EXHIBIT INDEX ON PAGE 57

                       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, 2001
                                       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


                                       N/A
--------------------------------------------------------------------------------
              (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 22, 2002 was approximately $3,704,000.

As of February 22, 2002, 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
29, 2002.

                                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 ..........    14
   ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....................................    20
   ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................................................    21
   ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL
             DISCLOSURE .....................................................................................    21
PART III ....................................................................................................    37
   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (1) .........................................    37
   ITEM 11.  EXECUTIVE COMPENSATION (1) .....................................................................    37
   ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (1) .............................    37
   ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (1) .............................................    37
PART IV .....................................................................................................    38
   ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ...............................    38
SIGNATURES ..................................................................................................    39


------------
(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, 2001, 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 Agreement; (h) AmeriCold Logistic's
obligations under the lease agreements with the Vornado REIT/Crescent REIT
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-

                                     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, "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 each 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, 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 or entities partially owned by 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 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

                                      -3-

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. The Company incurred $371,000 for the year ended December 31, 2001, and
$330,000 in each of the years ended December 31, 2000 and 1999, 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.

         The Company's restated certificate of incorporation, (the "Charter")
specifies that one of its corporate purposes is to perform under 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, 2001, 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.

         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 owned, 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, 2001. 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 REIT/Crescent REIT
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 REIT/Crescent REIT Partnership acquired the assets of Freezer Services,
Inc. and in July 1998 acquired the Carmar Group.

                                      -4-

         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 REIT/Crescent REIT
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 REIT/Crescent
REIT 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 Agreement with Vornado and paid the
balance of $6,000,000 in March 2000.

         On February 6, 2002, Crescent Operating filed a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code. Subject to confirmation of a plan
of reorganization and shareholder approval, it had agreed to transfer its
interest in AmeriCold Logistics to an entity that will be owned by the
shareholders of Crescent. It is uncertain at this time whether or when this plan
will be approved and what effect, if any, this will have on the operation and
management of AmeriCold Logistics.

         AmeriCold Logistics, headquartered in Atlanta, Georgia, has 5,900
employees and operates 100 temperature controlled warehouse facilities
nationwide with an aggregate of approximately 525 million cubic feet of
refrigerated, frozen and dry storage space. Of the 100 warehouses, AmeriCold
Logistics leases 89 temperature controlled warehouses with an aggregate of
approximately 445 million cubic feet from the Vornado REIT/Crescent REIT
Partnership, and manages 11 additional warehouses containing approximately 80
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 2001 Revenue
                                         -----------------
                                      
H.J. Heinz & Co. .....................           16%
ConAgra, Inc. ........................            8
McCain Foods, Inc. ...................            5
Sara Lee Corp. .......................            5
Tyson Foods, Inc. ....................            4
General Mills, Inc. ..................            4
J.R. Simplot Co. .....................            3
Flowers Industries, Inc. .............            3
Pro-Fac Cooperative, Inc. ............            2
Farmland Industries, Inc. ............            2
Other ................................           48


         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.

                                      -5-

         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 with the Landlord covering 89
of 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. The leases provide
for fixed base rents of approximately $136,000,000 in 2000, $137,000,000 per
annum from 2001 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%.

         On February 22, 2001, AmeriCold Logistics' leases with 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 additional 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.

         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 $9,500,000 annually.

         AmeriCold Logistics recognized $156,276,000 and $170,640,000 of rent
expense for the years ended December 31, 2001 and 2000 which includes, effects
of straight-lining, rent to parties other than the Landlord and is before the
waiver of rent discussed below.

         AmeriCold Logistics has the right to defer the payment of 15% of fixed
base rent and all percentage rent until December 31, 2003 to the extent that
available cash, as defined in the leases, is insufficient to pay such rent.
Pursuant thereto, AmeriCold Logistics' balance of deferred rent is as follows:



                             Total               The Company's Share
                             -----               -------------------
                                           
2001 deferral .......    $ 25,469,000            $       15,281,400
2000 deferral .......      19,011,000                    11,406,600
1999 deferral .......       5,400,000                     3,240,000
                         ------------            ------------------
Total ...............    $ 49,880,000            $       29,928,000
                         ============            ==================


         In the fourth quarter ended December 31, 2001, AmeriCold Logistics
reversed $25,469,000 of the rent expense recorded for 2001. This results from
the Landlord waiving its rights to collect this portion of the rent. Further,
the Landlord waived $14,343,000 of the rent expense recorded by AmeriCold
Logistics for 2000 which AmeriCold Logistics recorded as income in the fourth
quarter ended December 31, 2001. The aggregate amount waived by the Landlord of
$39,812,000 (of which the Company's share was $23,887,000) represents a portion
of the rent due under the leases which AmeriCold Logistics deferred in such
years.

         On January 23, 2002, the leases with the Landlord were restructured to
consolidate four of the non-encumbered leases into one non-encumbered lease. The
restructuring did not affect total contractual rent due under the combined
leases.

         In addition, in the year ended December 31, 2001, AmeriCold Logistics
recorded a charge of $8,895,000 comprised of (i) severance and relocation costs
associated with a management restructuring, and (ii) expenses arising from the
consolidation of a portion of the corporate office in Portland, Oregon into
AmeriCold Logistics' Atlanta

                                      -6-

headquarters. Severance related charges are for the termination of 199
employees, located primarily in the Atlanta and Portland offices. Through
December 31, 2001, AmeriCold Logistics had terminated 30 of the employees.

         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing through sales of non-core assets.
In addition, AmeriCold Logistics anticipates that the Landlord may further
restructure the leases to provide additional cash flow.

         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 REIT/Crescent REIT Partnership for an annual fee of $268,000 in
2001, 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.

         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.

         On May 1, 2001, Alec C. Covington became the President and Chief
Executive Officer of AmeriCold Logistics. Mr. Covington succeeded Daniel F.
McNamara who continues as Vice Chairman until May, 2002. Mr. Covington, age 45,
was formerly an Executive Vice President of SUPERVALU Inc. (NYSE:SVU) and
President and Chief Operating Officer of the SUPERVALU food distribution
companies division, which is the nation's largest distributor to grocery
retailers having $17 billion of revenue and 34 distribution centers. Previously,
Mr. Covington was the President and Chief Operating Officer of the wholesale
division of Richfood Holdings, Inc. when it was acquired by SUPERVALU in the
fall of 1999. He has more than 25 years of wholesale, retail and supply-chain
management experience in the food industry.

         On October 22, 2001, Jonathan C. Daiker joined AmeriCold Logistics as
Chief Financial Officer. Most recently, Mr. Daiker served for five years as
Executive Vice President and Chief Financial Officer of the Simmons Company, a
manufacturer and distributor of mattresses. Prior thereto, from 1981-1995, he
held subsidiary and unit Chief Financial Officer positions with Phillips
Electronics N.V., a multibillion dollar consumer electronics company. Mr.
Daiker, a CPA, began his career with Price Waterhouse & Company.

EMPLOYEES

         Effective June 15, 2001, Emanuel R. Pearlman resigned from his position
as Chief Operating Officer of the Company to pursue other interests.

         At December 31, 2001, the Company has 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 5,900 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

                                      -7-

continue to do so. In 2001, AmeriCold Logistics agreed with the Landlord of its
temperature controlled logistics warehouses to the restructuring of 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 did not generate enough revenues to pay its reduced rents
and may not do so in the future. The Company is also exploring possible sales of
non-core assets of AmeriCold Logistics. However, the Company may not succeed in
selling any such assets 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 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
managerial 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, 2001, 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, 15.5% 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

                                      -8-

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 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 AGREEMENT; 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 are
payable under the Revolving Credit Agreement until it expires on December 31,
2004, 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 Agreement. There is no assurance that the Company will have
sufficient working capital to cover cash flow deficits, finance future
acquisitions or pursue additional opportunities. 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.

         The Company may currently be unable to pay dividends under Delaware
law. Under the Delaware General Corporation Law, a corporation may pay dividends
only out of its surplus or, in case there is not surplus, out of its net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. The Company has a stockholders' deficit, has not incurred any net
profits since its commencement of operations and may never do so.

         DEPENDENCE ON KEY PERSONNEL

         The Company is dependent on the efforts of Steven Roth, the Chairman
and Chief Executive Officer of the Company, and Michael D. Fascitelli, the
President 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.

                                      -9-

         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 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 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, 2001.

                                      -10-

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 60, 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 a general partner and more recently 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, Inc.

         Michael D. Fascitelli, age 45, 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. Mr. Fascitelli
has been president of Alexander's since August 1, 2000. 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 56, 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 and
Chief Financial Officer of Vornado since March 2001. From 1985 to January 1998,
Mr. Macnow was Vice President and Chief Financial Officer of Vornado.

         Patrick T. Hogan, age 34, is Vice President - Chief Financial Officer
since March 1, 2001. Mr. Hogan is also Vice President of Vornado since March
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 forming
Correctional Properties Trust.

         Neither Mr. Roth nor any other member of management is committed to
spending a particular amount of time on the Company's affairs, nor does any of
them devote their full time to the Company. Mr. Roth and the other members of
management 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,
Alexander's and other businesses.

                                      -11-

                                    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, 2001 and 2000 were as follows:



                      YEAR ENDED                      YEAR ENDED
                   DECEMBER 31, 2001              DECEMBER 31, 2000
                   -----------------              -----------------
QUARTER           HIGH           LOW              HIGH          LOW
-------           ----           ---              ----          ---
                                                 
1st .........   $  6.00       $  1.81          $  14.25      $   5.31
2nd .........      3.00          1.30             13.25          5.75
3rd .........      2.52          0.90              7.88          5.38
4th .........      1.30          0.30              5.56          1.38


         The approximate number of record holders of Common Stock of the Company
at December 31, 2001 was 1,900.

         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, subject to applicable law. Under the Delaware General
Corporation Law, a corporation may pay dividends only out of its surplus or, in
case there is not surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year. The Company has a
stockholders' deficit, has not incurred any net profits since its commencement
of operations and may never do so.

