earned but not yet delivered.” In addition, futur changes in the value of the shares are no longer recognized as additional compensation expense. The fair value of this obligation was $50,345,000 at December 31, 2003. The Company has reflected this liability as Deferred Compensation Shares Not Yet Delivered in the Shareholders’ Equity section of the balance sheet. For the year ended December 31, 2001, the Company recognized appr oximately $4,744,000 of compensation expense of which $2,612,000 represented the appreciation in value of the shares and $2,132,000 represented dividends paid on the shares. 

Effective January 1, 2002, the Company extended its employment agr eement with Mr. Fascitelli for a five-year period through December 31, 2006. Pursuant to the extended employment agreement, Mr . Fascitelli is entitled to receive a deferred payment on December 31, 2006 of 626,566 Vornado common shares which ar e valued for compensation purposes at $27,500,000 (the value of the shares on March 8, 2002, the date the extended employment agreement was executed). The shares are being held in a rabbi trust for the benefit of Mr Fascitelli and vested 100% on December 31, 2002. The extended employment agreement does not permit diversification, allows settlement of the deferred compensation obligation by delivery of these shares only, and permits the deferred delivery of these shares. The value of these shares was amortized ratably over the one year vesting period as compensation expense. 

Pursuant to the Company’s annual compensation review in February 2002 with Joseph Macnow, the Company’s Chief Financial Officer, the Compensation Committee approved a $2,000,000 loan to Mr. Macnow, bearing interest at the applicable federal rate of 4.65% per annum and due January 1, 2006. The loan, which was funded on July 23, 2002, was made in conjunction with Mr. Macnow’s June 2002 exercise of options to pur chase 225,000 shares of the Company’s common stock. The loan is collateralized by assets with a value of not less than two times the loan amount. In 2002, as a result of the decline in the value of the options, Mr Macnow supplemented the collateral with cash and marketable securities. 

One other executive officer of the Company has a loan outstanding pursuant to an employment agreement totaling $500,000 at December 31, 2003. The loan matures in April 2005 and bears inter est at the applicable Federal rate provided (4.5% at December 31, 2003). 

## Transactions with Affiliates and Officers and Trustees of the Company 

## ALEXANDER’S 

The Company owns 33.1% of Alexander’s. Mr. Roth and Mr. Fascitelli ar e Officers and Directors of Alexander’s and the Company provides various services to Alexander’s in accordance with management, development and leasing agreements and the Company has made loans to Alexander’s aggregating $124,000,000 at December 31, 2003. See Note—5 Investments in Partially-Owned Entities for further details. 

In 2002, the Company constructed a $16.3 million community facility and low-income residential housing development (the “30th Street Venture”), in order to receive 163,728 squar feet of transferable development rights, generally referred to as “air rights”. The Company donated the building to a charitable or ganization. The Company sold 106,796 square feet of these air rights to third parties at an average price of $120 per squar foot. An additional 28,821 square feet of air rights was purchased by Alexander’s at a price of $120 per square foot for use at Alexander’ s 59th Street development project (the “59th Street Project”). In each case, the Company received cash in exchange for air rights. The Company identified third party buyers for the remaining 28,111 square feet of air rights related to the 30th Street Venture. These third party buyers wanted to use the air rights for the development of two projects located in the general ar ea of 86th Street which was not within the required geo- graphical radius of the construction site nor in the same Community Board as the low-income housing and community facility project. The 30th Street Venture asked Alexander’s to sell 28,111 squar e feet of the air rights it already owned to the third party buyers (who could use them) and the 30th Street Venture would r eplace them with 28,111 square feet of air rights. In October 2002, the Company sold 28,111 squar feet of air rights to Alexander’s for an aggregate purchase price of $3,058,000 

