RECKSON ASSOCIATES REALTY CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission File Number 1-13762

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RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)

MARYLAND 11-3233650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

225 BROADHOLLOW ROAD,
MELVILLE, NY 11747
(Address of principal (Zip Code)
executive offices)

Registrant's telephone number, including area code: (631) 694-6900
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of Each Exchange on Which Registered
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Common Stock, $.01 par value New York Stock Exchange
Class B Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ ]

The aggregate market value of the shares of common stock and Class B Common
Stock held by non-affiliates was approximately $894.5 million based on the
closing prices on the New York Stock Exchange for such shares on March 15, 2000.

The Company has two class' of common stock, issued at $.01 par value per
share with 40,378,846 and 10,283,763 shares of common stock and Class B Common
Stock outstanding, respectively as of March 15, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held May 18, 2000 are incorporated by reference into Part III.

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TABLE OF CONTENTS

ITEM
NO. PAGE
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PART I
1. Business ..................................................................... I-1
2. Properties ................................................................... I-8
3. Legal Proceedings ............................................................ I-17
4. Submission of Matters to a Vote of Security Holders .......................... I-17

PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters ........ II-1
6. Selected Financial Data ...................................................... II-2
7. Management's Discussion and Analysis of Financial Condition and Results of II-3
Operations ...................................................................
7(a). Quantitative and Qualitative Disclosures about Market Risk ................... II-12
8. Financial Statements and Supplementary Data .................................. II-12
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ................................................................... II-12

PART III
10. Directors and Executive Officers of the Registrant ........................... III-1
11. Executive Compensation ....................................................... III-1
12. Security Ownership of Certain Beneficial Owners and Management ............... III-1
13. Certain Relationships and Related Transactions ............................... III-1
PART IV
14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K ......... IV-1

PART I

ITEM 1. BUSINESS

GENERAL

Reckson Associates Realty Corp. was incorporated in September 1994 and
commenced operations effective with the completion of its initial public
offering on June 2, 1995. Reckson Associates Realty Corp., together with Reckson
Operating Partnership, L.P. (the "Operating Partnership"), and their affiliates
(collectively, the "Company") were formed for the purpose of continuing the
commercial real estate business of Reckson Associates, its affiliated
partnerships and other entities ("Reckson"). For more than 40 years, Reckson has
been engaged in the business of owning, developing, acquiring, constructing,
managing and leasing office and industrial properties in the New York tri-state
area (the "Tri-State Area"). Based on industry surveys, management believes that
the Company is one of the largest owners and operators of Class A office
properties and industrial properties in the Tri-State Area. The Company operates
as a fully-integrated, self-administered and self-managed real estate investment
trust ("REIT"). As of December 31, 1999, the Company owned 189 properties (the
"Properties") (including two joint venture properties) in the Tri-State Area
encompassing approximately 21.4 million rentable square feet, all of which are
managed by the Company. The Properties consist of 77 Class A office properties
(the "Office Properties") encompassing approximately 13.1 million square feet,
110 industrial properties (the "Industrial Properties") encompassing
approximately 8.3 million square feet and two 10,000 square foot retail
properties. The Company also owns a 357,000 square foot office building located
in Orlando, Florida. In addition, as of December 31, 1999, the Company had
approximately $315.6 million invested in certain mortgage indebtedness
encumbering three Class A Office Properties encompassing approximately 1.6
million square feet, approximately 472 acres of land located in New Jersey and
in a note receivable secured by a partnership interest in Omni Partners, L. P.,
owner of the Omni, a 575,000 square foot Class A Office Property located in
Uniondale, New York (the "Mortgage Note Investments"). As of December 31, 1999,
the Company also owned approximately 346 acres of land in 16 separate parcels of
which the Company can develop approximately 1.9 million square feet of office
space and approximately 300,000 square feet of industrial space. During 1998 and
1999, the Company made investments in joint ventures with Reckson Strategic
Venture Partners, LLC ("RSVP"), a venture capital fund created as a research and
development vehicle for the Company to invest in alternative real estate sectors
(see Corporate Strategies and Growth Opportunities). RSVP is managed by an
affiliate of Reckson Service Industries, Inc. currently D/B/A FrontLine Capital
Group ("FrontLine"). The Company has committed up to $100 million for
investments in the form of either (i) joint ventures with RSVP or (ii) loans to
FrontLine for FrontLine's investment in RSVP. To date, the Company has invested
$24.8 million in RSVP joint venture investments. During 1998, the Company spun
off FrontLine, its commercial service business, to its shareholders and has
provided FrontLine with a $100 million line of credit. As of December 31, 1999,
$79.5 million had been drawn and is outstanding on this line.

