Real Estate Companies                        (5,444)        (8,249)
  Capital contributions                                             6,000         38,723
                                                                 --------       --------

        Net cash provided by financing activities                   7,253         30,474
                                                                 --------       --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                            (1,773)         7,988

CASH AND CASH EQUIVALENTS:
  Beginning of period                                               7,988             --
                                                                 --------       --------

  End of period                                                  $  6,215       $  7,988
                                                                 ========       ========



                                                                     (Continued)


                                      -43-
   44
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD FROM
MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------



                                                                   2000           1999

                                                                          
SUPPLEMENTAL DISCLOSURES:
  Interest paid                                                  $    753       $    331
                                                                 ========       ========

SUPPLEMENTAL INFORMATION ABOUT NONCASH
  ACTIVITIES:
  Liabilities assumed in connection with acquisition of
    non-real estate assets                                                      $ 13,198
                                                                                ========
  Initial working capital to be collected on behalf of
    Real Estate Companies                                                       $ 21,200
                                                                                ========


                                                                     (Concluded)


See notes to consolidated financial statements.





                                      -44-
   45
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 1999 AND FOR THE YEAR ENDED
DECEMBER 31, 2000 AND FOR THE PERIOD FROM
MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------


1.       ORGANIZATION AND BUSINESS

Vornado Crescent Logistics Operating Partnership (the "Partnership") was formed
on March 11, 1999. The Partnership holds its assets and conducts its business
through its wholly owned subsidiary AmeriCold Logistics, LLC (collectively
"AmeriCold Logistics"). At December 31, 2000, AmeriCold Logistics, headquartered
in Atlanta, Georgia, has 6,700 employees and operates 99 temperature controlled
warehouse facilities nationwide with an aggregate of approximately 518 million
cubic feet of refrigerated, frozen, and dry storage space. Of the 99 warehouses,
AmeriCold Logistics leases 88 temperature controlled warehouses with an
aggregate of approximately 439 million cubic feet from the Vornado REIT/Crescent
REIT Partnership, and manages 11 additional warehouses containing approximately
79 million cubic feet of space. AmeriCold Logistics provides the frozen food
industry with refrigerated warehousing and transportation management services.
Refrigerated warehouses are comprised of production and distribution facilities.
Production facilities typically serve one or a small number of customers,
generally food processors, located nearby. These customers store large
quantities of processed or partially processed products in the facility until
they are shipped to the next stage of production or distribution. Distribution
facilities primarily warehouse a wide variety of customers' finished products
until future shipment to end-users. Each distribution facility primarily
services the surrounding regional market. AmeriCold Logistics' transportation
management services include freight routing, dispatching, freight rate
negotiation, backhaul coordination, freight bill auditing, network flow
management, order consolidation, and distribution channel assessment.
Additionally, AmeriCold Logistics mines limestone at two of its locations.


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The consolidated financial statements of the Partnership
include the accounts of the Partnership and its subsidiary. The Partnership is
owned 60% by Vornado Operating L.P. and 40% by COPI Cold Storage L.L.C. (an
affiliate of Crescent Operating Inc.). The partnership agreement provides that
net income and losses are allocated to each partner's account in relation to
their ownership interests. Subject to certain provisions, the Partnership
continues for a term through October 2027. Certain reclassifications to prior
year amounts have been made to conform with the current year's presentation.
Management has made 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 period. Actual results could differ from those
estimates.

Cash and Cash Equivalents - Cash and cash equivalents consist of highly liquid
investments purchased with original maturities of three months or less.

Restricted Cash - Cash restricted for uses related to payment of rent ($7,229 at
December 31, 2000 and 1999) and settlement of certain self-insured liabilities
($7,507 and $9,658 at December 31, 2000 and 1999, respectively) are classified
as restricted cash.


                                      -45-
   46
Property, Plant, and Equipment - Depreciation and amortization are computed on
the straight-line method over the estimated useful lives of the respective
assets. Depreciation and amortization begin the month in which the asset is
placed into service.

Properties are reviewed for impairment if events or changes in circumstances
indicate that the carrying amount of the property may not be recoverable. In
such an 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. Such carrying amount would be adjusted,
if necessary, to estimated fair value to reflect an impairment in the value of
the asset.