                                      -12-

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA



                                                                                                              For the Period
                                                                                                             October 16, 1998
                                                                                                               (Commencement
                                                                                                             of Operations) to
                                                                     Year Ended December 31,                    December 31,
                                                                     -----------------------
                                                           2001               2000               1999               1998
                                                           ----               ----               ----               ----
                                                                                                    
Revenues:
     Interest income                                   $      7,293       $     85,441       $    421,690       $    261,948
                                                       ------------       ------------       ------------       ------------
Expenses:
     General and administrative                           1,896,822          1,574,963          1,094,773            271,698
     Organization costs                                          --                 --            359,643            971,959
                                                       ------------       ------------       ------------       ------------
Total expenses                                            1,896,822          1,574,963          1,454,416          1,243,657
                                                       ------------       ------------       ------------       ------------
                                                         (1,889,529)        (1,489,522)        (1,032,726)          (981,709)

Interest and debt expense to Vornado Realty Trust        (2,422,337)        (1,904,580)        (1,216,628)                --
Loss from AmeriCold Logistics                            (2,331,105)       (10,890,600)        (5,546,400)                --
Unrealized loss from marketable securities                 (777,630)                --                 --                 --
Loss from Transportal Network                                    --         (4,982,576)          (540,000)                --
Gain on sale of investment in Charles E. Smith
     Commercial Realty L.P                                       --                 --            280,000                 --
                                                       ------------       ------------       ------------       ------------
Loss before minority interest                            (7,420,601)       (19,267,278)        (8,055,754)          (981,709)
Minority interest                                                --          1,581,765            797,520             97,189
                                                       ------------       ------------       ------------       ------------
Net loss                                               $ (7,420,601)      $(17,685,513)      $ (7,258,234)      $   (884,520)
                                                       ============       ============       ============       ============

Net Loss per share - basic and diluted                 $      (1.82)      $      (4.35)      $      (1.78)      $       (.22)
                                                       ============       ============       ============       ============

Balance Sheet Data:
     Total assets                                      $ 19,110,923       $ 16,729,358       $ 21,372,706       $ 25,226,674
     Note Payable to Vornado Realty Trust                31,423,538         19,781,538          4,586,896                 --
     Stockholders' equity (deficit)                     (12,899,024)        (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 and $(11,209,000) in 1997.

                                      -13-

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


RESULTS OF OPERATIONS

Years Ended December 31, 2001 and 2000

         The Company had a net loss of $7,421,000 for the year ended December
31, 2001 compared to a net loss of $17,686,000 for the prior year, a decrease of
$10,265,000.

         Revenues (comprised of interest income) were $7,000 for the year ended
December 31, 2001, compared to $85,000 for the prior year, a decrease of
$78,000, which resulted primarily from lower average invested balances.

         General and administrative expenses were $1,897,000 for the year ended
December 31, 2001, compared to $1,575,000 for the prior year, an increase of
$322,000. This results from (i) higher payroll and rent expenses associated with
the Company's Chief Operating Officer who was hired on June 15, 2000 and
resigned effective June 15, 2001, and who remained as a consultant to the
Company through December 31, 2001, and (ii) an increase in professional fees.

         The Company's loss from AmeriCold Logistics was $2,331,000 for the year
ended December 31, 2001, compared to a net loss of $10,891,000 for the prior
year, a decrease of $8,560,000. Included in these losses is interest income of
$1,082,000 and $171,000, for the years ended December 31, 2001 and 2000, earned
on the promissory notes advanced to AmeriCold Logistics by the Company. The
amounts discussed below in "AmeriCold Logistics Results of Operations for the
Years Ended December 31, 2001 and 2000" exclude this interest income. The losses
from AmeriCold Logistics excluding interest income were $3,413,000 and
$11,062,000 for the years ended December 31, 2001 and 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 additional 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.

         In the fourth quarter ended December 31, 2001, AmeriCold Logistics
reversed $25,469,000 of the rent expense recorded for 2001. This results from
the Landlord waiving its rights to collect this portion of the rent. Further,
the Landlord waived $14,343,000 of the rent expense recorded by AmeriCold
Logistics for 2000 which AmeriCold Logistics recorded as income in the fourth
quarter ended December 31, 2001. The aggregate amount waived by the Landlord of
$39,812,000 (of which the Company's share was $23,887,000) represents a portion
of the rent due under the leases which AmeriCold Logistics deferred in such
years.

         On January 23, 2002, the leases with the Landlord were restructured to
consolidate four of the non-encumbered leases into one non-encumbered lease. The
restructuring did not affect total contractual rent due under the combined
leases.

         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing through sales of non-core assets.
In addition, AmeriCold Logistics anticipates that the Landlord may further
restructure the leases to provide additional cash flow.

         AMERICOLD LOGISTICS RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER
31, 2001 AND 2000

                  The following is a discussion 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 discussion 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 ("Managed Warehouses"), (ii) Transportation
         Management Services, which includes freight routing, dispatching,
         freight rate negotiation, backhaul coordination, and distribution
         channel assessments, and (iii) Quarry Operations.

                                      -14-

                  Revenues were $647,259,000 for the year ended December 31,
         2001, compared to $676,158,000 for the prior year, a decrease of
         $28,899,000. Revenues from Leased Operations were $441,744,000 for the
         year ended December 31, 2001, compared to $460,973,000 for the prior
         year, a decrease of $19,229,000. Revenues from Other Operations were
         $205,515,000 for the year ended December 31, 2001, compared to
         $215,185,000 for the prior year, a decrease of $9,670,000.

                  The revenue decrease in Leased Operations for the year results
         from lower warehouse revenues as a result of a reduction in both total
         customer inventory stored at the warehouses and customer inventory
         turns. The decrease in revenue from Other Operations results from (i) a
         decrease in revenues from Managed Warehouses as a result of losing a
         customer, (ii) a decline in Transportation Management Services revenues
         due to the expiration of a contract with a customer in the second
         quarter of 2000, and (iii) a reduction in output at the Quarry
         Operations.

                  The gross margin for Leased Operations was $159,407,000, or
         36.1% for the year ended December 31, 2001, compared to $186,171,000,
         or 40.4% for the prior year, a decrease of $26,764,000. The decreases
         in both gross margin and gross margin percentage are attributable to
         lower customer inventory levels and customer inventory turns.

                  Operating income from Other Operations was $13,189,000 for the
         year ended December 31, 2001, compared to $11,178,000 for the prior
         year, an increase of $2,011,000. This increase results from (i)
         achieving more profitable results from Transportation Management
         Services on lower revenues (gross margin increased to 3.2% in 2001 from
         0.4% in 2000), partially offset by (ii) a decline in Managed
         Warehouses, and (iii) a reduction in output at the Quarry Operations.

                  Rent expense was $130,807,000 for the year ended December 31,
         2001, compared to $170,640,000 for the prior year, a decrease of
         $39,833,000. $14,500,000 of this decrease resulted from the lease
         restructuring announced on February 22, 2001. The remaining decrease
         resulted primarily from the waiver from the Landlord in the fourth
         quarter ended December 31, 2001, both of which are discussed above.

                  Forgiveness of rent deferred in the previous year of
         $14,343,000 also resulted from the waiver from the Landlord in the
         fourth quarter ended December 31, 2001 discussed above.

                  General and administrative expenses were $37,691,000 for the
         year ended December 31, 2001, compared to $35,933,000 for the prior
         year, an increase of $1,758,000. This increase results primarily from
         accruals for legal settlements.

                  Reserves established for restructuring were $8,895,000 for the
         year ended December 31, 2001. This primarily reflects senior management
         changes at AmeriCold Logistics. Severance related charges are for the
         termination of 199 employees, located primarily in the Atlanta and
         Portland offices. Through December 31, 2001, AmeriCold Logistics had
         terminated 30 of the employees.

                  Depreciation and amortization expense was $11,477,000 for the
         year ended December 31, 2001, compared to $7,803,000 for the prior
         year, an increase of $3,674,000. This increase resulted primarily from
         (i) additional machinery and equipment and (ii) a change in estimate
         for depletion of $2,098,000 at one of the Company's quarries.

                  Interest expense was $4,702,000 for the year ended December
         31, 2001, compared to $2,136,000 for the prior year, an increase of
         $2,566,000. This increase resulted from higher average debt and
         interest on deferred rent. Approximately $1,100,000 of This Year's
         interest expense relates to the deferred rent balance which was waived
         by the Landlord as discussed above.

                  Other income, net was $945,000 for the year ended December 31,
         2001, compared to $727,000 for the prior year, an increase of $218,000.
         This results from lower write-off's.

                                      -15-

                  As a result of the aforementioned factors, AmeriCold
         Logistics' net loss for the year ended December 31, 2001 decreased by
         $12,748,000 to $5,688,000 when compared to the prior year's loss. The
         Company's share of the net loss for the year ended December 31, 2001 is
         $3,413,000.


         Transportal Network ceased operations in September 2000. Accordingly,
there was no results of operations for the year ended December 31, 2001. Loss
from Transportal Network was $4,983,000 for the prior year.

         The Company recognized an unrealized loss from marketable securities of
$778,000 in the first quarter of 2001, due to an "other than temporary decline"
in fair value of marketable securities available for sale.

         Interest and debt expense to Vornado Realty Trust was $2,422,000 for
the year ended December 31, 2001, compared to $1,905,000 for the prior year, an
increase of $517,000, which resulted primarily from higher average outstanding
balances under the Revolving Credit Agreement with Vornado Realty Trust.

Years Ended December 31, 2000 and 1999

         The Company had a net loss of $17,686,000 for the year ended December
31, 2000, compared to a net loss of $7,258,000 for the prior year, an increase
of $10,428,000.

         Revenues were $85,000 for the year ended December 31, 2000, compared to
$422,000 for the prior year, a decrease of $337,000, which resulted from lower
average invested balances.

         General and administrative expenses were $1,575,000 for the year ended
December 31, 2000, compared to $1,095,000 for the prior year, an increase of
$480,000. 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 $360,000 were 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 a loss of $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.

         Had the rent under the lease restructuring on February 22, 2001
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 would have 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 is a discussion 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 discussion 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 ("Managed Warehouses"), (ii) Transportation
         Management Services, which includes freight routing, dispatching,
         freight rate negotiation, backhaul coordination, and distribution
         channel assessments, 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.

                                      -16-

                  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 warehouses. See
         above for the effect of the lease restructuring on February 22, 2001 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 the net loss for the year ended December
         31, 2000 is $11,062,000.


         Loss from Transportal Network was $4,983,000 for the year ended
December 31, 2000, compared to $540,000 for the prior year, an increase of
$4,443,000. Transportal Network ceased operations during 2000 and the loss for
2000 includes $723,000 relating to shutting down the operation.

