REGO II MANAGEMENT AND DEVELOPMENT AGREEMENT

EXHIBIT 10.54

REGO II MANAGEMENT

AND DEVELOPMENT AGREEMENT

THIS REGO II MANAGEMENT AND DEVELOPMENT AGREEMENT dated as of the 20 ^th day of December, 2007 (the “ Management Agreement ”) between ALEXANDER’S OF REGO PARK II, INC., a Delaware corporation, having an office c/o Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019 (collectively “ Owner ”) and VORNADO REALTY L.P., a Maryland limited partnership having an office at c/o Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019 (“ Manager ”).

IN CONSIDERATION of the mutual promises and covenants herein contained. Owner and Manager agree as follows:

ARTICLE I

Appointment of Manager

A.        Owner hereby appoints Manager, on the conditions and for the term hereinafter provided, to act for it in the operation, maintenance, management and development of the property identified on Exhibit A attached hereto and made a part hereof (the “Property”), which management and development duties are more particularly described in Articles IV and V. Manager hereby accepts said appointment to the extent of, and subject to, the conditions set forth below.

B.         Owner and Manager hereby acknowledge that Owner and Manager are simultaneously herewith entering into that certain Real Estate Retention Agreement (the “ Retention Agreement ”), whereby Vornado Realty, L.P., as successor in interest to Vornado, Inc., has agreed to act as leasing agent with respect to the Property.

ARTICLE II

Term

The term of this Agreement shall commence on the date hereof and shall continue until the date of Substantial Completion of the Property (the “ Initial Expiration Date ”) unless this Agreement shall be terminated and the obligations of the parties hereunder shall sooner cease and terminate, as hereinafter provided; provided , however , that the term of this Management Agreement shall automatically extend for consecutive one-year periods following the Initial Expiration Date unless Manager or Owner provides the other with written notice, at least six months prior to the beginning of any such additional one-year period, of its election to terminate this Management Agreement.

ARTICLE III

Management and Development Fee

A.        Owner shall pay Manager, as Manager’s entire compensation for the services rendered hereunder in connection with the management of the Property, a management fee (the “ Management Fee ”) equal to (i)$120,000.00 per annum, payable in equal monthly installments, in arrears, in the amount of $10,000.00 each on the tenth day of each calendar month beginning with the first calendar month after the date hereof. In the event that this Agreement shall commence on a date other than the first day of a calendar month or shall terminate on a date other than the last day of a calendar month, the installment of the Management Fee payable for that month shall be prorated for the actual number of days that this Agreement is effective in that calendar month.

B.         Owner shall pay Manager, as Manager’s compensation for the services rendered hereunder in connection with the development of the Property, a development fee (the “ Development Fee ”) (the Development Fee and the Management Fee are sometimes referred to herein, collectively, as the “ Management and Development Fee ”) equal to (i) five percent (5%) of the total Development Costs (as hereinafter defined) with

respect to the Property, plus (ii) general overhead and administrative expenses equal to one percent (1%) of the total Development Costs with respect to the Property.

Owner shall pay Manager, on account of the Development Fee, monthly installments (the “Development Installments”) each in an amount equal to the Specified Installment Amount (as defined below), with each such installment payable, in arrears, on the tenth day of each calendar month, beginning with the calendar month immediately following the date hereof. In the event that it is determined, upon Substantial Completion of the Property, that the aggregate Development Installments paid to Manager as of such date on account of the Development Fee total less than the amount of the Development Fee that is due to Manager hereunder in respect of the Property, Owner shall pay to Manager, within 15 days after Substantial Completion of the Property or upon the transfer of the Property to any unaffiliated third party, whichever is earlier, an amount equal to such difference.

As used herein, the following terms shall have the following meanings:

“ Development Budget ” shall mean, collectively, the capital budgets and development schedules setting forth the Development Costs to be incurred in connection with the Property, as prepared by Manager and approved by Owner and as more particularly described in Article V hereof.

“ Development Costs ” shall mean the costs incurred by Owner in accordance with the Development Budget in connection with the planning, design and construction, and development or redevelopment of the Property, including, without limitation, fees of any construction manager, general contractor or any other third-party professionals unaffiliated with Manager and costs set forth in the Development Budget that may be reimbursed by tenants at the Property for improvements outside the leased premises of those tenants. Notwithstanding the foregoing, in no event shall Development Costs include costs paid for or reimbursed by the tenants for improvements inside the leased premises of those tenants, the Development Fee, costs of the land and, with respect to loans made to Owner, interest, commitment fees and points.

