VORNADO REALTY TRUST 10 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income and EBITDA for the years ended December 31, 2003, 2002 and 2001 Below is a summary of Net income and EBITDA (1) by segment for the years ended December 31, 2003, 2002 and 2001. On January 1, 2003, the Company revised its definition of EBITDA to comply with the Securities and Exchange Commission’s Regulation G concerning non-GAAP financial measures. The revised definition of EBITDA includes minority interest, gains (losses) on the sale of depreciable real estate and income arising from the straight-lining of rent and the amortization of acquired  in-place leases. Accordingly, EBITDA for all periods disclosed represents “Earnings before Interest, Taxes, Depreciation and Amortization.” Management considers EBITDA a supplemental measur e for making decisions and assessing the unlevered performance of its segments as it is related to the retur on assets as opposed to the levered return on equity. As properties ar bought and sold based on a multiple of EBITDA, management utilizes this measure to make investment decisions as well  as to compar the performance of its assets to that of its peers. EBITDA is not a surrogate for net income because net income is after interest expense and accordingly, is a measure of retur on equity as opposed to return on assets. December 31, 2003 Included in EBITDA are gains on sale of real estate of $161,789, of which $157,200 and $4,589 relate to the Office and Retail segments, respectively. See Notes on page 12. Temperature Merchandise Controlled (AMOUNTS IN THOUSANDS) Total Office Retail Mart Logistics Other (3) Property rentals $1,210,048 $ 823,302 $ 136,490 $ 197,554 $ — $ 52,702 Straight-line rents: Contractual rent increases 34,023 27,031 3,108 3,875 — 9 Amortization of free rent 7,924 292 5,390 2,251 — (9) Amortization of acquired  below market leases, net 9,047 8,007 1,040 — — — Total rentals 1,261,042 858,632 146,028 203,680 — 52,702 Expense reimbursements 179,214 102,826 56,900 16,402 — 3,086 Fee and other income: Tenant cleaning fees 29,062 29,062 — — — — Management and leasing fees 12,812 11,427 1,290 — — 95 Other 20,925 8,852 4,694 7,344 — 35 Total revenues 1,503,055 1,010,799 208,912 227,426 — 55,918 Operating expenses 583,660 377,500 70,462 91,033 — 44,665 Depreciation and amortization 215,032 151,994 18,835 30,125 — 14,078 General and administrative 122,405 37,251 9,783 20,215 — 55,156 Total expenses 921,097 566,745 99,080 141,373 — 113,899 Operating income 581,958 444,054 109,832 86,053 — (57,981) Income applicable to Alexander’s 15,574 — — — — 15,574 Income from partially-owned entities 67,901 2,426 3,752 (108) 18,416 43,415 Interest and other investment income 25,402 2,960 359 93 — 21,990 Interest and debt expense (229,662) (134,715) (59,674) (14,788) — (20,485) Net gain on disposition of  wholly-owned and partially- owned assets other than real estate 2,343 180 — 188 — 1,975 Minority interest (178,675) (1,119) — — — (177,556) Income before discontinued  operations and gains on sale  of real estate 284,841 313,786 54,269 71,438 18,416 (173,068) Discontinued operations 14,073 15,536 261 — — (1,724) Gains on sale of real estate  (discontinued operations) 161,789 157,200 4,589 — — — Net income 460,703 486,522 59,119 71,438 18,416 (174,792) Interest and debt expense (2) 296,059 138,379 62,718 15,700 24,670 54,592 Depreciation and amortization (2) 279,507 155,743 21,642 30,749 34,879 36,494 Income taxes 1,627 45 — — — 1,582 EBITDA (1) $1,037,896 $ 780,689 $ 143,479 $ 117,887 $ 77,965 $ (82,124)