Placement Agency Agreement

Placement Agency Agreement






                              VORNADO REALTY TRUST


                    (a Maryland real estate investment trust)


                           PLACEMENT AGENCY AGREEMENT







Dated:  February 25, 2002











                              VORNADO REALTY TRUST
                    (a Maryland real estate investment trust)
                           PLACEMENT AGENCY AGREEMENT

                                                               February 25, 2002

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
North Tower
4 World Financial Center
New York, New York  10080

Ladies and Gentlemen:

         Vornado  Realty  Trust,  a Maryland real estate  investment  trust (the
"Company"),  and  Vornado  Realty  L.P.,  a Delaware  limited  partnership  (the
"Operating Partnership"),  each confirms its agreement with Merrill Lynch & Co.,
Merrill  Lynch,  Pierce,  Fenner & Smith  Incorporated  ("Merrill  Lynch" or the
"Placement  Agent"),  to act as placement  agent for the Company with respect to
the  issue and sale by the  Company  to,  and the  purchase  by,  Cohen & Steers
Quality  Income  Realty Fund,  Inc., a Maryland  corporation  (the  "Fund"),  of
884,543 common shares of the Company (the "Common Shares" or the "Securities").

         It is contemplated that the Securities will be issued by the Company to
the Fund at a purchase price per share of $42.96,  representing  aggregate gross
proceeds to the Company of  $37,999,967.28.  In acting as the  Placement  Agent,
Merrill Lynch will seek to place the securities  with the Fund on a best efforts
basis,  acting as the Company's agent and not as a principal in the placement of
the Securities. Merrill Lynch may separately engage, at its own expense and with
the prior  approval  of the  Company,  sub-agents  as it may deem  necessary  or
appropriate.

         The Company has filed with the Securities and Exchange  Commission (the
"Commission")  one or more  registration  statements  on Form S-3,  including  a
prospectus relating to the Common Shares and other securities of the Company for
the registration of such securities under the Securities Act of 1933, as amended
(the "1933 Act"). Such registration  statements have been declared  effective by
the  Commission.  A  prospectus  supplement  reflecting  the terms of the Common
Shares,  the  terms of the  offering  thereof  and the other  matters  set forth
therein has been  prepared or will be prepared  and will be filed in  accordance
with the  provisions of paragraph  (b) of Rule 424 ("Rule  424(b)") of the rules
and   regulations  of  the  Commission   under  the  1933  Act  (the  "1933  Act
Regulations").  Such  prospectus  supplement,  in the form first filed after the
date hereof  pursuant to Rule  424(b),  is  hereinafter  called the  "Prospectus
Supplement."  Such  registration  statements,  as  amended  at the date  hereof,
including all documents  incorporated  or deemed to be incorporated by reference
therein and the exhibits thereto, and schedules thereto, if any, are hereinafter
called the "Registration Statement" and the base prospectus included therein and
relating to all offerings of securities  under the  Registration  Statement,  as
supplemented   by  the  Prospectus   Supplement,   is  hereinafter   called  the
"Prospectus",  except that if such base prospectus is amended or supplemented on
or prior to the date on which the Prospectus  Supplement is first filed

                                       2


pursuant  to  Rule  424(b),  the  term  "Prospectus"  shall  refer  to the  base
prospectus as so amended or  supplemented  and as supplemented by the Prospectus
Supplement,  including  the documents  filed by the Company with the  Commission
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
that are incorporated by reference therein. For purposes of this Agreement,  all
references to the  Registration  Statement or the Prospectus or any amendment or
supplement to either of the foregoing  shall be deemed to include the copy filed
with the Commission  pursuant to its  Electronic  Data  Gathering,  Analysis and
Retrieval System ("EDGAR").

         All references in this Agreement to financial  statements and schedules
and other information which is "contained,"  "included," "stated,"  "described,"
"discussed" or "set forth" in the  Registration  Statement or the Prospectus (or
other  references  of like import)  shall be deemed to mean and include all such
financial  statements and schedules and other  information which is incorporated
by reference in the  Registration  Statement or the Prospectus,  as the case may
be; and all  references in this  Agreement to amendments or  supplements  to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the 1934 Act, which is incorporated by reference in
the Registration Statement or the Prospectus, as the case may be.

         As  used  herein,  the  term  "subsidiary"   means  a  corporation,   a
partnership,  or limited liability company, a majority of the outstanding voting
stock,  partnership  or  membership  interests,  as the case may be, of which is
controlled,  directly or indirectly,  by the Company, the Operating Partnership,
or  by  one  or  more  other  subsidiaries  of  the  Company  or  the  Operating
Partnership.

         SECTION 1. Representations and Warranties.

         (a)  Representations  and  Warranties  by  the  Company.   The  Company
represents and warrants to the Placement Agent as of the date hereof,  and as of
the  Closing  Time  referred  to in Section  2(b)  hereof,  and agrees  with the
Placement Agent, as follows:

          (i) Incorporated Documents. The documents incorporated by reference in
     the Registration  Statement and the Prospectus,  when they became effective
     or were filed with the  Commission,  as the case may be,  conformed  in all
     material  respects to the  requirements of the 1933 Act or the 1934 Act, as
     applicable, and the rules and regulations of the Commission thereunder, and
     none of such documents  contained an untrue statement of a material fact or
     omitted to state a material fact required to be stated therein or necessary
     to make the statements therein not misleading; and any further documents so
     filed and incorporated by reference in the  Registration  Statement and the
     Prospectus  or any  further  amendment  or  supplement  thereto,  when such
     documents  become  effective or are filed with the Commission,  as the case
     may be, will conform in all material  respects to the  requirements  of the
     1933 Act or the 1934 Act, as applicable,  and the rules and  regulations of
     the  Commission  thereunder  and will not contain an untrue  statement of a
     material  fact or omit to  state a  material  fact  required  to be  stated
     therein  or  necessary  to make  the  statements  therein  not  misleading;
     provided, however, that this representation and warranty shall not apply to
     any  statements or omissions  made in reliance upon and in conformity  with
     information  furnished  in writing to the  Company by the  Placement  Agent
     expressly for use in the Registration Statement or the Prospectus,  in each
     case as amended or supplemented, relating to such Common Shares;

                                       3


          (ii)  Compliance  with  Registration  Requirements.  The  Registration
     Statement  and the  Prospectus  conform,  and  any  further  amendments  or
     supplements to the  Registration  Statement or the Prospectus will conform,
     in all material  respects to the  requirements of the 1933 Act and the 1933
     Act  Regulations  and do not and will not, as of the  applicable  effective
     date as to the Registration  Statement and any amendment  thereto and as of
     the  applicable  filing  date as to the  Prospectus  and any  amendment  or
     supplement thereto,  contain an untrue statement of a material fact or omit
     to state a material fact required to be stated therein or necessary to make
     the  statements  therein  not  misleading;  provided,  however,  that  this
     representation  and warranty shall not apply to any statements or omissions
     made in reliance  upon and in  conformity  with  information  furnished  in
     writing to the  Company by the  Placement  Agent  expressly  for use in the
     Prospectus as amended or supplemented relating to such Common Shares;

          (iii) No Material Adverse Change in Business.  Neither the Company nor
     any of its  subsidiaries has sustained since the date of the latest audited
     financial   statements   included  or  incorporated  by  reference  in  the
     Prospectus any material loss or  interference  with its business from fire,
     explosion, flood or other calamity, whether or not covered by insurance, or
     from any labor dispute or court or  governmental  action,  order or decree,
     otherwise than as set forth or contemplated  in the Prospectus;  and, since
     the respective  dates as of which  information is given in the Registration
     Statement and the Prospectus, except as otherwise stated therein, there has
     not been any change in the  capitalization or long-term debt of the Company
     or any material adverse change in or affecting the condition,  financial or
     otherwise,  or the earnings,  business affairs or business prospects of the
     Company and its subsidiaries taken as a whole,  otherwise than as set forth
     or contemplated in the Prospectus;