Revenue Recognition - Revenues include storage, transportation and handling
fees, and management fees for locations managed on behalf of third parties.
Storage revenues are recognized as services are provided. Transportation fees
and expenses are recognized upon tender of product to common carriers, which is
not materially different than if such revenues and expenses were recognized upon
delivery. Management fees are recognized when the Company is contractually
entitled to such fees. Costs related to managed facilities are included in
operating expenses. AmeriCold Logistics charges customers for both inbound and
outbound handling in advance but defers the outbound handling revenue until the
product has been shipped. Revenues from the sale of limestone are recognized
upon delivery to customers.

Income Taxes - AmeriCold Logistics has elected to be treated as a partnership
for income tax purposes. Taxable income or loss of AmeriCold Logistics is
reported in the income tax returns of the partners. Accordingly, no provision
for income taxes is made in the financial statements of AmeriCold Logistics.

Fair Value of Financial Instruments - All financial instruments of the Company
are reflected in the accompanying consolidated balance sheets at historical cost
which, in management's estimation, based upon an interpretation of available
market information and valuation methodologies, reasonably approximates their
fair values. Such fair values are not necessarily indicative of the amounts that
would be realized upon disposition of the Company's financial instruments.

Recently Issued Accounting Standards - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133")
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The Company is required to adopt SFAS No. 133, as amended by
SFAS No. 138, effective January 1, 2001. Because the Company does not currently
utilize derivatives or engage in hedging activities, management does not
anticipate that implementation of this statement will have a material effect on
the Company's financial statements.

3.    ACQUISITION

In March 1999, AmeriCold Logistics purchased all of the non-real estate assets
of a group of companies owned by Vornado Realty Trust and subsidiaries of
Crescent Real Estate Equities Company and Crescent Operating, Inc. (the "Real
Estate Companies").

The purchase price of the non-real estate assets was $48.7 million including the
assumption of approximately $10 million of liabilities in connection with the
closure of one of the warehouse facilities. In addition, the Company acquired
capitalized leased assets and assumed $3.2 million of capitalized lease
obligations as a result of the purchase.


                                      -46-
   47
The purchase method of accounting was applied to this acquisition. Approximate
fair values assigned to assets and liabilities acquired were as follows:



(amounts in thousands)
                                                                    
Property, plant, and equipment                                         $ 43,421
Other assets                                                              8,500
                                                                       --------
                                                                         51,921
Other liabilities                                                       (13,198)
                                                                       --------

                                                                       $ 38,723
                                                                       ========


Results of operations are presented from the date of acquisition in 1999.

4.    ACCRUED EXPENSES

Detail of accrued expenses as of December 31, 2000 and 1999 is as follows:




(amounts in thousands)                                        2000         1999

                                                                   
Accrued payroll and related expense                         $ 9,854      $ 8,855
Accrued employee retirement and other benefits                7,636        8,521
Accrued workers' compensation                                 8,443        7,961
Other accrued expenses                                       17,720       19,233
                                                            -------      -------

                                                            $43,653      $44,570
                                                            =======      =======


5.    LONG-TERM DEBT



(amounts in thousands)

                                                                     
Promissory Notes, due March 2002                                        $ 5,000
Promissory Note, payable in equal monthly
   installments through January 2003                                      1,937
                                                                        -------

                                                                          6,937

   Less: current maturities                                                (577)
                                                                        -------

                                                                        $ 6,360
                                                                        =======


The promissory notes are due in March 2002. At the Company's option, these loans
may be repaid at any time. Until the notes are paid, monthly interest-only
payments are due at the annual rate of 12%. The notes are secured by certain
property with a net book value of approximately $18,400,000.

The promissory note payable in equal monthly installments may be repaid prior to
its maturity, subject to certain prepayment penalties. This loan bears interest
at the rate of 10.72% per annum. The note is secured by certain equipment with a
net book value of approximately $1,967,000.



                                      -47-
   48
6.    TRANSACTIONS WITH REAL ESTATE COMPANIES AND OWNERS

During 2000 and 1999, AmeriCold Logistics received a management fee of $255,000
and $201,000, respectively, from the Real Estate Companies for administrative
services performed.

During 2000 and 1999, AmeriCold Logistics paid a management fee of $487,000 to
Vornado Realty L.P.

At December 31, 2000 and 1999, $1,061,000 and $952,000, respectively, were
receivable from the Partnership's owners for expenditures made on their behalf
for a new business venture. Such amounts have been included in other assets.

