Vornado, which currently owns 34% of Smith Commercial, willacquire the remaining 66% of the company for $599 million in stockand $985 million in debt. In return, Vornado will take overownership and management of Smith Commercial's 12.4 million sf ofoffice space in the District, as well as the management of 5.8million sf of office and other commercial space in the Washington,DC region.

The transaction is expected to close in the first quarter of2002, at which point the company will increase the size of itsboard of trustees from seven members to nine. Officially, SmithCommercial will become Charles E. Smith Commercial Realty, adivision of Vornado Realty Trust.

Company executives and industry analysts say the acquisitionwill not adversely effect Smith Commercial's 225 employees. "It'sgoing to be run as a separate division," said Salomon Smith Barneyanalyst Gary Boston. "There will be, over time, some cost savingsbut there shouldn't be much of a change in the day-to-dayoperations."