The Office Properties are Class A office buildings and are well-located,
well-maintained and professionally managed. In addition, these properties are
modern with high finishes or have been modernized to successfully compete with
newer buildings and achieve among the highest rent, occupancy and tenant
retention rates within their markets. The majority of the Office Properties are
located in twelve planned office parks and are tenanted by a diverse industry
group of national firms which include consumer products, telecommunication,
health care, insurance and professional service firms such as accounting firms
and securities brokerage houses. The Industrial Properties are utilized for
distribution, warehousing, research and development and light manufacturing /
assembly activities and are located primarily in three planned industrial parks
developed by Reckson.

All of the Company's interests in the Properties, the Mortgage Note
Investments and land are held directly or indirectly by, and all of its
operations are conducted through, the Operating Partnership. Reckson Associates
Realty Corp. controls the Operating Partnership as the sole general partner and
as of December 31, 1999, owned approximately 87% of the Operating Partnership's
outstanding common units of limited partnership ("Units") and Class B common
units of limited partnership interest.

I-1

The Company seeks to maintain cash reserves for normal repairs,
replacements, improvements, working capital and other contingencies. The
Operating Partnership has established an unsecured credit facility (the "Credit
Facility") with a maximum borrowing amount of $500 million scheduled to mature
on July 23, 2001 and an unsecured term loan ("the "Term Loan") with a maximum
borrowing capacity of $75 million scheduled to mature on June 16, 2001. The
Credit Facility and the Term Loan require the Company to comply with a number of
financial and other covenants on an ongoing basis.

During 1999, the Operating Partnership issued $300 million of five year and
ten year senior unsecured notes and the Company issued six million shares of
Series B Convertible Cumulative Preferred Stock for proceeds of $150 million.
The combined net proceeds of approximately $447.4 million were used to repay
outstanding borrowings under the Credit Facility and as partial consideration in
the acquisition of the first mortgage note secured by 919 Third Avenue located
in New York City.

On May 24, 1999, in conjunction with the Tower portfolio acquisition (see
Corporate Strategies and Growth Opportunities below), the Company issued
11,694,567 shares of Class B Exchangeable Common Stock, par value $.01 per
share, of the Company (the "Class B Common Stock") which were valued for
purposes under generally accepted accounting principals ("GAAP") at $26 per
share for total consideration of approximately $304.1 million.

There are numerous commercial properties that compete with the Company in
attracting tenants and numerous companies that compete in selecting land for
development and properties for acquisition.

The Company's executive offices are located at 225 Broadhollow Road,
Melville, New York 11747 and its telephone number at that location is (631)
694-6900. At December 31, 1999, the Company had approximately 300 employees.

RECENT DEVELOPMENTS

Acquisition Activity.

Set forth below is a brief description of the Company's major acquisition
activity during 1999.

On May 24, 1999, the Tower portfolio acquisition was completed with the
Company obtaining title to all of Tower's real estate assets. Simultaneously
with the closing of the Tower portfolio acquisition the Company arranged for the
sale of four of Tower's Class B New York City office properties. In addition,
the Company sold, with the exception of one Class A, 357,000 square foot office
building located in Orlando, Florida, all of the assets located outside of the
Tri-State Area. In addition to the aforementioned property in Orlando, Florida,
the Company's remaining assets from the Tower portfolio acquisition include
three Class A New York City Office Properties encompassing approximately 1.6
million square feet and one Class A Office Property on Long Island encompassing
approximately 101,000 square feet.

On June 15, 1999, the Company acquired the first mortgage note secured by
919 Third Avenue, a 47 story, 1.4 million square foot Class A Office Property
located in New York City for approximately $277.5 million. The first mortgage
note entitles the Company to all the net cash flow of the property and to
substantial rights regarding the operations of the property.

In addition, as of December 31, 1999, the Company has invested
approximately $15.7 million in certain mortgage indebtedness encumbering one
Class A Office Property encompassing approximately 177,000 square feet and
approximately 472 acres of land located in New Jersey. The Company has also
loaned approximately $17 million to its minority partner in Omni, its 575,000
square foot flagship Long Island Office Property, and effectively increased its
economic interest in the property owning partnership.

On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a
540,000 square foot, 35 story, Class A office property, located in New York
City, for a purchase price of approximately $126.5 million. This acquisition was
financed through a $70 million secured debt financing and a draw under the
Company's Credit Facility.

I-2

On January 6, 1998, the Company made an initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to Reckson Morris Operating
Partnership, L.P. ("RMI") in exchange for operating partnership units in RMI.