7.    LEASE COMMITMENTS (SEE ALSO LEASE RESTRUCTURING DISCUSSION - NOTE 9)

AmeriCold Logistics entered into leases with the Real Estate Companies covering
the warehouses used in this business. The leases, as amended in 2000, which
commenced in March 1999, generally have a 15-year term with two five-year
renewal options and provide for the payment of fixed base rent and percentage
rent based on revenues AmeriCold Logistics receives from its customers. Fixed
base rent is approximately $137 million per annum through 2003, $139 million per
annum from 2004 through 2008, and $141 million per annum from 2009 through 2014.
Percentage rent for each lease is based on a specified percentage of revenues in
excess of a specified base amount. The aggregate base revenue amount under five
of the six leases is approximately $350 million, and the weighted-average
percentage rate is approximately 36% for the initial five-year period,
approximately 38% for the period from 2004 through 2008, and approximately 40%
for the period from 2009 through February 28, 2014. The aggregate base revenue
amount under the sixth lease is approximately $32,000,000 through 2001, and
approximately $26,000,000 for the period from 2002 through February 28, 2014,
and the percentage rate is 24% through 2001, 37.5% for the period from 2002
through 2006, 40% from 2007 through 2011, and 41% from 2012 through February 28,
2014.

The fixed base rent for each of the two five-year renewal options is equal,
generally, to the greater of the then fair market value rent or the fixed base
rent for the immediately preceding lease year plus 5%.

AmeriCold Logistics has the right to defer the payment of 15% of fixed base rent
and all percentage rent for up to three years beginning in March 1999 to the
extent that available cash, as defined in the leases, is insufficient to pay
such rent. Pursuant to the agreement, AmeriCold Logistics exercised its deferral
rights and deferred approximately $19.0 million and $5.4 million in 2000 and
1999, respectively, in fixed and percentage rent.

AmeriCold Logistics is also required to pay for all costs arising from the
operation, maintenance and repair of the properties, including all real estate
taxes and assessments, utility charges, permit fees, and insurance premiums, as
well as property capital expenditures in excess of $5,000,000 annually.

AmeriCold Logistics also has operating lease agreements for equipment and other
facilities. AmeriCold Logistics pays taxes, insurance, and maintenance costs on
substantially all of the leased property. Lease terms generally range from 5 to
20 years with renewal or purchase options.


                                      -48-
   49
At December 31, 2000, future minimum fixed lease payments under these leases
with the Real Estate Companies and future minimum lease payments under operating
leases other than leases with the Real Estate Companies were as follows:



      (amounts in thousands)
      YEAR ENDED
      DECEMBER 31,
                             REAL ESTATE         OTHER
                              COMPANIES         LESSORS             TOTAL
                                                        
      2001                   $  137,201        $    8,068        $  145,269
      2002                      137,340             7,001           144,341
      2003                      137,327             5,175           142,502
      2004                      139,729             3,921           143,650
      2005                      138,920             3,538           142,458
      Thereafter              1,157,752             4,026         1,161,778
                             ----------        ----------        ----------

                             $1,848,269        $   31,729        $1,879,998
                             ==========        ==========        ==========



         Rent expense under all lease obligations for 2000 was $139,723,000 for
fixed rent and $30,917,000 for percentage rent. Rent expense under all lease
obligations for 1999 was $109,031,000 for fixed rent and $26,780,000 for
percentage rent.

8.    EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans - AmeriCold Logistics has defined benefit pension
plans that cover substantially all employees, other than union employees covered
by union pension plans under collective bargaining agreements. Benefits under
AmeriCold Logistics' plans are based on years of credited service and
compensation during the years preceding retirement, or on years of credited
service and established monthly benefit levels.

Postretirement Benefits Other Than Pensions - During 1999, AmeriCold Logistics
settled and curtailed postretirement healthcare and life insurance benefits for
a substantial portion of its employees. As a result, AmeriCold Logistics
recorded a gain of approximately $1,363,000.