         Interest and debt expense to Vornado Realty Trust was $1,905,000 for
the year ended December 31, 2000, compared to $1,217,000 for the prior year, an
increase of $688,000, which resulted from higher average outstanding balances
under the Revolving Credit Agreement 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.

                                      -17-

LIQUIDITY AND CAPITAL RESOURCES

         The Company has a $75,000,000 unsecured Revolving Credit Agreement with
Vornado that expires on December 31, 2004. Borrowings under this facility bear
interest at LIBOR plus 3% (4.87% at December 31, 2001). 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, 2001 and 2000
the Company paid $485,000 and $630,000 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, 2001 and 2000, $31,424,000 and
$19,782,000 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. The Company currently has no
external sources of financing except this facility.

         During the year ended December 31, 2001, the Company made two secured
loans totaling $8,940,000 to AmeriCold Logistics. The first loan, made on April
30, 2001, was $3,840,000 and is secured by a mortgage on AmeriCold Logistics'
quarries and is in addition to the $3,000,000 advanced in 2000. This loan bears
interest at 12% and requires monthly payments of interest until maturity on
March 31, 2002. The second loan, made on June 6, 2001, was $5,100,000 and is
secured by property, plant and equipment. This loan bears interest at 14% and
requires monthly payments of principal and interest of $98,933 until maturity on
December 31, 2002. On March 11, 2002 all three of these loans were amended to
extend the maturity date to December 31, 2004.

         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing through sales of non-core assets.
In addition, AmeriCold Logistics anticipates that the Landlord may further
restructure the leases to provide additional cash flow.

         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 additional 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.

         AmeriCold Logistics recognized $156,276,000 and $170,640,000 of rent
expense for the years ended December 31, 2001 and 2000 which includes, effects
of straight-lining, rent to parties other than the Landlord and is before the
waiver of rent discussed below.

         AmeriCold Logistics' balance of deferred rent is as follows:



                         Total          The Company's Share
                         -----          -------------------
                                     
2001 deferral         $25,469,000          $15,281,400
2000 deferral          19,011,000           11,406,600
1999 deferral           5,400,000            3,240,000
                      -----------          -----------
Total                 $49,880,000          $29,928,000
                      ===========          ===========


         In the fourth quarter ended December 31, 2001, AmeriCold Logistics
reversed $25,469,000 of the rent expense recorded for 2001. This results from
the Landlord waiving its rights to collect this portion of the rent. Further,
the Landlord waived $14,343,000 of the rent expense recorded by AmeriCold
Logistics for 2000 which AmeriCold Logistics recorded as income in the fourth
quarter ended December 31, 2001. The aggregate amount waived by the Landlord of
$39,812,000 (of which the Company's share was $23,887,000) represents a portion
of the rent due under the leases which AmeriCold Logistics deferred in such
years.

         On January 23, 2002, the leases with the Landlord were restructured to
consolidate four of the non-encumbered leases into one non-encumbered lease. The
restructuring did not affect total contractual rent due under the combined
leases.

         In addition, in the year ended December 31, 2001, AmeriCold Logistics
recorded a charge of $8,895,000 comprised of (i) severance and relocation costs
associated with a management restructuring, and (ii) expenses arising

                                      -18-

from the consolidation of a portion of the corporate office in Portland, Oregon
into AmeriCold Logistics' Atlanta headquarters. Severance related charges are
for the termination of 199 employees, located primarily in the Atlanta and
Portland offices. Through December 31, 2001, AmeriCold Logistics had terminated
30 of the employees.

         The Company's $6,000,000 contribution to AmeriCold Logistics in March
2000 was unmatched by the Company's partner, who recently filed for bankruptcy
protection. Accordingly, the $4,000,000 contribution receivable shown in
partner's capital of the Vornado Crescent Logistics Operating Partnership's
financial statements was cancelled at December 31, 2001. In the first quarter of
2002, the Company's $6,000,000 became a special equity contribution that: (i)
has priority over the original equity amounts, with voting rights of the Company
not effected, (ii) is redeemable only at AmeriCold Logistics' option, and (iii)
accrues interest at 12% compounded annually from March 7, 2000. The Company's
share of AmeriCold Logistics remains at 60%.

         In the aggregate, the Company's investments do not, and for the
foreseeable future, are not expected to, 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 for the Year Ended December 31, 2001

         Cash flows used in operating activities of $3,517,000 were comprised of
(i) net loss of $7,421,000 and (ii) the net change in operating assets and
liabilities of $287,000, offset by (iii) adjustments for non-cash and
non-operating items of $4,191,000. The adjustments for non-cash and
non-operating items are comprised of (i) loss from AmeriCold Logistics of
$3,413,000 and (ii) unrealized loss from marketable securities of $778,000.

         Net cash used in investing activities of $8,700,000 relate to the loans
advanced to AmeriCold Logistics during 2001.

         Net cash provided by financing activities of $11,642,000 resulted from
borrowings under the Company's Revolving Credit Agreement with Vornado.

Cash Flows for the Year Ended December 31, 2000

         Cash flows used in operating activities of $3,148,000 were comprised of
(i) net loss of $17,686,000, offset by (ii) the net change in operating assets
and liabilities of $123,000, and (iii) adjustments for non-cash and
non-operating items of $14,415,000. The adjustments for non-cash and
non-operating items are comprised of (i) loss from AmeriCold Logistics of
$11,062,000 and (ii) loss from Transportal Network of $4,983,000, offset by
(iii) minority interest of $1,582,000 and (iv) non-cash compensation of $48,000.

         Net cash used in investing activities of $14,718,000 was comprised of
investment in and advances to AmeriCold Logistics of $9,000,000, investment in
Transportal Network of $4,940,000, and purchases of securities available for
sale of $778,000.

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

Cash Flows for the Year Ended December 31, 1999

         Cash flows used in operating activities of $2,963,000 were comprised of
(i) net loss of $7,258,000 and (ii) the net change in operating assets and
liabilities of $720,000, offset by adjustments for non-cash and non-operating
items of $5,015,000. The adjustment for non-cash and non-operating items are
comprised of (i) loss from investment in AmeriCold Logistics of $5,546,000, (ii)
loss from investment in Transportal Network of $540,000 and (iii) stock
appreciation rights compensation expense of $6,000, offset by (i) minority
interest of $797,000 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 $10,159,000 was comprised of
investment in AmeriCold Logistics of $23,359,000, 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 $4,548,000 was comprised
primarily of proceeds from borrowing of $18,587,000, offset by repayments of
borrowings under the Company's Revolving Credit Agreement with Vornado of
$14,000,000.

                                      -19-

Recently Issued Accounting Standards

         In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 is effective immediately and SFAS No. 142 will be
implemented in January 2002. The implementation of these standards did not have
an impact on the Company's financial statements.

         In August 2001, FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations (effective January 1, 2003) and SFAS No. 144 Accounting
for the Impairment or Disposal of Long-Lived Assets (effective January 1, 2002).
SFAS No. 143 requires the recording of the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. SFAS No. 144
supercedes current accounting literature and now provides for a single
accounting model for long-lived assets to be disposed of by sale and requires
discontinued operations presentation for disposals of a "component" of entity.
The Company does not believe that the adoption of SFAS No. 143 and 144 will
affect the Company's financial statements.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         At December 31, 2001 and 2000, the Company had $31,424,000 and
$19,782,000 of variable rate debt outstanding bearing interest at LIBOR plus
3.00% (4.87% at December 31, 2001). 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 $314,000 increase in the Company's annual net loss for the year ended
December 31, 2001 ($0.08 per basic and diluted share).

                                      -20-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS




                                                                                                             PAGE
                                                                                                          
Independent Auditors' Report .............................................................................     22
Consolidated Balance Sheets at December 31, 2001 and 2000 ................................................     23
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 ...............     24
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
     December 31, 2001, 2000 and 1999 ....................................................................     25
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 ...............     26
Notes to Consolidated Financial Statements ...............................................................     27




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

         Not applicable.

                                      -21-

                          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, 2001 and 2000 and the related consolidated
statements of operations, stockholders' deficit and cash flows for each of the
three years in the period ended December 31, 2001. 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 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 consolidated financial statements present fairly,
in all material respects, the financial position of Vornado Operating Company at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.


DELOITTE & TOUCHE LLP


Parsippany, New Jersey
March 11, 2002

                                      -22-

                            VORNADO OPERATING COMPANY

                           CONSOLIDATED BALANCE SHEETS






                                                                                      DECEMBER 31,
                                                                                      ------------
                                                                                2001               2000
                                                                                ----               ----
                                                                                         
ASSETS

Cash and cash equivalents                                                   $     14,653       $    589,564
Marketable securities                                                                 --             57,504
Investment in and advances to AmeriCold Logistics                             18,943,309         15,765,891
Prepaid expenses and other assets                                                152,961            316,399
                                                                            ------------       ------------
                                                                            $ 19,110,923       $ 16,729,358
                                                                            ============       ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Note payable to Vornado Realty Trust                                        $ 31,423,538       $ 19,781,538
Due to Transportal Network                                                            --            582,194
Due to Vornado Realty Trust                                                       98,672             73,359
Accounts payable and accrued expenses                                            487,737            337,416
                                                                            ------------       ------------
     Total liabilities                                                        32,009,947         20,774,507
                                                                            ------------       ------------
Minority interest                                                                     --                 --
                                                                            ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT

Common stock: par value $.01 per share; authorized, 40,000,000 shares;
     issued and outstanding, 4,068,924 shares in each year                        40,689             40,689
Additional paid-in capital                                                    22,462,555         22,462,555
Accumulated deficit                                                          (33,248,868)       (25,828,267)
                                                                            ------------       ------------
                                                                             (10,745,624)        (3,325,023)
Accumulated other comprehensive loss                                          (2,153,400)          (720,126)
                                                                            ------------       ------------
     Total stockholders' deficit                                             (12,899,024)        (4,045,149)
                                                                            ------------       ------------
                                                                            $ 19,110,923       $ 16,729,358
                                                                            ============       ============



See notes to consolidated financial statements.