During 1999, the Company executed a contract for the sale, which will take
place in three stages, of its interest in RMI which consisted of 28 properties,
comprising approximately 6.1 million square feet and three other big box
Industrial Properties. The combined total sale price is approximately $298
million (approximately $42 million of which is payable to the Morris Companies
and its affiliates).

During 1999, the first stage of the RMI closing occurred and stages two and
three are scheduled for April 2000.

Leasing Activity

During the year ended December 31, 1999, the Company leased 1.7 million
square feet at the Office Properties at an average effective rent (i.e.,base
rent adjusted on a straight-line basis for free rent periods, tenant
improvements and leasing commissions) of $24.14 per square foot and 1.3 million
square feet at the Industrial Properties at an average effective rent of $6.71
per square foot. Included in this leasing data is 388,531 square feet at the
Long Island Office Properties at an average effective rent of $24.87; 707,731
square feet at the Westchester Office Properties at an average effective rent of
$22.04; 109,006 square feet at the Connecticut Office Properties at an average
effective rent of $26.57; 413,072 square feet at the New Jersey Office
Properties at an average effective rent of $22.63 and 86,476 square feet of the
New York City office properties at an average effective rent of $42.27. Also
included in this leasing data is 940,315 square feet at the Long Island
Industrial Properties at an average effective rent of $7.16 and 373,497 square
feet at the New Jersey Industrial Properties at an average effective rent of
$5.60.

Financing Activities

On July 23, 1998, the Company obtained its three year $500 million
unsecured revolving Credit Facility from Chase Manhattan Bank, Union Bank of
Switzerland and PNC Bank as co-managers of the Credit Facility bank group.
Interest rates on borrowings under the Credit Facility are priced off of LIBOR
plus a sliding scale ranging from 65 basis points to 90 basis points based on
the Company's investment grade rating on its senior unsecured debt. On March 16,
1999, the Company received its investment grade rating on its senior unsecured
debt. As a result, the pricing under the Credit Facility was adjusted to LIBOR
plus 90 basis points.

The Company utilizes the Credit Facility primarily to finance the
acquisitions of Properties and other real estate investments, fund its
development activities and for working capital purposes. At December 31, 1999,
the Company had availability under the Credit Facility to borrow an additional
$150.1 million (net of $52.3 million of outstanding undrawn letters of credit).

As of December 31, 1999, the Company had outstanding its 18 month, $75
million unsecured Term Loan from Chase Manhattan Bank. Interest rates on
borrowings under the Term Loan are priced off of LIBOR plus 150 basis points.
The Term Loan replaced the Company's previous term loan which matured on
December 17, 1999.

Other Financing Activities

On March 26, 1999, the Operating Partnership issued $100 million of 7.4%
senior unsecured notes due March 15, 2004 and $200 million of 7.75% senior
unsecured notes due March 15, 2009. Net proceeds of approximately $297.4 million
were used to repay outstanding borrowings under the Company's Credit Facility.

I-3

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company obtained a $130 million unsecured bridge facility (The "Bridge
Facility") from USB AG. Interest rates on borrowings under the Bridge Facility
were priced off of LIBOR plus approximately 214 basis points. On July 23, 1999,
the Bridge Facility was repaid through a long term fixed rate secured borrowing
and an advance under the Credit Facility. The new mortgage note, in the amount
of $125 million, is secured by two Office Properties with an aggregate carrying
value of approximately $261 million, is for a term of ten years and bears
interest at the rate of 7.73% per annum.

Stock Offerings

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company issued 11,694,567 shares of Class B Common Stock which were valued for
GAAP purposes at $26 per share for total consideration of approximately $304.1
million. The shares of Class B Common Stock are entitled to receive an initial
annual dividend of $2.24 per share, which dividend is subject to adjustment
annually commencing on July 1, 2000. The shares of Class B Common Stock are
exchangeable at any time, at the option of the holder, into an equal number of
shares of common stock, par value $.01 per share, of the Company subject to
customary antidilution adjustments. The Company, at its option, may redeem any
or all of the Class B Common Stock in exchange for an equal number of shares of
the Company's common stock at any time following the four year, six-month
anniversary of the issuance of the Class B Common Stock.

On June 2, 1999 the Company issued six million shares of its Series B
Preferred Stock for total proceeds of $150 million. The Series B Preferred Stock
accumulate dividends at an initial rate of 7.85% per annum with such rate
increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and
after April 30, 2001. The Series B Preferred Stock is convertible into the
Company's common stock at a price of $26.05 per share. Proceeds from the stock
offering were used as partial consideration in the acquisition of the first
mortgage note secured by 919 Third Avenue located in New York City.