          (iv) Good  Standing  of the  Company.  The  Company  is a real  estate
     investment  trust duly formed and  existing  under the laws of the State of
     Maryland in good standing  with the State  Department  of  Assessments  and
     Taxation  of  Maryland,  with trust  power to own,  lease and  operate  its
     properties  and to conduct its business  substantially  as described in the
     Prospectus  and to enter  into  and  perform  its  obligations  under  this
     Agreement;  and the Company is duly qualified as a foreign  organization to
     transact  business and is in good  standing in each  jurisdiction  in which
     such  qualification  is  required,  whether by reason of the  ownership  or
     leasing of property or the conduct of business, except where the failure to
     so  qualify  would not have a  material  adverse  effect on the  condition,
     financial  or  otherwise,  or the  earnings,  business  affairs or business
     prospects of the Company and its subsidiaries taken as a whole;

          (v)  Qualification  as a REIT.  The Company is organized in conformity
     with the requirements for  qualification as a real estate  investment trust
     (a  "REIT")  under the  Internal  Revenue  Code of 1986,  as  amended  (the
     "Code"),  and  currently  intends to operate in a manner which allows it to
     continue to meet such requirements;

          (vi)  Good  Standing  of  the  Operating  Partnership.  The  Operating
     Partnership  has been duly  formed  and is  validly  existing  as a limited
     partnership  in good  standing  under the laws of the State of Delaware and
     has  partnership  power  and  authority  to  own,  lease  and  operate  its
     properties  and to conduct its business  substantially  as described in the
     Prospectus  and is duly  qualified  as a foreign  organization  to transact
     business  and is in  good  standing  in each  jurisdiction  in  which  such
     qualification is required, whether by reason of the ownership or leasing of
     property or the conduct of business, except where the failure to so qualify
     would not have a material

                                       4


     adverse effect on the condition,  financial or otherwise,  or the earnings,
     business affairs or business prospects of the Operating Partnership; all of
     the issued and outstanding limited  partnership  interests in the Operating
     Partnership have been duly authorized and validly issued and are fully paid
     and nonassessable; the Company is the sole general partner of, and owned an
     approximately  86% common  limited  partnership  interest in, the Operating
     Partnership as of September 30, 2001;

          (vii) Good Standing of  Subsidiaries.  Each subsidiary of the Company,
     other than the Operating  Partnership,  which is covered in paragraph  (vi)
     above,  has been duly formed and is validly existing in good standing under
     the  laws  of the  jurisdiction  of its  organization  and  has  power  and
     authority  to own,  lease and  operate  its  properties  and to conduct its
     business substantially as described in the Prospectus and is duly qualified
     as a foreign  organization to transact  business and is in good standing in
     each  jurisdiction  in which such  qualification  is  required,  whether by
     reason of the  ownership or leasing of property or the conduct of business,
     except  where the failure to so qualify  would not have a material  adverse
     effect on the condition,  financial or otherwise, or the earnings, business
     affairs or business  prospects of the Company and its subsidiaries taken as
     a whole;  all of the  issued  and  outstanding  capital  stock of each such
     subsidiary has been duly authorized and validly  issued,  is fully paid and
     nonassessable  and is owned by the  Company or the  Operating  Partnership,
     directly or through subsidiaries,  free and clear of any security interest,
     mortgage,  pledge, lien, encumbrance,  claim or equity, except as would not
     have a material adverse effect on the condition, financial or otherwise, or
     the earnings, business affairs or business prospects of the Company and its
     subsidiaries taken as a whole and except as disclosed in the Prospectus;

          (viii) Capitalization. The Company has an authorized capitalization as
     set forth in its  Quarterly  Report on Form 10-Q for the  quarterly  period
     ended September 30, 2001 (except for subsequent issuances, if any, pursuant
     to this Agreement or pursuant to the terms of  reservations,  agreements or
     employee benefit plans, including,  without limitation,  the Vornado Realty
     Trust  Omnibus  Share Plan,  dividend  reinvestment  plans and  employee or
     director  stock option  plans,  the  redemption  of units of the  Operating
     Partnership or the exercise of options outstanding on the date hereof), and
     all of the issued and  outstanding  shares of  beneficial  interest  of the
     Company have been duly and validly authorized and issued and are fully paid
     and nonassessable;

          (ix)  Authorization  and Description of Securities.  The Common Shares
     have been duly  authorized,  and,  when the  Common  Shares  are issued and
     delivered  to the Fund  pursuant  to the  Purchase  Agreement  between  the
     Company and the Fund dated the date hereof (the "Purchase Agreement"), such
     Common  Shares  will  be  duly  and  validly  issued  and  fully  paid  and
     nonassessable;  the  Common  Shares  conform  to  the  description  thereof
     contained in the Prospectus  under the captions  "Description  of Shares of
     Beneficial Interest" and "Supplemental  Description of Shares of Beneficial
     Interest";

          (x)  Absence  of  Conflicts  and  Defaults.  The issue and sale of the
     Common Shares and the  compliance by the Company with all of the provisions
     of this Agreement and the  consummation  of the  transactions  contemplated
     herein have been duly  authorized by all necessary trust action and, except
     as would not have a material adverse effect on the condition,  financial or
     otherwise,  or the earnings,  business affairs or business prospects of the
     Company and its  subsidiaries  taken as a whole,  will not conflict with or
     result in a breach or  violation of any of the

                                       5


     terms or  provisions  of, or  constitute a default  under,  any  indenture,
     mortgage, deed of trust, loan agreement or other agreement or instrument to
     which the  Company  or any of its  subsidiaries  is a party or by which the
     Company or any of its subsidiaries is bound or to which any of the property
     or assets of the Company or any of its  subsidiaries  is subject,  nor will
     such action  result in any  violation of the  provisions of the Amended and
     Restated  Declaration of Trust, as amended,  or Amended and Restated Bylaws
     of the Company or any statute or any order, rule or regulation of any court
     or  governmental  authority,  agency or body having  jurisdiction  over the
     Company or any of its properties; and no consent, approval,  authorization,
     order,  registration  or  qualification  of  or  with  any  such  court  or
     governmental  agency  or body is  required  for the  issue  and sale of the
     Common  Shares  or the  consummation  by the  Company  of the  transactions
     contemplated by this Agreement, except such as have been, or will have been
     prior to the Closing Time (as defined  below),  obtained under the 1933 Act
     and the 1933 Act Regulations;

          (xi)  Authorization  of this  Agreement.  This Agreement has been duly
     authorized by all  necessary  trust action of the Company and all necessary
     partnership  action of the Operating  Partnership and has been executed and
     delivered by the Company and the Operating Partnership;

          (xii)  Absence  of  Proceedings.  Other  than  as  set  forth  in  the
     Prospectus, there are no legal or governmental proceedings pending to which
     the Company or any of its  subsidiaries is a party or of which any property
     of the  Company  or  any of its  subsidiaries  is the  subject,  which,  if
     determined  adversely  to the  Company  or any of its  subsidiaries,  would
     individually  or in the  aggregate  have a material  adverse  effect on the
     condition,  financial or otherwise,  or the earnings,  business  affairs or
     business  prospects of the Company and its  subsidiaries  taken as a whole;
     and,  to the  best of the  Company's  knowledge,  no such  proceedings  are
     threatened or  contemplated  by  governmental  authorities or threatened by
     others;  and there are no  contracts  or documents of the Company or any of
     its  subsidiaries  which  are  required  to be  filed  as  exhibits  to the
     Registration  Statement by the 1933 Act or the 1933 Act  Regulations  which
     have not been so filed;