                                      -23-


                            VORNADO OPERATING COMPANY

                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                                                     YEAR ENDED DECEMBER 31,
                                                                     -----------------------
                                                           2001               2000               1999
                                                           ----               ----               ----
                                                                                    
REVENUES:
     Interest income                                   $      7,293       $     85,441       $    421,690
                                                       ------------       ------------       ------------

EXPENSES:
     General and administrative                           1,896,822          1,574,963          1,094,773
     Organization costs                                          --                 --            359,643
                                                       ------------       ------------       ------------
Total expenses                                            1,896,822          1,574,963          1,454,416
                                                       ------------       ------------       ------------
                                                         (1,889,529)        (1,489,522)        (1,032,726)

Interest and debt expense to Vornado Realty Trust        (2,422,337)        (1,904,580)        (1,216,628)
Loss from AmeriCold Logistics                            (2,331,105)       (10,890,600)        (5,546,400)
Unrealized loss from marketable securities                 (777,630)                --                 --
Loss from Transportal Network                                    --         (4,982,576)          (540,000)
Gain on sale of investment in Charles E. Smith
   Commercial Realty L.P.                                        --                 --            280,000
                                                       ------------       ------------       ------------
Loss before income tax benefit and
   minority interest                                     (7,420,601)       (19,267,278)        (8,055,754)

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

Loss before minority interest                            (7,420,601)       (19,267,278)        (8,055,754)

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

NET LOSS                                               $ (7,420,601)      $(17,685,513)      $ (7,258,234)
                                                       ============       ============       ============

Net loss per share -- basic and diluted                $      (1.82)      $      (4.35)      $      (1.78)
                                                       ============       ============       ============




See notes to consolidated financial statements.

                                      -24-

                            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
                                      -----         -------           -------          ----            ---------          ----
                                                                                                    
BALANCE, JANUARY 1, 1999          $     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)
                                                                                                                      ============

Recognition of unrealized loss
    from marketable
    securities  previously
    included in comprehensive
    loss                                    --              --               --          720,126          720,126     $    720,126
Proportionate share of other
    comprehensive loss of
    partially-owned entity                  --              --               --       (2,153,400)      (2,153,400)      (2,153,400)
Net Loss                                    --              --       (7,420,601)              --       (7,420,601)      (7,420,601)
                                  ------------    ------------     ------------     ------------     ------------     ------------
BALANCE, DECEMBER 31, 2001        $     40,689    $ 22,462,555     $(33,248,868)    $ (2,153,400)    $(12,899,024)    $ (8,853,875)
                                  ============    ============     ============     ============     ============     ============




                See notes to consolidated financial statements.

                                      -25-

                            VORNADO OPERATING COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                              YEAR ENDED DECEMBER 31,
                                                                              -----------------------
                                                                    2001               2000               1999
                                                                    ----               ----               ----
                                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                   $ (7,420,601)      $(17,685,513)      $ (7,258,234)
     Adjustments to reconcile net loss to net cash used in
         operations:
         Minority interest                                                --         (1,581,765)          (797,520)
         Equity in loss from AmeriCold Logistics                   3,412,800         11,061,600          5,546,400
         Loss from Transportal Network                                    --          4,982,576            540,000
         Unrealized loss from marketable securities                  777,630                 --                 --
         Stock appreciation rights compensation (income)
            expense                                                       --            (47,865)             5,850
         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                           163,438            (14,054)           172,768
         Interest receivable on loans to AmeriCold Logistics         (43,380)           (15,000)                --
         Accounts payable and accrued expenses                       150,321            168,325             84,091
         Due to Transportal Network                                 (582,194)                --                 --
         Due to Vornado Realty Trust                                  25,313            (16,641)          (976,451)
                                                                ------------       ------------       ------------
Net cash used in operating activities                             (3,516,673)        (3,148,337)        (2,963,096)
                                                                ------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in and advances to AmeriCold Logistics            (8,940,000)        (9,000,000)       (23,358,891)
     Repayment of loans to AmeriCold Logistics                       239,762                 --                 --
     Investment in Transportal Network                                    --         (4,940,382)                --
     Proceeds from sale of Charles E. Smith Commercial
         Realty L.P                                                       --                 --         13,200,000
     Purchases of securities available for sale                           --           (777,630)                --
                                                                ------------       ------------       ------------
Net cash used in investing activities                             (8,700,238)       (14,718,012)       (10,158,891)
                                                                ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from borrowings                                     11,642,000         17,100,000         18,586,896
     Repayments on borrowings                                             --         (1,905,358)       (14,000,000)
     Other                                                                --              3,401            (38,600)
                                                                ------------       ------------       ------------
Net cash provided by financing activities                         11,642,000         15,198,043          4,548,296
                                                                ------------       ------------       ------------

Net (decrease) in cash and cash equivalents                         (574,911)        (2,668,306)        (8,573,691)
Cash and cash equivalents at beginning of period                     589,564          3,257,870         11,831,561
                                                                ------------       ------------       ------------

Cash and cash equivalents at end of period                      $     14,653       $    589,564       $  3,257,870
                                                                ============       ============       ============

SUPPLEMENTAL INFORMATION:
     Cash payments for interest                                 $  2,411,193       $  1,904,580       $  1,216,628
                                                                ============       ============       ============

NON-CASH TRANSACTIONS:
     Unrealized loss on securities available for sale           $         --       $   (720,126)      $         --
                                                                ============       ============       ============




See notes to consolidated financial statements.

                                      -26-

                            VORNADO OPERATING COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BUSINESS

         Vornado Operating Company, a Delaware corporation (the "Company"), was
incorporated on October 30, 1997, as a wholly owned subsidiary of Vornado Realty
Trust (together with its consolidated subsidiaries and "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. The 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. The 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 the Company for
each 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, 2001 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, and for the
foreseeable future, are not expected to, 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. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

         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' deficit and other comprehensive loss. Realized gains or losses on
the sale of securities are recorded based on average cost. At December 31, 2000,
these securities had an aggregate market value of $57,504, resulting in gross
unrealized losses of $720,126. The Company recognized the unrealized loss from
these securities of $777,630 during 2001 due to an "other than temporary
decline" in their fair value.

         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.

                                      -27-

                            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.

         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.

         STOCK APPRECIATION RIGHTS: Stock Appreciation Rights (SARs) are granted
at 100% of the market price of the Common Stock on the date of grant. SARs vest
ratably, becoming fully vested 36 months after grant. Expense is recognized
ratably in the statement of operations if the stock price exceeds the exercise
price at the balance sheet date. On subsequent balance sheet dates, if the stock
price falls the previously recognized expense is reversed, but not below zero.

         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 July 2001, the Financial
Accounting Standards Board issued SFAS No. 141, Business Combinations and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 is effective
immediately and SFAS No. 142 will be implemented in January 2002. The
implementation of these standards did not have an impact on the Company's
financial statements.

         In August 2001, FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations (effective January 1, 2003) and SFAS No. 144 Accounting
for the Impairment or Disposal of Long-Lived Assets (effective January 1, 2002).
SFAS No. 143 requires the recording of the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. SFAS No. 144
supercedes current accounting literature and now provides for a single
accounting model for long-lived assets to be disposed of by sale and requires
discontinued operations presentation for disposals of a "component" of entity.
The Company does not believe that the adoption of SFAS No. 143 and 144 will
affect the Company's financial statements.

3.   ACQUISITION AND DISPOSITION

Temperature Controlled Logistics Business ("AmeriCold Logistics")

         In October 1997, a partnership (the "Vornado REIT/Crescent REIT
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

                                      -28-

                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

REIT/Crescent REIT 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 REIT/Crescent REIT
Partnership (the "Landlord") for $48,700,000, of which the Company's 60% share
was $29,200,000. AmeriCold Logistics leases 89 temperature controlled warehouses
from the Vornado REIT/Crescent REIT 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 $9,500,000 annually. AmeriCold Logistics has the right
to defer the payment of 15% of fixed base rent and all percentage rent until
December 31, 2003, to the extent that available cash, as defined in the leases,
is insufficient to pay such rent. 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%. 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 Agreement
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 following 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.

                                      -29-

                            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 L.P .....            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 partnerships and loss
recognized from such investments are as follows:



         (amounts in thousands)
                              Investments in and                                                            Total Partners'
                            Advances to Partnership          Total Assets                Total Debt             Capital
                            -----------------------          ------------                ----------             -------
                           December 31,  December 31,
                              2001          2000          2001          2000          2001       2000      2001          2000
                              ----          ----          ----          ----          ----       ----      ----          ----
                                                                                               
AmeriCold Logistics (60%
interest)                   $ 18,943      $ 15,766      $175,107      $163,858      $ 30,162   $  8,686  $  7,766      $ 16,213
                            ========      ========      ========      ========      ========   ========  ========      ========


         During the year ended December 31, 2001, the Company made two secured
loans totaling $8,940,000 to AmeriCold Logistics. The first loan, made on April
30, 2001, was $3,840,000 and is secured by a mortgage on AmeriCold Logistics'
quarries and is in addition to the $3,000,000 advanced in 2000. This loan bears
interest at 12% and requires monthly payments of interest until maturity on
March 31, 2002. The second loan, made on June 6, 2001, was $5,100,000 and is
secured by property, plant and equipment. This loan bears interest at 14% and
requires monthly payments of principal and interest of $98,933 until maturity on
December 31, 2002. On March 11, 2002 all three of these loans were amended to
extend the maturity date to December 31, 2004.

         The Company's $6,000,000 contribution to AmeriCold Logistics in March
2000 was unmatched by the Company's partner, who recently filed for bankruptcy
protection. Accordingly, the $4,000,000 contribution receivable shown in
partner's capital of the Vornado Crescent Logistics Operating Partnership's
financial statements was cancelled at December 31, 2001. In the first quarter of
2002, the Company's $6,000,000 became a special equity contribution that: (i)
has priority over the original equity amounts, with voting rights of the Company
not effected, (ii) is redeemable only at AmeriCold Logistics' option, and (iii)
accrues interest at 12% compounded annually from March 7, 2000. The Company's
share of AmeriCold Logistics remains at 60%.