“Specified Installment Amount ” means $62,500.

“ Substantial Completion ” shall mean the date on which (a) all punch list items and landscaping at the Property have been completed, (b) the planning, design, construction and development of the Property have been completed, as certified by the Owner’s architect, in accordance with the plans and specifications therefor approved by Owner, (c) all necessary occupancy and other permits have been obtained with respect to the work completed at the Property for which Manager has any obligation hereunder and (d) if leases are then in effect at the Property, the portions of the Property demised under the leases have been delivered for possession to the tenants thereunder in accordance with the terms thereof, the tenants have otherwise taken possession of the demised premises, or, if tenants cannot take possession due to Owner’s obligation to perform tenant improvement work, tenant improvement work has commenced thereunder.

C.         Manager shall receive no commissions, fees or other compensation (other than the Management Fee) in connection with any leasing or sale of any part of or the entire Property or the procuring of any financing or refinancing with respect thereto; provided , however , that nothing contained herein shall in any way restrict the commissions, fees and other compensation otherwise payable to any affiliate of Manager by Owner pursuant to the Retention Agreement.

D.        In the event that Manager desires to provide services not required to be performed hereunder (“ Additional Services ”) for the benefit of a tenant of the Property, Manager shall notify Owner in advance of its intention to provide Additional Services to a tenant or tenants where those services are substantial in nature. Owner shall have the right to prohibit Manager from undertaking such services, if, in its judgment, the performance by Manager of the Additional Services would adversely affect the professional relationship and duties of Manager created by this Agreement.

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ARTICLE IV

Management Services

A.        Manager agrees to operate and manage the Property and to perform or cause to be performed by outside contractors and under Manager’s supervision, the following functions on behalf of Owner in an efficient and diligent manner using the same standard of care, including bidding and selection processes, segregation of funds, internal controls and internal auditing, used by Vornado Realty Trust in connection with its business and in connection with properties owned and/or managed by Vornado Realty Trust:

1.         Preparing, or causing to be prepared at Owner’s expense, and filing all income, franchise and other tax returns relating to the Property required to be filed by Owner.

2.         Keeping true and complete books of account in which shall be entered fully and accurately each transaction of Owner’s business relating to the Property. The books shall be kept in accordance with the accrual method of accounting, and shall reflect all transactions of Owner’s business relating to the Property.

3.         Except as otherwise provided hereunder, procuring, at Owner’s expense and at the direction of Owner or the Owner’s insurance brokers or insurance advisors, any insurance required or desirable in connection with Owner’s business relating to the Property or the employees required to operate Owner’s business relating to the Property and errors and omissions insurance for Manager, under which Owner shall be the sole beneficiary. Manager shall not settle any claim for a settlement amount in excess of $100,000 without the approval of Owner.

4.         Providing all general bookkeeping and accounting services required by the provisions of this Agreement at the expense of Manager. Any independent certified public accountant engaged by Manager shall be subject to the approval of Owner and all fees and expenses payable to such accountant shall be at Owner’s expense. Manager shall maintain separate books and records in connection with its management of the Property under this Management Agreement, which books and records shall be kept in accordance with generally accepted accounting principles. Owner shall have the right to examine or audit the books and records at reasonable times and Manager will cooperate with Owner in connection with any such audit.

5.         Investing funds not otherwise required to pay the costs of day-to-day maintenance and operation of the Property or in the operation of Owner’s business pursuant to guidelines set by Owner.

6.         Repairing, making replacements and maintaining the Property and all common areas at the Property and purchasing all materials and supplies that Manager deems necessary to repair and operate and maintain the Property, in order that the Property shall remain in good, sound and clean condition, and making such improvements, construction, changes and additions to the Property (including capital improvements), as Manager deems advisable, provided that Manager shall receive approval of Owner prior to undertaking any improvements, construction, changes or additions to the Property. Owner shall pay all fees, costs and expenses incurred by Manager in connection with the retention of outside contractors and suppliers for the performance of all repairs, replacements and maintenance of the Property in the event that Owner decides to remodel or extensively refurbish the Property, or any part thereof. Manager shall be entitled to receive additional compensation for services required to be rendered by it for services such as supervision of construction and allocation of overhead expense (i) to the extent that tenants at the Property reimburse Owner for such costs and (ii) if such costs are not reimbursable by the tenants and such remodeling or refurbishment shall be on a significant scale and shall require significant work by the Manager, the amount of such additional compensation payable to Manager shall be equal to Manager’s costs in connection with such work, plus twenty percent (20%) of Manager’s costs.