                                      -49-
   50
Actuarial information regarding the defined benefit pension plans and
postretirement benefits other than pensions as of December 31, 2000 and 1999 is
as follows:



                                                                                         2000
                                                                    ---------------------------------------------
                                                                         PENSION BENEFITS
                                                                    ----------------------------       OTHER
                                                                                     NATIONAL
                                                                     RETIREMENT      SERVICE       POSTRETIREMENT
(amounts in  thousands)                                             INCOME PLAN    RELATED PLAN       BENEFITS

                                                                                          
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                               $ 33,710       $  9,351         $  1,920
Service cost                                                             1,641            211               45
Interest cost                                                            2,518            707              106
Actuarial (gain) loss                                                    2,826         (1,168)            (257)
Settlements                                                                 --             --             (521)
Benefits paid                                                           (5,271)          (468)              (4)
                                                                      --------       --------         --------
Benefit obligation at end of year                                     $ 35,424       $  8,633         $  1,289
                                                                      ========       ========         ========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year                        $ 28,774       $  9,635         $     --
Actual return on plan assets                                             1,475            (38)              --
Employer contributions                                                   1,240            248                4
Benefits paid                                                           (5,271)          (468)              (4)
                                                                      --------       --------         --------

Fair value of plan assets at end of year                              $ 26,218       $  9,377         $     --
                                                                      ========       ========         ========

Funded status                                                         $ (9,205)      $    743         $ (1,289)
Unrecognized actuarial (gain) loss                                       2,805          1,283             (260)
Unrecognized prior service cost                                          1,264            152             (582)
Minimum liability adjustment                                            (2,091)            --               --
                                                                      --------       --------         --------
(Accrued) prepaid benefit cost                                        $ (7,227)      $  2,178         $ (2,131)
                                                                      ========       ========         ========


Amounts recognized in the consolidated balance sheet consist of:
  Accrued benefit liability                                           $ (7,227)      $     --         $ (2,131)
  Prepaid asset                                                             --          2,178               --
  Intangible asset                                                       1,261             --               --
  Accumulated other comprehensive loss                                     830             --               --
                                                                      --------       --------         --------
Net amount recognized                                                 $ (5,136)      $  2,178         $ (2,131)
                                                                      ========       ========         ========

Weighted-average assumptions as of December 31, 2000:
Discount rate                                                            7.75%          7.75%             7.50%
Expected return                                                          9.50%          9.50%              N/A
Rate of compensation increase                                            4.00%            N/A              N/A




                                      -50-
   51


                                                                                           1999
                                                                     -----------------------------------------------
                                                                           PENSION BENEFITS
                                                                     ----------------------------        OTHER
                                                                                      NATIONAL
                                                                      RETIREMENT      SERVICE        POSTRETIREMENT
(amounts in  thousands)                                              INCOME PLAN    RELATED PLAN        BENEFITS
                                                                                            
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of period                             $ 33,052        $ 11,653          $  7,150
Service cost                                                             1,297             254               147
Interest cost                                                            2,461             576               346
Actuarial (gain) loss                                                   (3,903)            404              (320)
Curtailments                                                                --              --            (2,735)
Settlements                                                                 --              --            (1,940)
Plan transfers                                                           2,930          (2,930)               --
Plan amendments                                                             --              --              (664)
Benefits paid                                                           (2,127)           (606)              (64)
                                                                      --------        --------          --------

Benefit obligation at end of period                                   $ 33,710        $  9,351          $  1,920
                                                                      ========        ========          ========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of period                      $ 25,693        $ 10,058          $     --
Actual return on plan assets                                             3,364           1,060                --
Employer contributions                                                      --             967                64
Plan transfers                                                           1,844          (1,844)               --
Benefits paid                                                           (2,127)           (606)              (64)
                                                                      --------        --------          --------

Fair value of plan assets at end of period                            $ 28,774        $  9,635          $     --
                                                                      ========        ========          ========

Funded status                                                         $ (4,936)            285          $ (1,920)
Unrecognized actuarial (gain) loss                                      (1,809)          1,409                (2)
Unrecognized prior service cost                                          1,338             157              (648)
                                                                      --------        --------          --------
(Accrued) prepaid benefit cost                                        $ (5,407)       $  1,851          $ (2,570)
                                                                      ========        ========          ========

Amounts recognized in the consolidated balance sheet consist of:
  Accrued benefit liability                                           $ (5,407)       $     --          $ (2,570)
  Prepaid asset                                                             --           1,851                --
                                                                      --------        --------          --------
Net amount recognized                                                 $ (5,407)       $  1,851          $ (2,570)
                                                                      ========        ========          ========

Weighted-average assumptions as of December 31, 1999:
Discount rate                                                             7.75%           7.75%             7.75%
Expected return                                                           9.50%           9.50%              N/A
Rate of compensation increase                                             4.00%            N/A               N/A