          (xiii) No Violations  or Defaults.  Neither the Company nor any of its
     subsidiaries is in violation of its  organizational  documents or bylaws or
     in default in the  performance  or observance  of any material  obligation,
     agreement,  covenant or  condition  contained  in any  material  indenture,
     mortgage,  deed of  trust,  loan  agreement,  lease or other  agreement  or
     instrument  to which it is a party or by which it or any of its  properties
     or assets may be bound,  which default would have a material adverse effect
     on the  general  affairs,  management,  financial  position,  shareholders'
     equity or results of operations of the Company and its  subsidiaries  taken
     as a whole;

          (xiv)  Accuracy of Certain  Descriptions.  The statements set forth in
     the  Prospectus  under the captions  "Description  of Shares of  Beneficial
     Interest", "Supplemental Description of the Shares of Beneficial Interest",
     "Federal Income Tax Considerations" and "Plan of Distribution",  insofar as
     they purport to describe the provisions of the laws and documents  referred
     to therein, are accurate,  complete and fair summaries;  Investment Company
     Act.  Neither  the  Company  nor the  Operating  Partnership  is subject to
     registration as an "investment company" under the Investment Company Act;

          (xv)  Independent  Public  Accountants.  Each of (a) Deloitte & Touche
     LLP, who has certified certain financial statements and financial statement
     schedules of the Company and its


                                       6


     subsidiaries  included or  incorporated  by reference  in the  Registration
     Statement, and (b) Arthur Andersen LLP, who has certified certain financial
     information  relating to Charles E. Smith Commercial Realty L.P.  contained
     in the Company's  Current Report on Form 8-K dated October 19, 2001,  which
     financial information is incorporated by reference into the Prospectus, are
     independent public accountants as required by the 1933 Act and the 1933 Act
     Regulations;

          (xvi) Financial Statements. The financial statements and the financial
     statement  schedules  of the  Company  and  its  consolidated  subsidiaries
     included or incorporated by reference in the Registration Statement and the
     Prospectus  present  fairly the  financial  position of the Company and its
     consolidated  subsidiaries as of the dates indicated,  the results of their
     operations  for the periods  specified and the  information  required to be
     stated  therein;  and said  financial  statements  and financial  statement
     schedules  have  been  prepared  in  conformity  with  generally   accepted
     accounting  principles applied on a consistent basis throughout the periods
     involved. The selected financial data included or incorporated by reference
     in the  Prospectus  present fairly the  information  shown therein and have
     been compiled on a basis consistent with that of the consolidated financial
     statements  included  or  incorporated  by  reference  in the  Registration
     Statement. Any pro forma financial statements and other pro forma financial
     information  included  in the  Registration  Statement  and the  Prospectus
     comply in all material  respects with the applicable  requirements  of Rule
     11-02  of  Regulation   S-X  of  the  Commission  and  present  fairly  the
     information  shown therein;  the pro forma  adjustments,  if any, have been
     properly  applied  to the  historical  amounts in the  compilation  of such
     statements,  and in the opinion of the Company, the assumptions used in the
     preparation  thereof are  reasonable and the  adjustments  used therein are
     appropriate to give effect to the transactions or circumstances referred to
     therein;

          (xvii)  Title  to  Property.  Except  as  otherwise  disclosed  in the
     Prospectus,  and except as would not have a material  adverse effect on the
     condition,  financial or otherwise,  or the earnings,  business  affairs or
     business  prospects of the Company and its  subsidiaries  taken as a whole:
     (i) each of the Company and its  subsidiaries has good and marketable title
     to all properties  and assets  described in the Prospectus as owned by such
     party, in each case free of all liens,  encumbrances and defects;  (ii) all
     of the leases under which the Company or any of its  subsidiaries  holds or
     uses real property or assets as a lessee are in full force and effect,  and
     neither the Company nor any of its  subsidiaries is in material  default in
     respect  of any of the terms or  provisions  of any of such  leases  and no
     claim has been  asserted by anyone  adverse to any such  party's  rights as
     lessee under any of such  leases,  or  affecting  or  questioning  any such
     party's right to the continued  possession or use of the leased property or
     assets  under any such  leases;  (iii) all  liens,  charges,  encumbrances,
     claims,  or  restrictions  on or affecting the properties and assets of the
     Company or any of its subsidiaries that are required to be disclosed in the
     Prospectus  are  disclosed  therein;  (iv) neither the Company,  any of its
     subsidiaries  nor,  to the  knowledge  of the  Company,  any  lessee of any
     portion  of any such  party's  properties  is in  default  under any of the
     leases pursuant to which the Company or any of its subsidiaries  leases its
     properties and neither the Company nor any of its subsidiaries knows of any
     event which, but for the passage of time or the giving of notice,  or both,
     would  constitute a default  under any of such leases;  (v) no tenant under
     any lease pursuant to which the Company or any of its  subsidiaries  leases
     its  properties  has an option or right of first  refusal to  purchase  the
     premises leased thereunder;  (vi) to the best of its knowledge, each of the
     properties  of the  Company or any of its  subsidiaries  complies  with all
     applicable  codes and zoning laws and  regulations;  and (vii)  neither the
     Company  nor  any of its  subsidiaries  has  knowledge  of any  pending  or
     threatened  condemnation,  zoning change or other proceeding or

                                       7


     action that will in any manner affect the size or use of,  improvements  or
     construction  on or access to the  properties  of the Company or any of its
     subsidiaries;

          (xviii)  Environmental  Laws.  Except as  otherwise  disclosed  in the
     Prospectus,  or as is not  reasonably  likely  to have a  material  adverse
     effect on the condition,  financial or otherwise, or the earnings, business
     affairs or business  prospects of the Company and its subsidiaries taken as
     a whole:

              a. each of the Company and its  subsidiaries is in compliance with
all applicable laws relating to pollution or the discharge of materials into the
environment,  including  common law  relating to damage to property or injury to
persons  ("Environmental  Laws"),  each  of the  Company  and  its  subsidiaries
currently holds all  governmental  authorizations  required under  Environmental
Laws in order to conduct their  businesses as described in the  Prospectus,  and
neither the Company nor any of its  subsidiaries  has any basis to believe  that
any such governmental  authorization may be modified,  suspended or revoked,  or
cannot be renewed in the ordinary course of business;

              b.   there   are  no  past   or   present   actions,   activities,
circumstances,  conditions, events or incidents,  including, without limitation,
the  release,  threatened  release,  or  disposal  of  any  material  (including
radiation  and  noise),  that  could form the basis of any claim  (whether  by a
governmental  authority or other person or entity) under  Environmental Laws for
cleanup  costs,  damages,  penalties,  fines,  or otherwise,  against any of the
Company or its subsidiaries, or against any person or entity whose liability for
such claim may have been  retained  by any of the  Company or its  subsidiaries,
whether by contract or law; and

              c. the Company and its  subsidiaries  have fully  disclosed to the
Placement  Agent or  counsel  for the  Placement  Agent  all  studies,  reports,
assessments,  audits  and  other  information  in their  possession  or  control
relating  to any  pollution  or  release,  threatened  release  or  disposal  of
materials  regulated under Environmental Laws on, at, under, from or transported
from any of their  currently or formerly owned,  leased or operated  properties,
including,  without limitation,  all information relating to underground storage
tanks and asbestos containing materials.

          (xix) No  Stabilizing  Actions.  Neither the Company nor the Operating
     Partnership   has  taken,   and  neither  the  Company  nor  the  Operating
     Partnership will take,  directly or indirectly,  any action designed to, or
     that might be reasonably  expected to, cause or result in  stabilization or
     manipulation of the price of the Common Shares.