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7.         Negotiating and executing contracts for the furnishing to the Property of all services and utilities, including electricity, gas, water, steam, telephone, cleaning, security, vermin extermination, elevator, escalator and boiler maintenance and any other utilities or services, including repairs and maintenance of the buildings, other improvements and common areas at the Property, or such of them as Manager deems advisable to assure that the Property shall be caused to be and remain in a good, sound and clean condition and properly operating. All fees, costs and expenses under the contracts shall be paid by Owner.

8.         Subject to the terms of any loan or credit agreement entered into by Owner with a lender and affecting the Property, demanding, receiving and collecting all rents, income and other revenues, which Manager shall deposit in a bank account or accounts of Owner maintained by Manager (with any interest thereon for the account of Owner) for the deposit of monies in regard to the Property; disbursing, deducting and paying from such rents, income and revenues, such amounts required to be disbursed or paid in connection with the repair, maintenance and operation of the Property and in the carrying out of Manager’s duties. In the event that Manager shall determine that funds in the accounts are insufficient to make necessary disbursements or payments, Manager shall notify Owner promptly of the amount of such insufficiency. Promptly after (i) Owner receives such notice, or (ii) Owner independently determines that such funds are insufficient, Owner shall determine and notify Manager as to the order of priority in which disbursements and payments shall be made. Disbursements or payments shall include, but not be limited to, the following items:

a.         all assessments and charges of every kind imposed by any governmental authority having jurisdiction (including real estate taxes, assessments, sewer rents and/or water charges) and, interest and penalties thereon; provided , however , that the interest or penalty payments shall be reimbursed by Manager to Owner if imposed by reason of delay in payment caused by Manager’s gross negligence, willful misconduct, bad faith or material misapplication of funds (to the extent such material misapplication of funds is not covered by insurance) (collectively, “ Malfeasance ”);

c.         license fees, permit fees, insurance appraisal fees, fines, penalties, legal fees, accounting fees incurred in the auditing of tenants’ books and records to establish and collect overage or percentage rents, and all similar fees reasonably incurred in connection with the ownership, management or operation of the Property, provided , however , that any fines or penalties shall be reimbursed to Owner by Manager if imposed by reason of delay in payment caused by Manager’s Malfeasance;

e.         salaries, wages and other related expenses, bonuses and fringe benefits for on-site personnel, service contracts, utilities, repairs, replacements, on-site administration expenses and Manager’s compensation;

f.          the Management Fee and any other sums payable hereunder to Manager;

g.         contributions to merchants associations, if and as required by any outstanding agreements; and advertisement and public relations costs for promotional activities; and

h.         any and all other expenses or costs that are customarily disbursed by managing agents of properties comparable to the Property or that are required in order for Manager to perform its duties.

In no event shall Manager be required to pay any bills or charges from its own funds, except as otherwise specifically provided herein.

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9.         Engaging, at the expense of Owner, any outside collection agency Manager deems appropriate for the collection of rent or other revenues or instituting, in Manager’s name (but only if Manager so elects) or in the name of Owner, but in any event at the expense of Owner, any and all legal actions or proceedings to collect rent or other income from the Property or to oust or dispossess tenants or other persons therefrom, or cancelling or terminating any lease or the breach thereof or default thereunder by the tenant, and holding all security deposits posted by tenants and occupants and applying the same against defaults by the tenant or occupant. Manager shall hold all security deposits in a separate account if required by law or if requested by Owner. Manager shall not terminate any lease or evict the tenant thereunder without the prior approval of Owner.

10.       Rendering such statements at such times and in such formats as Owner shall reasonably request and as shall be customary for properties comparable to the Property, including, without limitation, monthly cash flows, quarterly reports and operating statements and annual budgets as provided below.