                                      -51-
   52


                                                                 2000
                                          ------------------------------------------------
                                                PENSION BENEFITS
                                          ----------------------------
                                                            NATIONAL           OTHER
                                           RETIREMENT       SERVICE        POSTRETIREMENT
                                          INCOME PLAN     RELATED PLAN        BENEFITS
(amounts in thousands)
                                                                     
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
  Service cost                              $ 1,641          $   211          $    45
  Interest cost                               2,518              707              106
  Expected return on plan assets             (3,153)          (1,094)              --
  Recognized net actuarial loss (gain)         (119)              90               --
  Amortization of prior service cost             80                6              (65)
                                            -------          -------          -------

                                            $   967          $   (80)         $    86
                                            =======          =======          =======




                                                                 1999
                                          -----------------------------------------------
                                                PENSION BENEFITS
                                          -----------------------------
                                                             NATIONAL          OTHER
                                           RETIREMENT        SERVICE       POSTRETIREMENT
                                          INCOME PLAN      RELATED PLAN       BENEFITS
(amounts in thousands)
                                                                     
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
  Service cost                              $ 1,297          $   254          $   147
  Interest cost                               2,461              576              346
  Expected return on plan assets             (2,531)            (820)              --
  Recognized net actuarial loss                 338               18               67
  Amortization of prior service cost            104                5              (56)
                                            -------          -------          -------

                                            $ 1,669          $    33          $   504
                                            =======          =======          =======


The medical plan for retirees provides a fixed dollar benefit for each year that
the retiree is receiving benefits. All increases in medical costs are paid by
the retiree, thus, there is no assumed health care cost trend.

Profit Sharing - AmeriCold Logistics has defined contribution employee benefit
plans which cover all eligible employees. The plans also allow contributions by
plan participants in accordance with Section 401(k) of the Internal Revenue
Code. Profit sharing expense for 2000 and 1999 was approximately $3,084,000 and
$4,060,000, respectively.

Deferred Compensation - AmeriCold Logistics has deferred compensation and
supplemental retirement plan agreements with certain of its executives. The
agreements provide for certain benefits at retirement or disability, and also
provide for survivor benefits in the event of death of the employee. AmeriCold
Logistics charges expense for the accretion of the liability each year.

The net expense for all deferred compensation and supplemental retirement plans
for 2000 and 1999 was approximately $123,000 and $164,000, respectively.

9.    SUBSEQUENT EVENT

On February 22, 2001 the leases with the Real Estate Companies were restructured
to, among other things, (i) reduce 2001's contractual rent to $146,000,000
($14,500,000 less than 2000's contractual rent), (ii) reduce 2002's contractual
rent to $150,000,000 (plus contingent rent in certain circumstances, (iii)
increase the Real Estate Companies' share of annual maintenance capital
expenditures by $4,500,000 to $9,500,000 effective January 1, 2000, and (iv)
extend the deferred rent period to December 31, 2003 from March 11, 2002.


                                      -52-
   53
                                  EXHIBIT INDEX



EXHIBIT NO.                                                                                   PAGE
-----------                                                                                   ----

                                                                                        
               The following is a list of all exhibits filed as part of this report

    2.1        Assignment Agreement, dated as of December 31, 1998, between Vornado            *
               Realty Trust, as assignor, and Vornado Operating Company, assignee
               (incorporated by reference to Exhibit 2.1 of the Company's Current
               Report on Form 8-K, dated December 31, 1998 (File No. 001-14525), as
               filed with the Commission on January 15, 1999)

    2.2        Put Agreement, dated as of December 31, 1998, between Vornado Realty            *
               Trust, as grantor, and Vornado Operating Company, as grantee
               (incorporated by reference to Exhibit 2.2 of the Company's Current
               Report on Form 8-K, dated December 31, 1998 (File No. 001 -14525), as
               filed with the Commission on January 15, 1999)

    2.3        Asset Purchase Agreement dated as of February 26, 1999, between                 *
               AmeriCold Logistics, LLC, as Purchaser, and AmeriCold Corporation, as
               Seller (incorporated by reference to Exhibit 2.1 of the Company's
               Current Report on Form 8-K, dated March 12, 1999 (File No. 001-14525),
               as filed with the Commission on March 31, 1999)