         (b) Officer's  Certificates.  Any certificate  signed by any officer of
the Company or any of its  subsidiaries  delivered to the Placement  Agent or to
counsel for the Placement Agent shall be deemed a representation and warranty by
the Company to the Placement Agent as to the matters covered thereby.


         SECTION 2. Placement Agent Fees.

         (a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions  herein set forth, the Company agrees to
pay Merrill  Lynch a fee (the  "Fee") as  compensation  in full by the  Company,
based upon the aggregate  amount of Securities sold, as calculated


                                       8


in accordance  with the provisions of this Section for its services  pursuant to
this  Agreement.  The  Fee  will  equal  5.125%  of the  purchase  price  of all
Securities sold to the Fund pursuant to this Agreement.

         (b) On the date on which the Fund  purchases  the  Securities  from the
Company in accordance with this Agreement (the "Closing Time"),  but in no event
prior to the Company's  receipt of the purchase  price for the  Securities,  the
Company  shall pay the Fee to the  Placement  Agent in cash by wire  transfer of
immediately available funds to a bank account designated by the Placement Agent.

         SECTION 3.  Covenants of the Company.  The Company  covenants  with the
Placement Agent as follows:

         (a) Delivery of Registration  Statements.  The Company has furnished or
will deliver to the Placement Agent and counsel for the Placement Agent, without
charge,  copies of the  Registration  Statement as originally  filed and of each
amendment  thereto  (including  exhibits  filed  therewith  or  incorporated  by
reference  therein and documents  incorporated  or deemed to be  incorporated by
reference  therein) and copies of all consents and certificates of experts.  The
copies of the Registration Statement and each amendment thereto furnished to the
Placement  Agent will be  identical  to the  electronically  transmitted  copies
thereof  filed  with the  Commission  pursuant  to EDGAR,  except to the  extent
permitted by Regulation S-T of the Commission.

         During the period when the Prospectus is required by the 1933 Act to be
delivered in connection with sales of the Common Shares, the Company will inform
the Placement  Agent of its intention to file any amendment to the  Registration
Statement or any supplement to the Prospectus;  will furnish the Placement Agent
with copies of any such amendment or supplement a reasonable  time in advance of
filing;  and will not file any such  amendment or  supplement in a form to which
the Placement  Agent or counsel to the Placement Agent shall  reasonably  object
(it being understood that the terms  "amendment" and "supplement" do not include
documents filed by the Company pursuant to the 1934 Act).

         (b) Delivery of  Prospectus.  The Company will furnish to the Placement
Agent,  without charge,  during the period when the Prospectus is required to be
delivered  under  the 1933 Act or the 1934  Act,  such  number  of copies of the
Prospectus (as amended or  supplemented)  as the Placement  Agent may reasonably
request.  The Prospectus and any amendments or supplements  thereto furnished to
the Placement Agent will be identical to the  electronically  transmitted copies
thereof  filed  with the  Commission  pursuant  to EDGAR,  except to the  extent
permitted by Regulation S-T of the Commission.

         (c) Continued  Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act  Regulations  and the 1934 Act and the  rules
and regulations of the Commission thereunder (the "1934 Act Regulations"), so as
to  permit  the  completion  of  the   distribution  of  the  Common  Shares  as
contemplated  in this  Agreement  and in the  Prospectus.  If at any time when a
prospectus is required by the 1933 Act to be delivered in connection  with sales
of the Common Shares, any event shall occur or condition shall exist as a result
of which it is necessary for the Company to amend the Registration  Statement or
amend or supplement the Prospectus in order that the Prospectus will not include
any  untrue  statements  of a  material  fact or omit to state a  material  fact
necessary in order to make the statements therein not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser,  or if it
shall be necessary at any such time to amend the Registration Statement


                                       9


or amend or supplement the  Prospectus in order to comply with the  requirements
of the 1933 Act or the 1933 Act  Regulations,  the Company will promptly prepare
and file with the Commission such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration  Statement or the
Prospectus  comply with such  requirements,  and the Company will furnish to the
Placement  Agent such number of copies of such  amendment or  supplement  as the
Placement Agent may reasonably request.

         (d) Rule 158. The Company will timely file such reports pursuant to the
1934  Act  as  are  necessary  in  order  to  make  generally  available  to its
securityholders  as soon as practicable  an earnings  statement for the purposes
of, and to provide the benefits  contemplated  by, the last paragraph of Section
11(a) of the 1933 Act.

         (e) Use of Proceeds.  The Company will use the net proceeds received by
it from the sale of the Common Shares in the manner  specified in the Prospectus
under "Use of Proceeds."

         (f)  Listing.  The  Company  will use its best  efforts  to effect  the
listing of the Common Shares on the New York Stock Exchange.

         SECTION 4. Payment of Expenses.

         (a)  Expenses.  The  Company  will  pay all  expenses  incident  to the
performance  of  its  obligations  under  this  Agreement,   including  (i)  the
preparation,  printing  and  filing  of the  Registration  Statement  (including
financial  statements  and exhibits) as originally  filed and of each  amendment
thereto,  (ii) the  preparation  and printing of this  Agreement  and such other
documents as may be required in connection  with the offering,  purchase,  sale,
issuance or delivery of the Common Shares,  (iii) the preparation,  issuance and
delivery of the  certificates  for the Common Shares to the Fund,  including any
stock or other  transfer  taxes and any stamp or other  duties  payable upon the
sale,  issuance or delivery of the Common Shares to the Fund,  (iv) the fees and
disbursements of the Company's counsel and accountants,  (v) the  qualification,
if any, of the Common Shares under state securities laws,  including filing fees
and the reasonable fees and  disbursements of counsel for the Placement Agent in
connection therewith and in connection with the preparation of a Blue Sky Survey
and any  supplement  thereto,  if any,  (vi) the  printing  and  delivery to the
Placement  Agent of the Prospectus  and any  amendments or supplements  thereto,
(vii) the fees and  expenses of any transfer  agent or registrar  for the Common
Shares,  (viii)  the  filing  fees  incident  to,  and the  reasonable  fees and
disbursements  of counsel to the Placement Agent in connection with, the review,
if any, by the National Association of Securities Dealers,  Inc. (the "NASD") of
the  terms  of the sale of the  Common  Shares  and  (ix) the fees and  expenses
incurred in  connection  with the  listing of the Common  Shares on the New York
Stock  Exchange.  It is understood,  however,  that,  except as provided in this
Section and Sections 5(i) and 6 hereof,  the Placement Agent will pay all of its
own costs and expenses, including the fees of its counsel.

         (b)  Termination  of Agreement.  If this Agreement is terminated by the
Placement  Agent in  accordance  with the  provisions  of  Section 5 or  Section
9(a)(i),  the  Company  shall  reimburse  the  Placement  Agent  for  all of its
out-of-pocket  expenses,  including the  reasonable  fees and  disbursements  of
counsel for the Placement Agent.

         SECTION 5. Conditions of Placement Agent's Obligations. The obligations
of  the  Placement   Agent   hereunder  are  subject  to  the  accuracy  of  the
representations  and warranties of the Company


                                       10


contained in Section 1 hereof or in  certificates  of any officer of the Company
or any subsidiary of the Company delivered pursuant to the provisions hereof, to
the performance by the Company of its covenants and other obligations hereunder,
and to the following further conditions:

         (a) Effectiveness of Registration  Statement.  No stop order suspending
the effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission,  and
any request on the part of the Commission for additional  information shall have
been complied with to the  reasonable  satisfaction  of counsel to the Placement
Agent. The Prospectus shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period  prescribed for such filing by the 1933
Act Regulations.