                                      -30-

                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)




(amounts in thousands)               Loss from Investments in Partnerships
                                     -------------------------------------
                                        For The Year Ended December 31,
                                        -------------------------------
                                        2001         2000         1999
                                        ----         ----         ----
                                                      
AmeriCold Logistics (60% interest)    $ (2,331)    $(10,891)    $ (5,546)
Transportal Network (60% interest)          --       (4,983)        (540)
                                      --------     --------     --------
                                      $ (2,331)    $(15,874)    $ (6,086)
                                      ========     ========     ========


         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
                                                           (Acquisition
                                   For the Year Ended        Date) to
                                       December 31,         December 31,
                                       ------------
                                    2001         2000          1999
                                    ----         ----          ----
                                                    
Revenues                         $ 647,259     $ 676,158     $ 557,708
                                 =========     =========     =========

Costs other than depreciation
    applicable to revenues       $ 605,470     $ 649,449     $ 535,426
                                 =========     =========     =========

Net loss                         $  (5,688)    $ (18,436)    $  (9,244)
                                 =========     =========     =========


         AmeriCold Logistics is experiencing cash flow deficits which management
of AmeriCold Logistics is currently addressing through sales of non-core assets.
In addition, AmeriCold Logistics anticipates that the Landlord may further
restructure the leases to provide additional cash flow.

         On February 22, 2001, AmeriCold Logistics' leases with 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 additional 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.

         AmeriCold Logistics recognized $156,276,000 and $170,640,000 of rent
expense for the years ended December 31, 2001 and 2000 which includes, effects
of straight-lining, rent to parties other than the Landlord and is before the
waiver of rent discussed below.

         AmeriCold Logistics' balance of deferred rents is as follows:



                            Total                The Company's Share
                            -----                -------------------
                                              
2001 deferral            $25,469,000                $15,281,400
2000 deferral             19,011,000                 11,406,600
1999 deferral              5,400,000                  3,240,000
                           ---------                  ---------
Total                    $49,880,000                $29,928,000
                         ===========                ===========


         In the fourth quarter ended December 31, 2001, AmeriCold Logistics
reversed $25,469,000 of the rent expense recorded for 2001. This results from
the Landlord waiving its rights to collect this portion of the rent. Further,
the Landlord waived $14,343,000 of the rent expense recorded by AmeriCold
Logistics for 2000 which AmeriCold Logistics recorded as income in the fourth
quarter ended December 31, 2001. The aggregate amount waived by the Landlord of
$39,812,000 (of which the Company's share was $23,887,000) represents a portion
of the rent due under the leases which AmeriCold Logistics deferred in such
years.

                                      -31-

                            VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         On January 23, 2002, the leases with the Landlord were restructured to
consolidate four of the non-encumbered leases into one non-encumbered lease. The
restructuring did not affect total contractual rent due under the combined
leases.

         In addition, in the year ended December 31, 2001, AmeriCold Logistics
recorded a charge of $8,895,000 comprised of (i) severance and relocation costs
associated with a management restructuring and (ii) expenses arising from the
consolidation of a portion of the corporate office in Portland, Oregon into
AmeriCold Logistics Atlanta headquarters. Severance related charges are for the
termination of 199 employees, located primarily in the Atlanta and Portland
offices. Through December 31, 2001, AmeriCold Logistics had terminated 30 of the
employees.

         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".

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 2001
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, 2001 and 2000
are as follows:


                                                                         December 31,
                                                             -------------------------------
                                                                 2001              2000
                                                             ------------      -------------
Deferred assets (liabilities):
                                                                         
   Organization costs                                         $  212,100        $   308,700
   Accrued compensation                                               --                 --
   Minority interest (taxed directly to Limited Partners)      1,063,400          1,049,400
   Net operating loss carryforward                             9,678,300          9,550,500
   Loss on Transportal Network                                        --                 --
   Equity interest in AmeriCold Logistics                      3,562,500            427,900
                                                             ------------      -------------
                                                              14,516,300         11,336,500
Valuation allowance                                          (14,516,300)       (11,336,500)
                                                             ------------      -------------
Net deferred tax asset                                        $       --        $        --
                                                             ============      =============


         Because the Company has only a limited history of operating losses, 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.



                                      -32-

                           VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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



                                                                  Year Ended December 31,
                                                   ---------------------------------------------------
                                                        2001               2000               1999
                                                   ------------       ------------       ------------
                                                                                
Loss before income taxes and minority interest       $7,420,600       $ 19,267,300         $8,055,800
Statutory federal income tax rate .............              34%                34%                34%
                                                   ------------       ------------       ------------
 ..............................................       2,523,000          6,550,900          2,739,000
Expected state income tax benefit .............         445,200          1,156,000            483,300
                                                   ------------       ------------       ------------
 ..............................................       2,968,200          7,706,900          3,222,300
Valuation allowance ...........................      (2,968,200)        (7,706,900)        (3,222,300)
                                                   ------------       ------------       ------------
Income taxes ..................................        $     --           $     --           $     --
                                                   ============       ============       ============


6.   REVOLVING CREDIT AGREEMENT

         The Company has a $75,000,000 unsecured Revolving Credit Agreement with
Vornado which expires on December 31, 2004. Borrowings under this facility bear
interest at LIBOR plus 3% (4.87% at December 31, 2001). 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, 2001 and 2000
the Company paid $485,000 and $630,000 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, 2001 and 2000, $31,424,000 and
$19,782,000 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. The Company currently has no
external sources of financing except this facility.

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:



                                          Year Ended December 31,
                            ------------------------------------------------------
                                   2001              2000                 1999
                            ---------------    ---------------     ---------------
Net loss:
                                                           
As reported ...............    $(7,420,601)      $(17,685,513)        $(7,258,234)
Pro forma .................    $(7,937,998)      $(18,421,033)        $(7,806,539)
Net loss per share:
     Basic and diluted:
         As reported ......         $(1.82)            $(4.35)             $(1.78)
         Pro forma ........         $(1.95)            $(4.53)             $(1.92)



                                      -33-

                           VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         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 period ended December 31, 2000 (no options were granted
in the years ended December 31, 2001 or 1999):



                                          Year Ended December
                                                31, 2000
                                       
          Expected volatility ................     194%
          Expected life ......................       5 Years
          Risk-free interest rate ............     5.0%
          Expected dividend yield ...........       --



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



                                                                              December 31,
                                           ---------------------------------------------------------------------------------------
                                                     2001                          2000                         1999
                                           --------------------------   --------------------------   ------------------------------
                                                           Weighted
                                                           Average                    Weighted                      Weighted
                                                           Exercise                    Average                       Average
                                             Shares         Price       Shares     Exercise Price     Shares     Exercise Price
                                           ----------      ----------   ---------  --------------   -----------  ------------------
                                                                                               
Outstanding at January 1 .............       651,475            $5.86      479,319       $5.54       486,599            $5.54

Granted ..............................            --              --       175,000        6.72            --               --

Exercised ............................            --              --          (614)       5.54            --               --
Cancelled ............................      (122,769)            6.65       (2,230)       5.54        (7,280)            5.54
                                           ---------                       ---------               ----------
Outstanding at December 31 ...........       528,706            $5.67      651,475       $5.86       479,319            $5.54
                                            ========                       =========               ==========
Options exercisable at December 31 ...       528,706                       319,414                  162,868
                                            ========                       =========               ==========
Fair value of options granted during
the year ended December 31 (per option)         $--                         $ 6.54                      $--
                                            ========                       =========               ==========


         The following table summarizes information about options outstanding
under the Plan at December 31, 2001:



                   Options Outstanding                                   Options Exercisable
     ---------------------------------------------------     ---------------------------------------
                          Number
                      Outstanding at         Remaining               Number
     Exercise          December 31,        Contractual           Exercisable at
      Price               2001                Life            December 31, 2001       Exercise Price
     -----------    -------------         --------------      -------------------     --------------

                                                                          
       $ 5.54             469,206            6.8 Years                469,206               $ 5.54
         6.72              59,500            8.4 Years                 59,500                 6.72
                    -------------                              --------------
                          528,706                                     528,706
                    =============                              ==============


         Shares available for future grant under the Plan at December 31, 2001
were 586,220.

         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, 2001



                                      -34-

                           VORNADO OPERATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

were 130,000, with an exercise price of $5.54. 130,000 SARs were exercisable at
December 31, 2001. The Company reversed all of the compensation expense relating
to SARs 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 Realty Trust ("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 (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. The Company incurred $371,000 for the year ended December 31, 2001 and
$330,000 in each of the years ended December 31, 2000 and 1999 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 present and future losses will be recognized by the Company.

         No distributions were made to Interstate for the years ended December
31, 2001, 2000 and 1999.



                                      -35-

                           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:



                                                                                    Year Ended December 31,
                                                                      --------------------------------------------------
                                                                          2001               2000               1999
                                                                      ------------      -------------       ------------
Numerator:
                                                                                                 
     Net loss ..................................................      $ (7,420,601)     $ (17,685,513)      $(7,258,234)
                                                                      ============      =============       ===========
Denominator:
     Denominator for basic loss per share-weighted average .....         4,068,924          4,068,727         4,068,310

     Effect of dilutive securities:
         Employee stock options ................................                --                 --                --
         Denominator for diluted loss per share-adjusted weighted
             average shares and assumed conversions ............         4,068,924          4,068,727         4,068,310
                                                                      ============      =============       ===========
Net loss per share-basic and diluted ...........................      $      (1.82)     $       (4.35)      $     (1.78)
                                                                      ============      =============       ===========


11.      COMMITMENTS AND 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 INCOME (LOSS)
                                                              PER SHARE
                     REVENUE         NET INCOME(LOSS)    (BASIC AND DILUTED)(1)
                    ---------       ------------------  ------------------------
   2001
                                               
    March 31           $3,329       $(3,804,399)          $(0.93)
    June 30             2,651        (6,844,943)(2)        (1.68)
    September 30        2,166        (6,878,317)(2)        (1.69)
    December 31          (853)       10,107,058(2)          2.48

   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)




(1)  The total for the year may differ from the sum of the quarters as a result
     of weighting.
(2)  Includes the Company's $23,887,000 share of AmeriCold Logistic's
     $39,812,000 rent reduction for deferred rent waived by its Landlord and
     $2,697,000 of the Company's $5,337,000 share of AmeriCold Logistic's charge
     of $8,895,000 comprised of (i) severance and relocation costs associated
     with a management restructuring and (ii) expenses arising from the
     consolidation of a portion of the corporate office in Portland, Oregon into
     AmeriCold's Atlanta headquarters. The $2,640,000 balance of the Company's
     share of this charge was recognized $1,740,000 in the quarter ended June
     30, 2001 and $900,000 in the quarter ended September 30, 2001.


                                      -36-

                                    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, 2001, and such information is incorporated herein by reference. For
information on the executive officers of the Company, see "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.