    2.4        Asset Purchase Agreement, dated as of March 9, 1999, between Vornado            *
               Crescent Logistics Operating Partnership, as Purchaser, and URS
               Logistics, Inc., as Seller (incorporated by reference to Exhibit 2.2 of
               the Company's Current Report on form 8-K, dated March 12, 1999 (File
               No. 001-14525), as filed with the Commission on March 31, 1999)

    2.5        Asset Purchase Agreement, dated as of March 9, 1999, between AmeriCold          *
               Logistics, LLC, as Purchaser, and VC Omaha Holdings, L.L.C., as Seller
               (incorporated by reference to Exhibit 2.3 of the Company's Current
               Report on Form 8-K, dated March 12, 1999 (File No. 001-14525), as filed
               with the Commission on March 31, 1999)

    2.6        Asset Purchase Agreement, dated as of March 9, 1999, between AmeriCold          *
               Logistics II, LLC, as Purchaser, and VC Missouri Holdings, L.L.C., as
               Seller (incorporated by reference to Exhibit 2.4 of the Company's
               Current Report on Form 8-K, dated March 12, 1999 (File No. 001-14525),
               as filed with the Commission on March 31, 1999)

    3.1        Restated Certificate of Incorporation of Vornado Operating Company              *
               (incorporated by reference to Exhibit 3.1 of the Company's Registration
               Statement on Form S-11 (File No. 333-40701), as filed with the
               Commission on September 28, 1998)


----------
* Incorporated by reference.


                                      -53-
   54


EXHIBIT NO.                                                                                   PAGE
-----------                                                                                   ----

                                                                                        
    3.2        Amended and Restated Bylaws of Vornado Operating Company (incorporated          *
               by reference to Exhibit 3.2 of the Company's Quarterly Report on Form
               10-Q for the period ended March 31, 2000 (File No. 001-14525), as filed
               with the Commission on May 9, 2000)

    4.1        Specimen stock certificate (incorporated by reference to Exhibit 4.1 of         *
               the Company's Registration Statement on Form S-11 (File No. 333-40701),
               as filed with the Commission on January 23, 1998)

   10.1        Intercompany Agreement, dated as of October 16, 1998, between Vornado           *
               Operating Company and Vornado Realty Trust (incorporated by reference
               to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the
               year ended December 31, 1998 (File No. 001-14525))

   10.2        Credit Agreement dated as of January 1, 1999, between Vornado Operating         *
               Company and Vornado Realty L.P., together with related form of Line of
               Credit Note (incorporated by reference to Exhibit 10.2 of the Company's
               Annual Report on Form 10-K for the year ended December 31, 1998 (File
               No. 001-14525))

   10.3        1998 Omnibus Stock Plan of Vornado Operating Company (incorporated by           *
               reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K
               for the year ended December 31, 1998 (File No. 001 -14525))

   10.4        Agreement of Limited Partnership of Vornado Operating L.P.                      *
               (incorporated by reference to Exhibit 10.4 of the Company's Annual
               Report on Form 10-K for the year ended December 31, 1998 (File No.
               001-14525))

   10.5        Agreement, dated March 11, 1999, between Vornado Operating L.P. and             *
               COPI Temperature Controlled Logistics L.L.C. (incorporated by reference
               to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated
               March 12, 1999 (File No. 001-14525), as filed with the Commission on
               March 31, 1999)

   10.6        Master Lease Agreement, dated as of April 22, 1998, between URS Real            *
               Estate, L.P., as Landlord, and URS Logistics, Inc., as Tenant
               (incorporated by reference to Exhibit 10.2 of the Company's Current
               Report on Form 8-K/A, dated March 12, 1999 (File No. 001-14525), as
               filed with the Commission on May 26, 1999).

   10.7        First Amendment to Master Lease Agreement, dated as of March 10, 1999,          *
               between URS Real Estate, L.P. and URS Logistics, Inc. (incorporated by
               reference to Exhibit 10.3 of the Company's Current Report on Form
               8-K/A, dated March 12, 1999 (File No. 001-14525), as filed with the
               Commission on May 26, 1999).


----------
* Incorporated by reference.


                                      -54-
   55


EXHIBIT NO.                                                                                   PAGE
-----------                                                                                   ----

                                                                                        
   10.8        Assignment and Assumption of Master Lease, dated as of March 11, 1999,          *
               between URS Logistics, Inc. and AmeriCold Logistics II, LLC
               (incorporated by reference to Exhibit 10.4 of the Company's Current
               Report on Form 8-K/A, dated March 12, 1999 (File No. 001-14525), as
               filed with the Commission on May 26, 1999).

