CEO/President 2013 Letter to Shareholders

Dear Fellow Shareholders:
April 2014

By all performance standards - operations, earnings, leasing, new investments, dispositions and growth in net asset value - 2013 was a strong year for our Company. We invested net equity of approximately $221 million in new and follow on investments of which two investments, the ST Residential Portfolio and 701 Times Square, together exceeded $170 million inclusive of first quarter 2014 funding. Parenthetically, our investments of late are decidedly larger than those of the past both because of the greater notional returns they generate and our larger cash positions. In 2013, the Company earned $0.51 per share and produced $1.36 per share of funds from operations ("FFO"). Same store leasing activity continued to show improvement increasing from 86% in 2012 to 88% at year-end 2013. Our net asset value ("NAV") range per share, among management's most followed metrics, improved from $12.85 to $15.13 as at year end 2012 to $13.80 to $15.83 per share as of year end 2013. This improvement occurred notwithstanding a 2.75 million common share offering at $11.45 per share in September 2013. Finally, we closed the year maintaining an internal rate of return on investments originated and finalized over the last five years of 34.21%.

Our core investment thesis remains unchanged as to asset classes, capital stack optionality, geographic markets and, most importantly, risk/return. We remain NAV and risk/return focused - if not obsessed. Because of this, a significant concern of late is the diminishing number of investments we are offered that meet our rigorous investment criteria. Continued low interest rates, an ever increasing supply of equity and debt capital, and a market perception of a growing economy are combining to depress investment returns relative to risk, making it difficult to accretively deploy our capital. This improvement in real estate asset pricing and corresponding decline in lending metrics appears to us to be much more financially driven than real estate demand driven, particularly for non-trophy assets outside of New York, San Francisco, Boston and Washington D.C. While we believe the cyclicality of real estate opportunity remains unchanged, the timing as to when it will resurface is unpredictable. Our unyielding adherence to our investment principles is, however, unchanging.

Management's response to the present pricing of real estate investments has been threefold. First, we will build and hold on to our cash until opportunity reemerges rather than invest into a cycle of decreased returns and increased risk. Secondly, we are borrowing both fixed rate and floating rate debt financing whenever possible at the lowest rates we have seen in our collective careers. Our third response is to sell mature assets where advantageous but subject to real estate investment trust disposition limitations. These limitations essentially restrict the Company to not more than seven dispositions in any calendar year. To date in 2014, we have completed three sales and have two assets under contract with a third being actively marketed. We are closely reviewing various alternatives that might permit the Company to increase the number of sales it could complete in 2014.

To our way of thinking, the most immediate issue for us to address this year is the relative poor performance of our share pricing in 2012 and 2013. Notwithstanding exceptional underlying investment returns and steady NAV growth, we have been unable to achieve share price returns at least consistent with those delivered in the overall REIT share market. At December 31, 2013, we were trading at a FFO multiple of 8.1 and paying a common dividend of approximately 5.89%. The Company's NAV has increased every year improving by 5.9% during 2013. Finally, our five year blended investment return on originated and closed investments is 34.21%. The share price underperformance in the context of the Company's strong operating and investment results is worsened by the fact that throughout the year our balance sheet cash accounted for 32% to 52% of our ending quarterly share price, indicating that our performance on cash deployed implies an even less favorable share price earnings and FFO multiple.

Like you, management is unhappy with this situation. We are uncomfortable with a number of suggestions recommended to us for addressing the problem. For example, we are reluctant to have the Company issue shares the principal purpose of which is to increase our float so as to draw a greater following to the Company. Our resistance is not simply that such share offerings are dilutive to NAV but we believe that selling equity in order to raise the stock price with no discernible accretive investment need or deleveraging opportunity replaces one problem with another down the road. We are equally unwilling to invest to purchase a stabilized asset at market capitalization rates absent an opportunity to reposition this asset for higher returns. In the first instance, we are concerned that the benefit of acquiring fully leased assets at a market price has more downside risk than upside potential. Moreover, there already exist more than 125 equity REITs whose business is the sourcing of stabilized assets at market pricing for investors. It would be an act of hubris on our part to assume that we can materially distinguish ourselves from so many qualified competitors for your capital pursuing that investment strategy. Management and our Board of Trustees are acutely aware of our share price performance and of the need to improve shareholder value where it counts the most - share price. To that end, we have and will pursue all reasonable alternatives during the coming year with an open mind.

Finally, it is time to acknowledge once again, the hard work of our acquisitions, asset management and accounting divisions. John Alba, Jay Cramer and John Garilli have all had an important role in the complex, multi-faceted transactions in which the Company is involved and we are grateful for their talent and commitment. Their efforts and those of their 40 or so colleagues with whom they work are greatly appreciated by us. We also want to thank our independent Trustees for their tireless devotion and expertise which they consistently bring to the business and affairs of our Company. All of us, together with our Board of Trustees, hope to see you at our annual Shareholders meeting on Wednesday, May 20, 2014 at 11:00am in New York.

By the way, for all of you value investors and skeptics like ourselves, we highly recommend "The Art of Thinking Clearly" by Rolf Doubelli. In 100 three page chapters he succinctly summarizes much of the behavioral economics research and findings of Kahneman, Twersky, Taleb, Goldstein and others. Worth reading and re-reading.

Carolyn B. Tiffany
Michael L. Ashner
Chairman of the Board and
Chief Executive Officer