                                      -37-

                                    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                                                     40

     Consolidated Balance Sheets at December 31, 2001 and 2000                        41

     Consolidated Statements of Operations for the Years Ended December
     31, 2001, 2000 and 1999                                                          43

     Consolidated Statements of Partners' Capital for the Years
     Ended December 31, 2001, 2000 and 1999                                           44

     Consolidated Statements of Cash Flows for the Years Ended December
     31, 2001, 2000 and 1999                                                          45

     Notes to Financial Statements                                                    47


         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 57.

     (b) Reports on Form 8-K.

         During the last quarter of the period covered by this Annual Report on
Form 10-K the Company did not file any reports on Form 8-K.


                                      -38-

                                   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/ Patrick T. Hogan
                                                ---------------------------
                                                Patrick T. Hogan, Vice President
                                                and Chief Financial Officer

Date:  March 11, 2002


         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 11, 2002
    ----------------------------------------                Directors (Principal
          (Steven Roth)                                     Executive Officer)

By:   /s/ Michael D. Fascitelli                           President and Director            March 11, 2002
    ----------------------------------------
          (Michael D. Fascitelli)

By:   /s/ Douglas H. Dittrick                             Director                          March 11, 2002
    ----------------------------------------
          (Douglas H. Dittrick)

By:   /s/ Martin N. Rosen                                 Director                          March 11, 2002
    ----------------------------------------
          (Martin N. Rosen)

By:   /s/ Richard R. West                                 Director                          March 11, 2002
    ----------------------------------------
          (Richard R. West)

By:   /s/ Russell B. Wight, Jr.                           Director                          March 11, 2002
    ----------------------------------------
          (Russell B. Wight, Jr.)




                                      -39-

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, 2001 and 2000, and the related consolidated statements of
operations, partners' capital, and cash flows for the years ended December 31,
2001 and 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, 2001 and 2000, and their
consolidated results of operations and cash flows for the years ended December
31, 2001 and 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 20, 2002
(March 11, 2002 as to Note 4)


                                      -40-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS)




                                                                2001           2000

ASSETS
CURRENT ASSETS:
                                                                        
Cash and cash equivalents                                      $28,189         $6,215
Restricted cash                                                 21,388         14,736
Trade accounts receivable, net of allowance for doubtful
   accounts of $2,442 and $3,502, respectively                  67,415         79,780
Other current assets                                             4,559          4,930
Working capital to be collected on behalf of
   AmeriCold Corporation                                        (5,358)        (7,507)
                                                                ------         ------
Total current assets                                           116,193         98,154

PROPERTY, PLANT, AND EQUIPMENT:
Land                                                            14,794         16,831
Buildings and improvements                                       2,880          2,476
Machinery and equipment                                         49,270         44,131
                                                                ------         ------
                                                                66,944         63,438

Less accumulated depreciation                                  (19,574)       (10,722)
                                                                ------         ------
Property, plant, and equipment, net                             47,370         52,716

OTHER ASSETS                                                    11,544         12,988
                                                                ------         ------
                                                              $175,107       $163,858
                                                              ========       ========



                                                                     (Continued)

See notes to consolidated financial statements.



                                      -41-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS)



                                                                     2001           2000

LIABILITIES AND PARTNERS' CAPITAL


CURRENT LIABILITIES:
                                                                            
Accounts payable                                                    $14,039        $23,277
Accrued expenses                                                     50,006         36,017
Current portion of long-term debt                                     1,906            577
Current portion of capitalized lease obligations                        967            398
Unearned revenue                                                      8,373          9,242
Due to AmeriCold Corporation                                         32,216         27,074
                                                                   --------       --------
Total current liabilities                                           107,507         96,585
                                                                   --------       --------
LONG-TERM DEBT                                                       22,840          6,360

LONG-TERM CAPITALIZED LEASE OBLIGATIONS                               4,449          1,351

DEFERRED RENT OBLIGATIONS TO AMERICOLD
CORPORATION                                                           8,335         24,411

STRAIGHT-LINE RENT LIABILITY TO AMERICOLD
CORPORATION                                                          10,811          6,762

OTHER LIABILITIES                                                    13,399         12,176
                                                                   --------       --------
Total liabilities                                                   167,341        147,645

COMMITMENTS

PARTNERS' CAPITAL:
Partners' capital                                                    44,723         48,723
Accumulated deficit                                                 (33,368)       (27,680)
Accumulated other comprehensive loss - minimum pension charge        (3,589)          (830)
                                                                   --------       --------
Less: capital contribution receivable                                    --         (4,000)
                                                                   --------       --------
Total partners' capital                                               7,766         16,213
                                                                   --------       --------
                                                                   $175,107       $163,858
                                                                   ========       ========





See notes to consolidated financial statements.










                                      -42-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND
2000 AND FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31,
1999 (AMOUNTS IN THOUSANDS)



                                                                   2001          2000           1999
                                                                                      
REVENUES                                                         $647,259       $676,158       $557,708

OPERATING EXPENSES:
Cost of operations (not including depletion, depreciation,
and amortization)                                                 474,663        478,809        399,615
Rent expense on leases with AmeriCold Corporation,
net of $25,469 in reduction in 2001 contractual rents             130,807        170,640        135,811
Reduction in 2000 contractual rents                               (14,343)            --             --
General and administrative                                         37,691         35,933         26,542
Severance and other charges                                         8,895             --             --
Depletion, depreciation, and amortization                          11,477          7,803          4,789
                                                                  -------       --------        -------
Total operating expenses                                          649,190        693,185        566,757
                                                                  -------       --------        -------
OPERATING LOSS                                                     (1,931)       (17,027)        (9,049)

OTHER INCOME(EXPENSE):
Interest expense                                                   (4,702)        (2,136)          (534)
Other                                                                 945            727            339
                                                                  -------       --------        -------
NET LOSS                                                          $(5,688)      $(18,436)       $(9,244)
                                                                  =======       ========        =======




See notes to consolidated financial statements.




                                      -43-

 VORNADO CRESCENT LOGISTICS OPERATING PARTNERSHIP
 AND SUBSIDIARY

 CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER
 31, 2001 AND 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)
                                               ------       -------          ----        ------        ------
Total comprehensive loss                                                                              (19,266)
                                                                                                       ------

BALANCE - December 31, 2000                    48,723       (27,680)         (830)       (4,000)       16,213


Cancellation of capital commitment             (4,000)           --            --         4,000            --

COMPREHENSIVE LOSS:

Net loss                                           --        (5,688)           --            --        (5,688)

Adjustment for minimum pension liability           --            --        (2,759)           --        (2,759)
                                               ------       -------          ----        ------        ------
Total comprehensive loss                                                                               (8,447)
                                                                                                       ------

BALANCE - December 31, 2001                   $44,723      $(33,368)      $(3,589)     $     --        $7,766
                                              =======      ========       =======      ========        ======





See notes to consolidated financial statements.




                                      -44-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)




                                                                  2001          2000           1999

OPERATING ACTIVITIES:
                                                                                    
  Net loss                                                       $(5,688)     $(18,436)      $(9,244)
  Adjustments to reconcile net loss
    to net cash provided by operating activities:
    Provision for bad debts                                        2,653         1,645         1,685
    Depletion, depreciation and amortization                      11,477         7,803         4,789
    Straight line rent expense                                     4,049         3,673         3,089
    Reduction in 2000 contractual rent                           (14,343)           --            --
    Gain on settlement and curtailment of benefit plan                --            --        (1,363)
    Changes in assets and liabilities, net of acquisitions:
      Restricted cash                                             (6,652)        2,151            --
      Trade accounts receivable                                   10,843        (2,524)          239
      Other assets                                                  (522)           (9)       (6,420)
      Accounts payable and accrued expenses                        2,071        (8,081)       (1,493)
      Due to AmeriCold Corporation                                 7,028        (2,158)       29,232
      Deferred rent obligations                                   (1,733)       19,011         5,400
      Other liabilities                                              354           (69)          (11)
                                                                --------      --------      --------

        Net cash provided by operating activities                  9,537         3,006        25,903

INVESTING ACTIVITIES:
  Purchase of non-real estate assets                                  --            --       (38,723)
  Additions to property, plant, and equipment                     (2,368)      (12,302)       (9,666)
                                                                --------      --------      --------

        Net cash provided by investing activities                 (2,368)      (12,302)      (48,389)

FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                        18,940         7,014            --
  Repayment of long-term debt                                     (1,131)          (47)           --
  Repayment of capital lease obligation                             (855)           --            --
  Repayment of due to AmeriCold Corporation                       (2,149)       (5,444)       (8,249)
  Capital contributions                                               --         6,000        38,723
                                                                --------      --------      --------

        Net cash provided by financing activities                 14,805         7,523        30,474
                                                                --------      --------      --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                           21,974        (1,773)        7,988

CASH AND CASH EQUIVALENTS:
  Beginning of period                                              6,215         7,988            --
                                                                --------      --------      --------

  End of period                                                  $28,189        $6,215        $7,988
                                                                ========      ========      ========


                                                                     (Continued)
See notes to consolidated financial statements.


                                      -45-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)



                                                             2001        2000        1999

SUPPLEMENTAL DISCLOSURES:
                                                                           
  Interest paid                                              $2,787        $753        $331
                                                            =======     =======     =======

SUPPLEMENTAL INFORMATION ABOUT NONCASH
  ACTIVITIES:
  Acquisition of fixed assets under capital leases           $4,522          --          --
                                                            =======
  Liabilities assumed in connection with acquisition of
    non-real estate assets                                       --          --     $13,198
                                                                                    =======
  Initial working capital to be collected on behalf of
    AmeriCold Corporation                                        --          --     $21,200
                                                                                    =======


                                                                     (Concluded)


See notes to consolidated financial statements.