11.       Maintaining, at Manager’s expense, insurance with reasonable deductibles, if any, for any and all claims or causes of action arising from bodily injury, disease or death of any of Manager’s employees, agents, or representatives and for any and all claims or causes of action arising from Manager’s negligence, infidelity or wrongful acts in connection with the performance of this Agreement, as well as employer’s liability and worker’s compensation for Managers employees and fidelity bonds for employees of Manager that handle funds and proceeds from the Property, in each case at customary levels of coverage.

12.       Causing, at Owner’s expense, all such acts and things to be done in or about the Property as shall be necessary to comply with all statutes, ordinances, laws, rules, regulations, orders and determinations, ordinary or extraordinary, foreseen or unforeseen of every kind or nature affecting or issued in connection with the Property by any governmental authority having jurisdiction thereof, as well as with all such orders and requirements of the Board of Fire Underwriters, Fire Insurance Exchange, or any other body that may hereafter exercise similar functions (collectively, “ Applicable Laws ”). In the event that Manager’s good faith estimate of the cost of complying with any Applicable Laws shall exceed $100,000 in connection with the Property, Manager shall not take any action to comply with Applicable Laws without first obtaining the consent of Owner. Notwithstanding the foregoing, however, Owner shall have no obligation to pay for the expenses incurred in connection with compliance with Applicable Laws to the extent such costs are incurred due to Managers Malfeasance or material breach of this Agreement. Manager shall have the right to contest such Applicable Laws, and pending the final determination of the contest, Manager may withhold compliance, provided that Manager shall receive Owner’s prior consent to so withhold compliance. Manager agrees to contest any Applicable Law Owner shall request Manager to contest.

13.       Filing applications, in Manager’s name (but only if Manager so elects) or in the name of Owner, but in any event at Owner’s expense for the reduction of real estate tax assessments and/or water charges and sewer rents, and/or for the cancellation or reduction of any other taxes, assessments, duties, imposts or other obligations of any nature imposed by law; and instituting any and all legal actions or proceedings in connection therewith; filing, settling, trying or appealing of all such applications and/or proceedings, upon such terms and conditions as Manager deems appropriate, provided , however , that Manager shall receive the consent of Owner prior to the institution or setting of any legal action or proceeding.

14.       Taking, at Owner’s expense and with the prior consent of Owner, any appropriate steps to protest and/or litigate to final decision in any appropriate court or forum any violation, order, rule or regulation affecting the Property.

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15.       Engaging, at Owner’s expense, counsel, approved by Owner, and paying counsel fees and court costs and disbursements in connection with any proceedings involving the Property.

16.       Assisting Owner in obtaining financing for the Property and causing Owner to comply, or complying on behalf of Owner, at Owner’s expense, with all terms, conditions and obligations of any lease, mortgage, credit agreement, reimbursement agreement, development agreement, construction agreement, or any other agreement that shall relate to any matters in connection with the rental, operation or management of the Property, unless prevented or delayed by strikes, riot, civil commotion, war, inability to obtain materials because of governmental restrictions or acts of God or public enemy, or any other cause beyond Manager’s control.

17.       Performing administrative services required in connection with managing the Property, including, without limitation, the following:

a.         administration of tenants’ insurance and enforcement of continuing coverage in accordance with the terms of the leases.

d.         supervision of tenant litigation in conjunction with Owner’s legal counsel.

e.         obtaining sales volume reports from tenants and calculating and collecting percentage rents as a result of those reports.

f.          providing necessary information to Owner for tax reporting, in a format reasonably approved by Owner and upon Owner’s request, initiating together with Owner’s counsel, property tax appeals.

g.         providing quarterly financial statements, in a format reasonably approved by Owner, reflecting in reasonable detail the operating income and expense of the Property.

h.         alerting Owner if tenant sales volume reports appear inaccurate and recommend audits.

i.          reporting and making recommendations regarding unusual tenant problems requiring Owner’s approval.

j.          obtaining contractors to maintain, operate and provide security for the Property.

k.         coordinating with any consultants retained by Owner in connection with the Property.

18.       Preventing the use of the Property for any purpose that would void any insurance policy covering the Property, or that would render any loss thereunder uncollectible, or that would be in violation of any governmental restriction, any tenant lease or any reciprocal easement agreement.

B.         Owner shall be responsible for, and shall indemnify Ma