         (b) Opinion of Counsel for  Company.  At Closing  Time,  the  Placement
Agent shall have  received the opinion,  dated as of Closing Time, of Sullivan &
Cromwell, counsel for the Company, in form and substance reasonably satisfactory
to counsel to the Placement Agent, to the effect set forth in Exhibit A.

         (c) Opinion of Special Maryland  Counsel for Company.  At Closing Time,
the Placement  Agent shall have received the opinion,  dated as of Closing Time,
of Ballard  Spahr  Andrews & Ingersoll  LLP,  special  Maryland  counsel for the
Company,  in form  and  substance  reasonably  satisfactory  to  counsel  to the
Placement Agent, to the effect set forth in Exhibit B.

         (d)  Opinion of Counsel  for  Placement  Agent.  At Closing  Time,  the
Placement Agent shall have received the favorable  opinion,  dated as of Closing
Time, of Skadden,  Arps,  Slate,  Meagher & Flom LLP,  counsel for the Placement
Agent, with respect to the matters set forth in clauses (i), (v) and (vi) in the
opinion and (i) in the letter in Exhibit A hereto.  In giving such  opinion such
counsel may state that,  insofar as such opinion involves factual matters,  they
have relied,  to the extent they deem proper,  upon  certificates of officers of
the Company and its subsidiaries and certificates of public officials.

         (e) Officers' Certificate.  At Closing Time, there shall not have been,
since the date hereof or since the respective  dates as of which  information is
given in the  Prospectus,  any  material  adverse  change  in or  affecting  the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries  taken as a whole,  whether or not
arising in the ordinary  course of business,  and the Placement Agent shall have
received a  certificate  of the Chairman or President,  and the  Executive  Vice
President - Finance and Administration,  Chief Financial Officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change,  (ii) the  representations and warranties in Section 1(a) hereof
are true and correct with the same force and effect as though  expressly made at
and as of Closing Time,  (iii) the Company has complied with all  agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing  Time,  and  (iv) no stop  order  suspending  the  effectiveness  of the
Registration  Statement has been issued and no proceedings for that purpose have
been instituted or, to the best of such officers' knowledge,  are pending or are
contemplated by the Commission.

         (f) Accountant's  Comfort Letter.  At the time of the execution of this
Agreement,  the Placement Agent shall have received from Deloitte & Touche LLP a
letter dated such date,  in form and  substance  satisfactory  to the  Placement
Agent,  containing statements and information of the type ordinarily included in
accountants'  "comfort  letters"  with respect to the financial  statements  and
certain financial  information  contained in the Registration  Statement and the
Prospectus.


                                       11


         In  addition,  at the  time of the  execution  of this  Agreement,  the
Placement Agent shall have received from Arthur  Andersen LLP a letter,  in form
and substance  satisfactory to the Placement  Agent,  containing  statements and
information  as may be  requested  by the  Placement  Agent and  counsel for the
Placement  Agent,  with  respect to certain  financial  information  relating to
Charles E. Smith  Commercial  Realty L.P.  contained  in the  Company's  Current
Report on Form 8-K dated  October  19,  2001,  which  financial  information  is
incorporated by reference into the Prospectus.

         (g) Bring-down  Comfort  Letter.  At Closing Time, the Placement  Agent
shall have received from each of Deloitte & Touche LLP and Arthur Andersen LLP a
letter,  dated  as of  Closing  Time,  to the  effect  that  they  reaffirm  the
statements made in their respective letters furnished pursuant to subsection (f)
of this Section,  except that the specified date referred to shall be a date not
more than three business days prior to Closing Time.

         (h) Approval of Listing.  At Closing Time,  the  Securities  shall have
been  approved  for  listing on the New York  Stock  Exchange,  subject  only to
official notice of issuance.

         (i)  Additional  Documents.  At Closing Time counsel for the  Placement
Agent shall have been  furnished  with such  documents  and opinions as they may
require for the purpose of enabling  them to pass upon the  issuance and sale of
the Securities as herein  contemplated,  or in order to evidence the accuracy of
any of the  representations  or  warranties,  or the  fulfillment  of any of the
conditions,  herein  contained;  and all  proceedings  taken by the  Company  in
connection  with the issuance and sale of the Securities as herein  contemplated
shall be reasonably  satisfactory  in form and substance to the Placement  Agent
and counsel for the Placement Agent.

         (j)  Termination  of  Agreement.  If any  condition  specified  in this
Section 5 shall not have been  fulfilled  when and as required to be  fulfilled,
this Agreement may be terminated by the Placement Agent by notice to the Company
at any time at or prior to Closing  Time and such  termination  shall be without
liability  of any party to any other  party  except as provided in Section 4 and
except that Sections 1, 6, 7 and 8 shall survive any such termination and remain
in full force and effect.

         SECTION 6. Indemnification.

         (a)  Indemnification  of Placement Agent. The Company and the Operating
Partnership  each agree to indemnify and hold  harmless the Placement  Agent and
each person,  if any, who  controls  the  Placement  Agent within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, as follows:

          (i) against  any and all loss,  liability,  claim,  damage and expense
     whatsoever,  as  incurred,  arising out of any untrue  statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or any amendment  thereto),  or the omission or alleged omission therefrom
     of a material fact  required to be stated  therein or necessary to make the
     statements therein not misleading or arising out of any untrue statement or
     alleged untrue  statement of a material fact included in the Prospectus (or
     any amendment or supplement  thereto),  or the omission or alleged omission
     therefrom  of a material  fact  necessary  in order to make the  statements
     therein,  in the light of the circumstances under which they were made, not
     misleading;


                                       12


          (ii) against any and all loss,  liability,  claim,  damage and expense
     whatsoever,  as  incurred,  to the extent of the  aggregate  amount paid in
     settlement of any  litigation,  or any  investigation  or proceeding by any
     governmental  agency  or body,  commenced  or  threatened,  or of any claim
     whatsoever  based upon any such untrue  statement or omission,  or any such
     alleged  untrue  statement or omission;  provided  that (subject to Section
     6(d) below) any such settlement is effected with the written consent of the
     Company; and

          (iii) against any and all expense whatsoever,  as incurred (including,
     subject to Section 6(c) below, the fees and disbursements of counsel chosen
     by the Placement Agent), reasonably incurred in investigating, preparing or
     defending against any litigation, or any investigation or proceeding by any
     governmental  agency  or  body,  commenced  or  threatened,  or  any  claim
     whatsoever  based upon any such untrue  statement or omission,  or any such
     alleged untrue  statement or omission,  to the extent that any such expense
     is not paid under (i) or (ii) above;

provided,  however,  that this indemnity  agreement shall not apply to any loss,
liability,  claim,  damage or expense to the  extent  arising  out of any untrue
statement or omission or alleged  untrue  statement or omission made in reliance
upon and in conformity with written information  furnished to the Company by the
Placement  Agent  expressly  for  use  in the  Registration  Statement  (or  any
amendment thereto), or the Prospectus (or any amendment or supplement thereto).

         (b)  Indemnification  of  Company,  Operating  Partnership,   Trustees,
Partners and Officers. The Placement Agent agrees to indemnify and hold harmless
the Company, the Operating  Partnership,  their respective trustees or partners,
each of the officers who signed the Registration Statement,  and each person, if
any, who controls the Company or the Operating Partnership within the meaning of
Section 15 of the 1933 Act or Section  20 of the 1934 Act,  against  any and all
loss, liability,  claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred,  but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions,  made in the
Registration  Statement (or any  amendment  thereto) or the  Prospectus  (or any
amendment  thereto) in reliance upon and in conformity with written  information
furnished to the Company or the Operating  Partnership  by the  Placement  Agent
expressly for use in the  Registration  Statement (or any amendment  thereto) or
the Prospectus (or any amendment thereto).