                                      -46-

VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS ENDED DECEMBER 31, 2001 AND
2000 AND FOR THE PERIOD FROM MARCH 11,1999 (DATE OF INCEPTION) TO DECEMBER
31,1999


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 "the Company" or "AmeriCold Logistics"). At December 31,
       2001, AmeriCold Logistics, headquartered in Atlanta, Georgia, has 5,900
       employees and operates 100 temperature controlled warehouse facilities
       nationwide with an aggregate of approximately 525 million cubic feet of
       refrigerated, frozen, and dry storage space. Of the 100 warehouses,
       AmeriCold Logistics leases 89 temperature controlled warehouses with an
       aggregate of approximately 445 million cubic feet from the Vornado
       REIT/Crescent REIT Partnership ("AmeriCold Corporation"), and manages 11
       additional warehouses containing approximately 80 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. 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. ("Vornado") and
       40% by COPI Cold Storage L.L.C. (an affiliate of Crescent Operating Inc.)
       ("Crescent"). 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. Vornado's $6,000,000
       contribution to the Partnership in March 2000 was unmatched by Crescent,
       who recently filed for bankruptcy protection. Accordingly, the $4,000,000
       contribution receivable shown in partner's capital was cancelled at
       December 31, 2001. During the first quarter of 2002, Vornado's $6,000,000
       became a special equity contribution that: (i) has priority over the
       original equity amounts, with voting rights of Vornado not effected, (ii)
       is redeemable only at the Partnership's option, and (iii) accrues
       interest at 12% compounded annually from March 7, 2000. Vornado's share
       of the Partnership remains at 60%.

       Estimates - 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.

       On February 6, 2002, Crescent Operating filed a voluntary petition under
       Chapter 11 of the U.S. Bankruptcy Code. Subject to confirmation of a plan
       of reorganization and shareholder approval, it had agreed to transfer its
       interest in AmeriCold Logistics to an entity that will be owned by the
       shareholders of Crescent Real Estate Equities. It is uncertain at this
       time whether or when this plan will be approved and what effect, if any,
       this will have on the operation and management of AmeriCold Logistics.



                                      -47-

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

      Restricted Cash - Cash restricted for uses related to payment of rent
      ($7,229,000 at December 31, 2001 and 2000) and settlement of certain
      self-insured liabilities ($14,159,000 and $7,507,000 at December 31, 2001
      and 2000, respectively) are classified as restricted cash.

      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.

      The Company's long-lived assets are reviewed for impairment if events or
      changes in circumstances indicate that the carrying amounts may not be
      recoverable. In such an event, a comparison is made of the expected future
      operating cash flows of the long-lived assets on an undiscounted basis to
      the carrying amounts of long-lived assets. If the carrying amounts of the
      long-lived assets exceed the sum of the expected undiscounted cash flows,
      an impairment charge is recognized in an amount equal to the excess of the
      carrying amount over the estimated fair value of the long-lived assets.
      The Company also periodically reviews the appropriateness of the estimated
      useful lives of its long-lived assets.

      Capitalized Leases - Capitalized leases are recorded at the lower of the
      present value of future lease payments or the fair market value of the
      property. Capitalized leases are depreciated on a straight-line basis over
      the estimated asset life or lease term for equipment, whichever is
      shorter. Depreciation expense on capital leases is included in
      depreciation and amortization expense.

      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 AmeriCold Logistics 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.

      Significant customer - During 2001 and 2000, H.J. Heinz & Co. accounted
      for approximately 16% and 18% of total revenue, respectively.

      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.

      Collective Bargaining Agreements - At December 31, 2001, approximately 21%
      of the Company's labor force was covered by collective bargaining
      agreements. Collective bargaining agreements covering approximately 7% of
      the labor force will expire in 2002.

      Derivatives - In June 1998, the Financial Accounting Standards Board
      ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
      133, Accounting for Derivative Instruments and Hedging Activities, as
      amended in June 2000 by SFAS No. 138, Accounting for Certain Derivative
      Instruments and Certain Hedging Activities. SFAS No. 133, as amended,
      requires the Company to recognize all derivatives on the balance sheet


                                      -48-

       at fair value. The Company adopted SFAS No. 133, as amended, on January
       1, 2001. The adoption of these standards did not have a material impact
       on the Company's consolidated financial statements, as the Company does
       not use derivatives.

       Recent Accounting Pronouncement - In August 2001, the FASB issued SFAS
       No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
       This Statement supersedes SFAS No. 121, Accounting for the Impairment of
       Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No.
       144 also supercedes previous guidance for segments of a business to be
       disposed. The Company is required to adopt SFAS No. 144 on January 1,
       2002. The Company does not expect SFAS No. 144 to have a significant
       effect on its consolidated financial position or results of operations.

       Reclassifications - Certain reclassifications have been made to the 2000
       and 1999 balances to conform with the 2001 presentation.

3.     ACCRUED EXPENSES

       Detail of accrued expenses as of December 31, 2001 and 2000 is as
       follows:



       (amounts in thousands)                   2001         2000

                                                      
       Accrued payroll and related expense     $10,127      $9,854
       Accrued workers' compensation             8,580       8,443
       Severance and Other Charges               6,764          --
       Other accrued expenses                   24,535      17,720
                                               -------     -------
                                               $50,006     $36,017
                                                =======     =======



       4.    LONG-TERM DEBT




             (amounts in thousands)       2001          2000

                                                 
       Notes payable to Vornado:
       12% promissory note payable       $3,000        $3,000
       12% promissory note payable        3,840            --
       14% promissory note payable        4,856            --

       Notes payable to Crescent:
       12% promissory note payable        2,000         2,000
       12% promissory note payable        3,500            --
       14% promissory note payable        6,190            --

       Note payable to bank               1,360         1,937
                                       --------      --------
                                         24,746         6,937
       Less: current maturities          (1,906)         (577)
                                       --------      --------
                                        $22,840        $6,360
                                       ========      ========




         The 12% promissory notes payable to Vornado and Crescent, as amended,
         are due December 31, 2004 and may be repaid at any time prior to their
         maturity. Until the notes are paid, aggregate interest-only payments of
         $123,000 are due on a monthly basis. These notes are secured by certain
         property and equipment with a net book value of approximately
         $15,606,000.

         The 14% promissory notes payable to Vornado and Crescent, as amended,
         are payable in aggregate monthly


                                      -49-

       installments of principal and interest of $224,999 with a maturity date
       of December 31, 2004. The notes are secured by certain property and
       equipment with a net book value of approximately $22,483,000.

       Effective March 11, 2002, the Vornado and Crescent notes were amended to
       extend maturity dates to December 31, 2004.

       The note payable to the bank due January 2003 is payable in equal monthly
       installments of principal and interest and may be repaid prior to its
       maturity date, 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 $1,287,000.

5.     TRANSACTIONS WITH AMERICOLD CORPORATION AND OWNERS

       During 2001 and 2000 and 1999, AmeriCold Logistics received a management
       fee of $268,000 and $255,000 and $201,000, respectively, from AmeriCold
       Corporation for administrative services performed.

       During 2001 and 2000 and 1999, AmeriCold Logistics recorded a management
       fee of $487,000 and $487,000 and $329,000, respectively, to Vornado
       Realty L.P.

       At December 31, 2001 and 2000, other accrued liabilities included
       $1,303,000 and $816,000, respectively, owed to Vornado Realty L.P.

       At December 31, 2001 and 2000, $1,131,000 and $1,061,000, respectively,
       were receivable from Crescent for expenditures made on its behalf for a
       new business venture. Due to the uncertainty of collection, the Company
       established a reserve for this amount at December 31, 2001. Such amounts
       are included in other assets.

6.     LEASE COMMITMENTS

       AmeriCold Logistics has operating leases with the AmeriCold Corporation
       covering the warehouses used in this business. The leases, 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
       revenues AmeriCold Logistics receives from its customers. Fixed base rent
       is approximately $137,000,000 per annum through 2003, $139,000,000 per
       annum from 2004 through 2008, and $141,000,000 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 the period March 1999 to December
       31, 2003 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
       $25,469,000 and $19,011,000 in 2001 and 2000, respectively, in fixed and
       percentage rent.

       As part of the February 2001 lease amendments, contractual rents due to
       AmeriCold Corporation were reduced to $146,000,000 for 2001 and
       $150,000,000 (plus additional contingent rent in certain


                                      -50-

       circumstances) for 2002.

       On December 27, 2001, the leases were amended to reduce fixed and
       percentage rent under the four non-encumbered leases by $25,469,000 to
       $17,918,000 for 2001 and by $14,343,000 to $38,223,000 for 2000.

       On January 23, 2002, the leases with AmeriCold Corporation were
       restructured to consolidate the four non-encumbered leases into one
       non-encumbered lease. The restructuring did not affect total contractual
       rent due under the combined leases.

       The Company anticipates that AmeriCold Corporation may further
       restructure the leases with the Company to provide additional cash flow
       to the Company.

       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
       $9,500,000 annually.

       AmeriCold Logistics also has both operating and capital 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 five to 20 years with renewal
       or purchase options.

       At December 31, 2001, future minimum fixed lease payments under the
       leases with AmeriCold Corporation and future minimum lease payments under
       operating leases other than leases with AmeriCold Corporation were as
       follows:

       (amounts in thousands)


       YEAR ENDED
       DECEMBER 31,


                        AMERICOLD       OTHER
                       CORPORATION     LESSORS         TOTAL

                                        
             2002       $137,340         $7,255       $144,595
             2003        137,327          5,220        142,547
             2004        139,729          3,932        143,661
             2005        138,920          3,546        142,466
             2006        138,920          3,545        142,465
       Thereafter      1,011,241          2,748      1,013,989
                      ----------     ----------     ----------
                      $1,703,477        $26,246     $1,729,723
                      ==========     ==========     ==========



       Rent expense under leases with AmeriCold Corporation for 2001 was
       $115,780,000 for fixed rent, net of a $25,469,000 contractual rent
       adjustment, and $15,027,000 for percentage rent. Rent expense under
       leases with AmeriCold Corporation for 2000 was $139,723,000 for fixed
       rent and $30,917,000 for percentage rent. Rent expense under leases with
       AmeriCold Corporation for 1999 was $109,031,000 for fixed rent and
       $26,780,000 for percentage rent.

       Rent expense under leases with other lessors was $8,068,000, $6,407,000,
       and $4,739,000 for 2001, 2000, and 1999, respectively.


                                      -51-

\       At December 31, 2001, future minimum lease payments under capital leases
       are as follows:

       (amounts in thousands)



       YEAR ENDED
       DECEMBER 31,

                                               
       2002                                       $1,407
       2003                                        1,284
       2004                                        1,201
       2005                                        1,199
       2006                                        1,069
       Thereafter                                    638
                                                 -------
       Total minimum obligations                   6,798
       Less interest portion                      (1,382)
                                                 -------
       Present value of net minimum payments       5,416
       Less current portion                         (967)
                                                 -------
       Long term portion                          $4,449
                                                 =======



       At December 31, 2001 and 2000, property leased under capital leases had a
       total cost of $7,974,000 and $2,751,000 and total accumulated
       depreciation of $2,976,000 and $1,171,000, respectively.