   10.9        Master Lease Agreement, dated as of April 22, 1998, between AmeriCold           *
               Real Estate, L.P., as Landlord and AmeriCold Corporation, as Tenant
               (incorporated by reference to Exhibit 10.5 of the Company's Current
               Report on Form 8-K/A, dated March 12, 1999 (File No. 001-14525), as
               filed with the Commission on May 26, 1999).

   10.10       First Amendment to Master Lease Agreement, dated as of March 10, 1999,          *
               between AmeriCold Real Estate, L.P. and AmeriCold Logistics, LLC
               (incorporated by reference to Exhibit 10.6 of the Company's Current
               Report on Form 8-K/A, dated March 12, 1999 (File No. 001-14525), as
               filed with the Commission on May 26, 1999).

   10.11       Assignment and Assumption of Master Lease, dated as of February 28,             *
               1999, between AmeriCold Corporation and AmeriCold Logistics, LLC
               (incorporated by reference to Exhibit 10.7 of the Company's Current
               Report on Form 8-K/A, dated March 12, 1999 (File No. 001-14525), as
               filed with the Commission on May 26, 1999).

   10.12       Master Lease Agreement, dated as of March 11, 1999, between URS                 *
               Logistics, Inc., as landlord, and AmeriCold Logistics II, LLC, as
               Tenant (incorporated by reference to Exhibit 10.8 of the Company's
               Current Report on Form 8-K/A, dated March 12, 1999 (File No.
               001-14525), as filed with the Commission on May 26, 1999).

   10.13       Master Lease Agreement, dated as of February 28, 1999, between                  *
               AmeriCold Corporation, as Landlord, and AmeriCold Logistics, LLC, as
               Tenant (incorporated by reference to Exhibit 10.9 of the Company's
               Current Report on Form 8-K/A, dated March 12, 1999 (File No.
               001-14525), as filed with the Commission on May 26, 1999).

   10.14       Master Lease Agreement, dated as of March 11, 1999, between each of the         *
               entities listed on Exhibit A thereto, collectively as Landlord, and
               AmeriCold Logistics, LLC, as Tenant (incorporated by reference to
               Exhibit 10.10 of the Company's Current Report on Form 8-K/A, dated
               March 12, 1999 (File No. 001-14525), as filed with the Commission on
               May 26, 1999).

   10.14(A)    Amendment to Master Lease Agreement, dated as of March 22, 2000, among          *
               each of the entities identified on Exhibit A thereto, collectively as
               Landlord, and AmeriCold Logistics LLC, as Tenant (incorporated by
               reference to Exhibit 10.14(A) of the Company's Quarterly Report on
               Form 10-Q for the period ended March 31, 2000 (File No. 001-14525),
               as filed with the Commission on May 9, 2000).


----------
* Incorporated by reference.


                                      -55-
   56


EXHIBIT NO.                                                                                   PAGE
-----------                                                                                   ----

                                                                                        
   10.15       Master Lease Agreement, dated as of March 11, 1999, between VC                  *
               Omaha Holdings, L.L.C. and Carmar Freezers Thomasville L.L.C.,
               together a Landlord, and AmeriCold Logistics, LLC, as Tenant
               (incorporated by reference to Exhibit 10.11 of the Company's
               Current Report on Form 8-K/A, dated March 12, 1999 (File No.
               001-14525), as filed with the Commission on May 26, 1999).

   10.16       Employment Agreement between Vornado Operating Company and Emanuel              *
               Pearlman, dated May 19, 2000 (incorporated by reference to
               Exhibit 10.16 of the Company's Quarterly Report on Form 10-Q for
               the period ended June 30, 2000 (File No. 001-14525) as filed with
               the Commission on August 7, 2000).

   10.17       Amended and Restated Limited Liability Company Agreement of                     *
               Transportal Network, LLC, a Delaware Limited Liability Company
               (incorporated by reference to Exhibit 10.17 of the Company's
               Quarterly Report on Form 10-Q for the period ended June 30, 2000
               File No. 001-14525), as filed with the Commission on August 7,
               2000).

   21          Subsidiaries of Vornado Operating Company


----------
* Incorporated by reference.





                                      -56-