         (c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably  practicable to each indemnifying party of
any action  commenced  against it in  respect of which  indemnity  may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying  party  from  any  liability  hereunder  to  the  extent  it is not
materially  prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement.  In the case of parties  indemnified  pursuant to Section 6(a) above,
counsel to the  indemnified  parties shall be selected by the  Placement  Agent,
and, in the case of parties indemnified  pursuant to Section 6(b) above, counsel
to the  indemnified  parties shall be selected by the Company.  An  indemnifying
party may  participate  at its own  expense in the  defense of any such  action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified  party) also be counsel to the indemnified party.
In no event shall the  indemnifying  parties be liable for fees and  expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel  for all  indemnified  parties  in  connection  with any one  action  or
separate but similar or related actions in the same jurisdiction  arising out of
the same general  allegations or  circumstances.  No  indemnifying  party shall,
without  the  prior  written  consent  of the  indemnified


                                       13


parties,  settle or  compromise  or  consent to the entry of any  judgment  with
respect  to  any  litigation,   or  any   investigation  or  proceeding  by  any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which  indemnification  or  contribution  could be sought  under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional  release of each indemnified  party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

         (d) Settlement without Consent if Failure to Reimburse.  If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified  party for fees and expenses of counsel in  accordance  with Section
6(a)(iii) hereof, such indemnifying party agrees that it shall be liable for any
settlement of the nature  contemplated by Section 6(a)(ii)  effected without its
written  consent if (i) such  settlement is entered into more than 45 days after
receipt  by  such  indemnifying  party  of  the  aforesaid  request,  (ii)  such
indemnifying party shall have received notice of the terms of such settlement at
least  30  days  prior  to  such  settlement  being  entered  into,  (iii)  such
indemnifying  party,  if it has not  theretofore  paid  such  reimbursement,  is
requested again to pay  reimbursement at least five, but not more than ten, days
prior to such settlement  being entered into, and (iv) such  indemnifying  party
shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.

         SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason  unavailable to or  insufficient  to hold harmless an
indemnified  party in respect of any  losses,  liabilities,  claims,  damages or
expenses referred to therein,  then each indemnifying  party shall contribute to
the aggregate amount of such losses,  liabilities,  claims, damages and expenses
incurred by such  indemnified  party, as incurred,  (i) in such proportion as is
appropriate to reflect the relative  benefits received by the Company on the one
hand and the  Placement  Agent  on the  other  hand  from  the  offering  of the
Securities  pursuant to this  Agreement  or (ii) if the  allocation  provided by
clause  (i) is not  permitted  by  applicable  law,  in  such  proportion  as is
appropriate to reflect not only the relative  benefits referred to in clause (i)
above  but also the  relative  fault of the  Company  on the one hand and of the
Placement Agent on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.

         The relative  benefits  received by the Company on the one hand and the
Placement  Agent  on the  other  hand in  connection  with the  offering  of the
Securities  pursuant  to  this  Agreement  shall  be  deemed  to be in the  same
respective  proportions  as the  total net  proceeds  from the  offering  of the
Securities  pursuant to this Agreement (before deducting  expenses)  received by
the  Company  and the  Fee and any  discounts  or  commissions  received  by the
Placement Agent.

         The  relative  fault of the  Company on the one hand and the  Placement
Agent on the other hand shall be determined by reference to, among other things,
whether  any such  untrue or alleged  untrue  statement  of a  material  fact or
omission or alleged  omission to state a material  fact  relates to  information
supplied  by the Company or by the  Placement  Agent and the  parties'  relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such statement or omission.

         The Company and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of  allocation  which does not take account of
the equitable  considerations referred to above in this Section 7.


                                       14


The  aggregate  amount of losses,  liabilities,  claims,  damages  and  expenses
incurred by an  indemnified  party and referred to above in this Section 7 shall
be deemed to include  any legal or other  expenses  reasonably  incurred by such
indemnified  party  in   investigating,   preparing  or  defending  against  any
litigation,  or any  investigation or proceeding by any  governmental  agency or
body,  commenced  or  threatened,  or any claim  whatsoever  based upon any such
untrue or alleged untrue statement or omission or alleged omission.

         Notwithstanding  the provisions of this Section 7, the Placement  Agent
shall not be required to contribute  any amount in excess of the amount by which
the total price of the Securities placed by it exceeds the amount of any damages
which the Placement  Agent has  otherwise  been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged omission.

         No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

         For purposes of this  Section 7, each person,  if any, who controls the
Placement  Agent  within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall  have the same  rights to  contribution  as the  Placement
Agent, and each trustee,  or partner,  as the case may be, of the Company or the
Operating  Partnership,  each officer of the Company who signed the Registration
Statement,  and each person,  if any, who controls the Company or the  Operating
Partnership  within  the  meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same  rights to  contribution  as the Company or the
Operating Partnership, as the case may be.

         SECTION  8.  Representations,  Warranties  and  Agreements  to  Survive
Delivery.  All  representations,  warranties  and  agreements  contained in this
Agreement  or in  certificates  of  officers  of  the  Company  or  any  of  its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and  effect,  regardless  of  any  investigation  made  by or on  behalf  of the
Placement  Agent or any controlling  person of the Placement  Agent, or by or on
behalf of the Company or any officer or trustee or partner or controlling person
of the Company of the Operating  Partnership,  and shall survive delivery of the
Securities to the Fund.

         SECTION 9. Termination of Agreement.

         (a)  Termination;  General.  The  Placement  Agent may  terminate  this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been,  since the time of execution  of this  Agreement or since the
respective  dates  as of which  information  is  given  in the  Prospectus,  any
material  adverse change in or affecting the condition,  financial or otherwise,
or the earnings,  business affairs or business  prospects of the Company and its
subsidiaries taken as a whole,  whether or not arising in the ordinary course of
business,  or (ii) if there has  occurred  any  material  adverse  change in the
financial  markets in the United  States,  or any  outbreak  of  hostilities  or
escalation  thereof or other  calamity  or crisis or any  change or  development
involving a prospective change in national or international political, financial
or economic conditions,  in each case the effect of which is such as to make it,
in the judgment of the Placement  Agent,  impracticable or inadvisable to market
the Securities or to enforce contracts for the sale of the Securities,  or (iii)
if trading in any  securities  of the Company has been  suspended or  materially
limited  by the  Commission  or the  New  York  Stock  Exchange,  or if  trading
generally on the American Stock Exchange or the New York Stock Exchange has been
suspended or


                                       15


materially limited, or minimum or maximum prices for trading have been fixed, or
maximum  ranges for prices have been  required,  by any of such  exchanges or by
order  of the  Commission  or any  other  governmental  authority,  or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.

         (b)  Liabilities.  If this  Agreement  is  terminated  pursuant to this
Section,  such termination  shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall  survive  such  termination  and  remain  in full  force and
effect.

         SECTION 10.  Notices.  All notices and other  communications  hereunder
shall be in  writing  and shall be  deemed to have been duly  given if mailed or
transmitted by any standard form of telecommunication.  Notices to the Placement
Agent shall be directed to Merrill Lynch & Co., Merrill Lynch, Pierce,  Fenner &
Smith  Incorporated at North Tower, 4 World Financial Center, New York, New York
10080,  attention  of Mark  Landau;  notices to the  Company  and the  Operating
Partnership  shall be directed to it at 888 Seventh  Avenue,  New York, New York
10019,  attention of the Executive Vice President - Finance and  Administration,
Chief Financial Officer.