7.     SEVERANCE AND OTHER CHARGES

       During the year ended December 31, 2001, the Company recorded a charge of
       $8,895,000 comprised of (i) severance and relocation costs associated
       with a management restructuring, and (ii) expenses arising from the
       consolidation of a portion of the corporate office in Portland, Oregon
       into the Company's Atlanta headquarters. Severance related charges of
       $7,725,000 are for the termination of 199 employees, located primarily in
       the Atlanta and Portland offices. Through December 31, 2001, the Company
       had terminated 30 of the employees. The remaining charges of $1,170,000
       consist primarily of a signing bonus, recruitment and other exit costs.

       These charges and the related liability at December 31, 2001 are
       summarized below: (amounts in thousands)



                               SEVERANCE     OTHER         TOTAL

                                                 
       Charges                  $7,725       $1,170       $8,895
       Expenditures               (961)      (1,170)      (2,131)
                               -------      -------      -------

       Severance Liability      $6,764      $    --       $6,764
                                ======      =======       ======


8.     CONTINGENCIES

       In the normal course of business, the Company is party to a number of
       lawsuits. The Company does not believe that the resolution of these
       lawsuits will have a material effect on its financial position, results
       of operations or cash flows.


9.     EMPLOYEE BENEFIT PLANS

       Defined Benefit Pension and Postretirement 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


                                      -52-

       established monthly benefit levels. The Company also has postretirement
       health care plans that provide medical and life insurance coverage to
       eligible retired employees.

       Actuarial information regarding the defined benefit pension plans and
       postretirement benefits other than pensions as of December 31, 2001 and
       2000 is as follows:




                                                                                  2001
                                                                   --------------------------------------------
                                                                           PENSION BENEFITS
                                                                   ----------------------------
                                                                                     NATIONAL         OTHER
                                                                    RETIREMENT       SERVICE     POSTRETIREMENT
(amounts in  thousands)                                            INCOME PLAN     RELATED PLAN     BENEFITS

                                                                                        
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                               $35,424        $8,633        $1,289
Service cost                                                            2,977           223            55
Interest cost                                                           2,562           632           126
Participant contributions                                                  --            --             7
Actuarial (gain) loss                                                   2,090          (327)          292
Settlements                                                                --            --            --
Plan amendments                                                            --           187            --
Benefits paid                                                          (4,777)         (524)          (37)
                                                                     --------      --------      --------

Benefit obligation at end of year                                     $38,276        $8,824        $1,732
                                                                     ========      ========      ========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year                        $26,218        $9,377      $     --
Actual return on plan assets                                             (122)          (81)           --
Employer contributions                                                  4,650           115            30
Participant contributions                                                  --            --             7
Benefits paid                                                          (4,777)         (524)          (37)
                                                                     --------      --------      --------

Fair value of plan assets at end of year                              $25,969        $8,887      $     --
                                                                     ========      ========      ========

Funded status                                                        $(12,307)          $63       $(1,732)
Unrecognized actuarial (gain) loss                                      7,423         1,830            18
Unrecognized prior service cost                                         1,182           332          (518)
Minimum liability adjustment                                           (4,771)           --            --
                                                                     --------      --------      --------

(Accrued) prepaid benefit cost                                        $(8,473)       $2,225       $(2,232)
                                                                     ========      ========      ========


Amounts recognized in the consolidated balance sheet consist of:
  Accrued benefit liability                                           $(8,473)     $     --       $(2,232)
  Prepaid asset                                                            --         2,225            --
  Intangible asset                                                      1,182            --            --
  Accumulated other comprehensive loss                                  3,589            --            --
                                                                     --------      --------      --------

Net amount recognized                                                 $(3,702)       $2,225       $(2,232)
                                                                     ========      ========      ========

Weighted-average assumptions as of December 31, 2001:
Discount rate                                                          7.25 %        7.25 %        7.25 %
Expected return                                                        9.50 %        9.50 %           N/A
Rate of compensation increase                                          4.00 %           N/A           N/A



                                      -53-



                                                                                    2000
                                                                 ---------------------------------------------
                                                                           PENSION BENEFITS
                                                                 ----------------------------
                                                                                  NATIONAL          OTHER
                                                                    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



                                      -54-





                                                             2001
                                         ------------------------------------------
                                              PENSION BENEFITS
                                         --------------------------
                                                        NATIONAL        OTHER
                                         RETIREMENT     SERVICE      POSTRETIREMENT
                                         INCOME PLAN   RELATED PLAN    BENEFITS
(amounts in thousands)
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
                                                            
  Service cost                              $2,977         $223          $55
  Interest cost                              2,562          632          126
  Expected return on plan assets            (2,591)        (876)          --
  Recognized net actuarial loss (gain)         186           84           15
  Amortization of prior service cost            81            6          (65)
                                           -------      -------      -------
                                            $3,215          $69         $131
                                           =======      =======      =======





                                                       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 (gain)         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.


                                      -55-

       Multiemployer Plans - Americold Logistics contributes to defined benefit
       multiemployer plans that cover substantially all union employees. Amounts
       charged to pension cost and contributed to the plans in 2001, 2000, and
       1999 were approximately $1,235,000, $1,252,000, and $1,211,000,
       respectively.

       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 2001 and 2000 and
       1999 was approximately $5,403,000 and $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 (income) expense for all deferred compensation and supplemental
       retirement plans for 2001 and 2000 and 1999 was approximately ($12,000)
       and $123,000 and $164,000, respectively.


                                      -56-

                                  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)

     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)



*        Incorporated by reference


                                      -57-



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

     10.7(A)    Second Amendment to Master Lease Agreement, effective as of February         *
                22, 2001, between URS Real Estate, L.P. and AmeriCold Logistics,
                LLC. (incoporated by reference to Exhibit 10.7(A) of the Company's
                Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
                (File No. 001-14525), as filed with the Commission on May 11, 2001)



*        Incorporated by reference

                                      -58-



  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)

     10.10(A)   Second Amendment to Master Lease Agreement, effective as of February        *
                22, 2001, between AmeriCold Real Estate, L.P. and AmeriCold
                Logistics, LLC. (incorporated by reference to Exhibit 10.10(A) of
                the Company's Quarterly Report on Form 10-Q for the quarter ended
                March 31, 2001 (File No. 001-14525), as filed with the Commission on
                May 11, 2001)

     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)

     10.12(A)   First Amendment to Master Lease Agreement, dated as of November 30,
                1999, between AmeriCold Corporation, as successor to URS Logistics,
                Inc., and AmeriCold Logistics LLC.

     10.12(B)   Second Amendment to Master Lease Agreement, effective as of February         *
                22, 2001, between AmeriCold Corporation, as successor to URS
                Logistics, Inc., and AmeriCold Logistics LLC. (incorporated by
                reference to Exhibit 10.12(A) of the Company's Quarterly Report on
                Form 10-Q for the quarter ended March 31, 2001 (File No. 001-14525),
                as filed with the Commission on May 11, 2001)

     10.12(C)   Amendment to Master Lease Agreement, dated as of December 27, 2001,
                between AmeriCold Corporation, as successor to URS Logistics, Inc.,
                and AmeriCold Logistics LLC.




*        Incorporated by reference

                                      -59-





Exhibit No.
                                                                                          Page

                                                                                     
     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)

     10.13(A)   First Amendment to Master Lease Agreement, dated
                November 30, 1999, between AmeriCold Corporation
                and AmeriCold Logistics, LLC.

     10.13(B)   Second Amendment to Master Lease Agreement, effective February 22,           *
                2001, between AmeriCold Corporation and AmeriCold Logistics, LLC.
                (incorporated by reference to Exhibit 10.13(A) of the Company's
                Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
                (File No. 001-14525), as filed with the Commission on May 11, 2001)

     10.13(C)   Third Amendment to Master Lease Agreement, dated
                as of December 27, 2001, between AmeriCold
                Corporation and AmeriCold Logistics, LLC.

     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)   First Amendment to Master Lease Agreement, dated
                as of November 30, 1999, by and among each of
                the entities listed on Exhibit A to the lease,
                or their successors thereto, and AmeriCold
                Logistics, LLC.

     10.14(B)   Second 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 quarter ended March 31, 2000
                (File No. 001-14525), as filed with the Commission on May 9, 2000)

     10.14(C)   Third Amendment to Master Lease Agreement,                                   *
                effective as of February 22, 2001, by and
                among each of the entities listed on Exhibit A
                to the lease, or their successors thereto, and
                AmeriCold Logistics, LLC. (incorporated by
                reference to Exhibit 10.14(B) of the Company's
                Quarterly Report on Form 10-Q for the quarter
                ended March 31, 2001 (File No. 001-14525), as
                filed with the Commission on May 11, 2001)

     10.14(D)   Fourth Amendment to Master Lease Agreement,
                dated as of December 27, 2001, by and among each
                of the entities listed on Exhibit A to the
                lease, or their successors thereto, and
                AmeriCold Logistics, LLC.

     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 as
                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)



*        Incorporated by reference


                                      -60-





Exhibit No.
                                                                                           Page
                                                                                      
     10.15(A)   First Amendment to Master Lease Agreement, dated as of November 30,
                1999, between VC Omaha Holdings, L.L.C., and Carmar Freezers
                Thomasville L.L.C., together as Landlord, and AmeriCold Logistics,
                LLC.

     10.15(B)   Second Amendment to Master Lease Agreement, effective as of February         *
                22, 2001, between VC Omaha Holdings, L.L.C., and Carmar Freezers
                Thomasville L.L.C., together as Landlord, and AmeriCold Logistics,
                LLC. (incorporated by reference to Exhibit 10.15(A) of the Company's
                Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
                (File No. 001-14525), as filed with the Commission on May 11, 2001)

     10.15(C)   Third Amendment to Master Lease Agreement, dated as of December 27,
                2001, between VC Omaha Holdings, L.L.C., and Carmer Freezers
                Thomasville L.L.C., together as Landlord, and AmeriCold Logistics,
                LLC.

     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

     23         Consent of Deloitte & Touche LLP










*        Incorporated by reference


                                      -61-