         SECTION 11. Parties.  This Agreement shall each inure to the benefit of
and be binding upon the Placement Agent, the Company, the Operating  Partnership
and  their  respective  successors.  Nothing  expressed  or  mentioned  in  this
Agreement  is  intended  or  shall be  construed  to give  any  person,  firm or
corporation,  other  than  the  Placement  Agent,  the  Company,  the  Operating
Partnership  and their  respective  successors and the  controlling  persons and
officers,  trustees and partners referred to in Sections 6 and 7 and their heirs
and legal  representatives,  any legal or equitable right, remedy or claim under
or in  respect  of  this  Agreement  or any  provision  herein  contained.  This
Agreement and all conditions  and  provisions  hereof are intended to be for the
sole and exclusive  benefit of the Placement Agent,  the Company,  the Operating
Partnership and their respective  successors,  and said controlling  persons and
officers,  trustees and partners and their heirs and legal representatives,  and
for the  benefit  of no other  person,  firm or  corporation.  No  purchaser  of
Securities  from the Placement Agent shall be deemed to be a successor by reason
merely of such  purchase.

         SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND  CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK.  SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.

         SECTION 13. Effect of Headings. The Article and Section headings herein
and the Table of  Contents  are for  convenience  only and shall not  affect the
construction hereof.


                                       16



         If the  foregoing  is in  accordance  with  your  understanding  of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument,  along with all  counterparts,  will become a binding agreement
among  the  Placement  Agent,  the  Company  and the  Operating  Partnership  in
accordance with its terms.

                                        Very truly yours,

                                        VORNADO REALTY TRUST


                                        By:
                                            /s/ STEVEN ROTH
                                           -------------------------------------
                                           Name:  Steven Roth
                                           Title: Chief Executive Officer


                                        VORNADO REALTY L.P.

                                        By:  Vornado Realty Trust,
                                        its General Partner

                                        By:
                                            /s/ STEVEN ROTH
                                           -------------------------------------
                                           Name:  Steven Roth
                                           Title: Chief Executive Officer

CONFIRMED AND ACCEPTED,
    as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
           INCORPORATED



By:
    /s/ MARK LANDAU
   -------------------------------------
          Authorized Signatory








                                                                       EXHIBIT A

                      FORM OF OPINION OF COMPANY'S COUNSEL
                    TO BE DELIVERED PURSUANT TO SECTION 5(b)

         (i) The Company is a real estate  investment  trust duly  organized and
existing  under the laws of the State of Maryland and is in good  standing  with
the State Department of Assessments and Taxation of Maryland;

         (ii) The  Company  has the trust  power to own,  lease and  operate its
properties  and to  conduct  its  business  substantially  as  described  in the
Prospectus  and to enter into and perform its  obligations  under this Agreement
and the Purchase Agreement;

         (iii) The Operating Partnership is a limited partnership duly organized
and  existing  under the laws of the State of Delaware  and has the  partnership
power and  authority to own,  lease and operate its  properties  and conduct its
business substantially as described in the Prospectus;

         (iv) The Common Shares have been duly authorized and validly issued and
are fully paid and nonassessable;

         (v) This Agreement has been duly authorized,  executed and delivered by
the Company and the Operating Partnership;

         (vi) The Registration  Statement has been declared  effective under the
1933 Act, and, to the best of such counsel's knowledge, no stop order suspending
the  effectiveness  of  the  Registration  Statement  has  been  issued  and  no
proceedings  for that purpose have been instituted or are pending under the 1933
Act;

         (vii) All regulatory  consents,  authorizations,  approvals and filings
required to be obtained  or made by the  Company  under the Federal  laws of the
United States and the laws of the State of New York for the  issuance,  sale and
delivery of the Common  Shares by the Company to the Fund have been  obtained or
made;  provided,  however,  that for  purposes of this  paragraph  (viii),  such
counsel need not express any opinion with respect to state  securities laws that
may be applicable to the issuance, sale or delivery of the Common Shares;

         (viii) The  execution  and  delivery by the  Company and the  Operating
Partnership of the Purchase Agreement, the issuance of the Common Shares and the
sale of the Common  Shares by the Company to the Fund  pursuant to the  Purchase
Agreement do not, and the  performance by the Company of its  obligations  under
this  Agreement  will not,  (A)  violate  the  Company's  Amended  and  Restated
Declaration of Trust, as amended,  or the Company's  Amended and Restated Bylaws
or the  certificate  of limited  partnership of the Operating  Partnership,  (B)
violate any court order or  administrative  decree  known to such counsel or any
Federal law of the United  States or law of the State of New York  applicable to
the Company or the  Operating  Partnership,

                                      A-1



or (C) result in a default under or breach of any agreement  filed as an exhibit
to the  Company's  most  recent  Annual  Report on Form 10-K and any  subsequent
Quarterly  Report  on Form  10-Q  or  Current  Report  on Form  8-K  under  Item
601(b)(10) of Regulation S-K, subject in the case of clauses (A), (B) and (C) of
this  paragraph  (viii),  to  bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or  affecting  creditors'  rights and to general  equity  principles;  provided,
however, that for purposes of this paragraph (ix), such counsel need not express
any opinion with respect to Federal or state  securities  laws,  other antifraud
laws, fraudulent transfer laws or the Employee Retirement Income Security Act of
1974 and related laws;

         (ix) Such counsel shall confirm (i) the opinion that,  commencing  with
its taxable year ending  December 31,  1993,  the Company has been  organized in
conformity with the requirements for qualification as a REIT under the Code, and
its proposed method of operation will enable it to satisfy the  requirements for
qualification  and  taxation  as a REIT and (ii) that the  discussion  set forth
under  the  caption  "Federal  Income  Tax  Considerations"  in  the  Prospectus
Supplement dated February 25, 2002 to the extent it describes  matters of law or
legal  conclusions,  is correct in all  material  respects;  in  providing  such
opinion,  such  counsel  may rely (i) upon the  statements  and  representations
contained in certificates provided by the Company and Two Penn Plaza REIT, Inc.,
(ii) without  independent  investigation,  upon  statements and  representations
contained  in  a  certificate  provided  by  Alexander's,  Inc.,  (iii)  without
investigation,   upon  an  opinion  of  Shearman  &  Sterling   concerning   the
qualification  of Alexander's as a REIT for federal income tax purposes and (iv)
upon any other  certificates  or  opinions  of  counsel as deemed  necessary  or
appropriate  in  rendering  such opinion and subject to an analysis of the Code,
Treasury Regulations  thereunder,  judicial authority and current administrative
rulings and such other laws and facts as deemed relevant and necessary; and

         (x) Neither the Company nor the Operating Partnership is an "investment
company", as such term is defined in the Investment Company Act of 1940.

         In giving this opinion, Sullivan & Cromwell may state that such opinion
is limited to the Federal laws of the United States of America,  the laws of the
State of New York,  the Laws of the State of Maryland  and the  Revised  Uniform
Limited  Partnership  Act of the State of Delaware,  and such counsel express no
opinion as to the effect of the laws of any other jurisdiction; and such counsel
may rely (1) as to  certain  matters,  upon  information  obtained  from  public
officials,  officers  of the  Company  and its  subsidiaries  and other  sources
believed by them to be responsible and (2) as to all matters of Maryland law, on
the  opinion of Ballard  Spahr  Andrews &  Ingersoll,  LLP,  and such  counsel's
opinion may be subject to the same assumptions,  qualifications  and limitations
with respect to such matters as are  contained in such opinion of Ballard  Spahr
Andrews & Ingersoll,  LLP. Such counsel may assume that the certificates for the
Common  Shares  conform to the specimen  thereof  examined by them and have been
duly  countersigned  and  registered  by a registrar  and transfer  agent of the
Common  Shares,  that this  Agreement  has been duly  authorized,  executed  and
delivered  by the  Placement  Agent  and that


                                      A-2


the signatures on all documents examined by them are genuine,  assumptions which
such counsel need not independently verify.

          (i) On the basis of the  information  which was reviewed in the course
     of the performance of the services referred to in their opinion  considered
     in the light of their  understanding  of the  applicable law (including the
     requirements  of Form S-3 and the character of the prospectus  contemplated
     thereby) and the  experience  they have gained through their practice under
     the 1933  Act,  such  counsel  are of the  opinion  that  each  part of the
     Registration   Statement,   when  such  part  became  effective,   and  the
     Prospectus, as of the date of the Prospectus Supplement,  appeared on their
     face to be appropriately  responsive,  in all material respects relevant to
     the offering of the Common Shares,  to the requirements of the 1933 Act and
     the  applicable  1933  Act  Regulations;  and  nothing  that  came to their
     attention  in the course of their  review has caused them to believe  that,
     insofar as relevant to the offering of the Common  Shares,  any part of the
     Registration  Statement,  when such part became  effective,  contained  any
     untrue  statement of a material  fact or omitted to state any material fact
     required to be stated therein or necessary to make the  statements  therein
     not  misleading or that the  Prospectus,  as of the date of the  Prospectus
     Supplement, contained any untrue statement of a material fact or omitted to
     state any material fact necessary in order to make the statements  therein,
     in the  light  of  the  circumstances  under  which  they  were  made,  not
     misleading;  also, nothing that has come to such counsel's attention in the
     course of certain procedures (as described in such opinion) has caused such
     counsel to believe that the Prospectus, as of the date and time of delivery
     of such  letter,  contained  any untrue  statement  of a  material  fact or
     omitted  to  state  any  material  fact  necessary  in  order  to make  the
     statements therein, in the light of the circumstances under which they were
     made, not misleading;  provided,  however, that such opinion may state that
     the limitations inherent in the independent verification of factual matters
     and the character of  determinations  involved in the registration  process
     are such that such  counsel  does not  assume  any  responsibility  for the
     accuracy,  completeness  or fairness  of the  statements  contained  in the
     Registration  Statement or the Prospectus,  except for those made under the
     captions  "Description of Shares of Beneficial  Interest" and "Supplemental
     Description of Shares of Beneficial Interest" in the Prospectus  Supplement
     insofar as they relate to the  provisions of documents  therein  described,
     and that such does not express  any  opinion or belief as to the  financial
     statements  or schedules or other  financial  data derived from  accounting
     records contained in the Registration Statement or the Prospectus; and


          (ii) Such  counsel  does not know of any  litigation  or  governmental
     proceeding  instituted  or  threatened  against  the  Company or any of its
     consolidated  subsidiaries  that would be required to be  disclosed  in the
     Prospectus  and is not so disclosed;  and such counsel does not know of any
     documents  that are  required to be filed as  exhibits to the  Registration
     Statement and are not so filed or of any documents  that are required to be
     summarized in the Prospectus that are not so summarized.


                                      A-3



                                                                       EXHIBIT B


                               FORM OF OPINION OF
                     SPECIAL MARYLAND COUNSEL TO THE COMPANY
                           TO BE DELIVERED PURSUANT TO
                                  SECTION 5(c)


         (i) The Company is a real estate  investment  trust duly  organized and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the State Department of Assessments and Taxation of Maryland;

         (ii) The  Company  has the trust  power to own,  lease and  operate its
properties  and to  conduct  its  business  substantially  as  described  in the
Prospectus  and to enter into and perform its  obligations  under this Agreement
and the Purchase Agreement;

         (iii) The Company has an authorized  capitalization as set forth in the
Prospectus under the caption"  Capitalization" (except for subsequent issuances,
if any,  pursuant to this  Agreement  or pursuant to the terms of  reservations,
agreements or employee benefit plans, including, without limitation, the Vornado
Realty Trust Omnibus  Share Plan,  dividend  reinvestment  plans and employee or
director stock option plans, or the exercise of options  outstanding on the date
hereof,  and in each case referred to in the  Prospects),  and all of the issued
and outstanding shares of beneficial  interest of the Company have been duly and
validly authorized and issued and are fully paid and  nonassessable;  the issued
and  outstanding  shares of  beneficial  interest of the Company  have been duly
authorized and validly issued and are fully paid and nonassessable;  and none of
the  outstanding  shares of  beneficial  interest  of the  Company was issued in
violation of any preemptive  rights of any  shareholder  of the Company  arising
under Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland ("Title 8") or the Declaration of Trust or Bylaws of the Company;

         (iv) The issuance and sale of the Common Shares to the Fund pursuant to
the Purchase Agreement have been duly authorized, and, when issued and delivered
by the Company  against  payment  therefor  pursuant to this  Agreement  and the
resolutions of the Board of Trustees and the duly authorized  committee  thereof
authorizing their issuance, the Common Shares will be validly issued, fully paid
and nonassessable;

         (v) The information in the Prospectus under the heading "Description of
Shares of Beneficial  Interest" in the Prospectus and "Supplemental  Description
of Shares of Beneficial  Interest" in the Prospectus  Supplement,  to the extent
that it  constitutes  matters  of  Maryland  law,  summaries  of legal  matters,
documents or proceedings or legal conclusions, has been reviewed by such counsel
and is correct in all material respects;

         (vi) The Common Shares  conform in all material  respects as to matters
of  Maryland  law  to  the  description  thereof  contained  under  the  caption
"Description   of  Shares  of  Beneficial   Interest"  in  the   Prospectus  and
"Supplemental  Description  of Shares of Beneficial  Interest" in the Prospectus
Supplement  and the form of  certificate  evidencing the Common Shares is in due
and proper form in accordance with Title 8;

                                      B-1



         (vii)  The  issuance  of  the  Common  Shares  is  not  subject  to any
preemptive or similar rights arising under Title 8, the  Declaration of Trust or
the Bylaws of the Company;

         (viii) No  authorization,  approval,  consent  or order of any court or
governmental  authority  or agency  of the  State of  Maryland  is  required  in
connection with the offering, issuance or sale of the Common Shares to the Fund,
except such as may be required under the 1933 Act or the 1933 Act Regulations or
securities laws or regulations of any state or other jurisdiction;

         (ix) This  Agreement has been duly  authorized  by all necessary  trust
action of the Company,  executed and, so far as is known to us, delivered by the
Company;

         (x) The execution and filing of Articles  Supplementary relating to the
Common Shares (the "Articles  Supplementary")  have been duly  authorized by the
Company and the Articles  Supplementary  have been executed in  accordance  with
Title 8 and have been filed with the SAT; and

         (xi) The execution,  delivery and  performance of this  Agreement,  the
consummation of the transactions  contemplated  herein and the compliance by the
Company with its  obligations  hereunder will not result in any violation of (A)
the provisions of the Amended and Restated Declaration of Trust or Bylaws of the
Company or (B) any applicable  Maryland law or administrative  regulation or, to
the best knowledge of such counsel,  administrative or court decree of the State
of Maryland,  except with respect to clause (B),  such  violations  as would not
have a material  adverse effect on the general  affairs,  management,  financial
position,  shareholders'  equity or results of operations of the Company and its
subsidiaries,  and subject,  in the case of clauses (A) and (B), to  bankruptcy,
insolvency, fraudulent transfer, reorganization,  moratorium and similar laws of
general applicability  relating to or affecting creditors' rights and to general
equity principles;


         In giving these  opinions,  Ballard Spahr Andrews & Ingersoll,  LLP may
state that such  opinions  are limited to the laws of the States of Maryland and
may rely (1) as to all matters of fact, upon certificates and written statements
of officers and employees of and  accountants  for the Company and (2) as to the
qualification and good standing of the Company or any of its subsidiaries in any
other  jurisdiction,  upon opinions of counsel in such other  jurisdictions  and
certificates of appropriate government officials.





                                      B-2