CORPORATE STRATEGIES AND GROWTH OPPORTUNITIES

The Company's primary business objectives are to maximize current return to
stockholders through increases in distributable cash flow per share and to
increase stockholders' long-term total return through the appreciation in value
of its common stock. The Company plans to achieve these objectives by continuing
Reckson's corporate strategies and capitalizing on the internal and external
growth opportunities as described below.

Corporate Strategies. Management believes that throughout its 40-year
operating history, Reckson has created value in its properties through a variety
of market cycles by implementing the operating strategies described below. These
operating strategies include the implementation of: (i) a multidisciplinary
leasing approach that involves architectural design and construction personnel
as well as leasing professionals, (ii) innovative property marketing programs
such as the broker frequent leasing points program which was established by the
Company to enhance relationships with the brokerage community and which allows
brokers to accumulate points for leasing space in the Company's portfolio which
can be redeemed for luxurious prizes, (iii) a comprehensive tenant service
program and property amenities designed to maximize tenant satisfaction and
retention, (iv) cost control management and systems that take advantage of
economies of scale that arise from the Company's market position and
efficiencies attributable to the state-of-the-art energy control systems at many
of the Office Properties and (v) an acquisition and development strategy that is
continuously adjusted in light of anticipated changes in market conditions and
that seeks to capitalize on management's multidisciplinary expertise and market
knowledge to modify, upgrade and reposition a property in its marketplace in
order to maximize value.

The Company also intends to adhere to a policy of maintaining a debt ratio
(defined as the total debt of the Company as a percentage of the sum of the
Company's total debt and the market value of its equity) of less than 50%. As of
December 31, 1999, the Company's debt ratio was approximately 42.3%. This
calculation is net of minority partners' proportionate share of debt and
including the Company's share of unconsolidated joint venture debt. This debt
ratio is intended to provide the Company with financial flexibility to select
the optimal source of capital (whether debt or equity) with which to finance
external growth.

I-4

Growth Opportunities. The Company intends to achieve its primary business
objectives by applying its corporate strategies to the internal and external
growth opportunities described below.

Internal Growth. To the extent Long Island, Westchester, New Jersey and
Southern Connecticut suburban office and industrial markets continue to improve,
management believes the Company is well positioned to benefit from rental
revenue growth through: (i) contractual annual compounding 4% Base Rent
increases (defined as fixed gross rental amounts that excludes payments on
account of real estate tax, operating expense escalations and base electrical
charges) on approximately 85% of existing leases at the Long Island Properties,
(ii) periodic contractual increases in Base Rent on existing leases at the
Westchester Properties, the New Jersey Properties and the Southern Connecticut
Properties and (iii) the potential for increases to Base Rents as leases expire
as a result of continued tightening of the office and industrial markets with
limited new supply.

In connection with the Company's acquisition and merger transaction with
Tower Realty Trust, Inc. (see External Growth below) the Company entered the New
York City office market. The Manhattan office market is currently experiencing
favorable supply and demand characteristics similar to those currently in the
Company's suburban markets and also is characterized by its similar lack of
available land supply and other barriers to entry that limit our competition.
The Tower portfolio includes Manhattan office buildings that offer similar
potential for increase in Base Rents as described in (iii) above.

External Growth. The Company seeks to acquire multi-tenant suburban Class A
office and industrial properties located in the Tri-State Area. Management
believes that the Tri-State Area presents opportunities to acquire or invest in
properties at attractive yields. The Company believes that its (i) capital
structure, in particular its Credit Facility providing for a maximum borrowing
amount of up to $500 million, (ii) ability to acquire a property for Units of
the Operating Partnership and thereby defer the seller's income tax on gain,
(iii) operating economies of scale, (iv) relationships with financial
institutions and private real estate owners, (v) fully integrated operations in
its five existing divisions and (vi) its dominant position and franchise in the
submarkets in which it owns properties will enhance the Company's ability to
identify and capitalize on acquisition opportunities. The Company also intends
to selectively develop new Class A suburban office and industrial properties and
to continue to redevelop existing Office and Industrial Properties as these
opportunities arise. In the near future, the Company will concentrate its
development activities on industrial and Class A office properties within the
Tri-State Area. The Company's expansion into the Manhattan office market and the
opening of its New York City division provides it with additional opportunities
to acquire an interest in properties at attractive yields. The Company also
believes that the addition of its New York City division provides additional
leasing and operational facilities and enhances its overall franchise value by
being the only real estate operating company in the Tri-State Area with
significant presence in both Manhattan and each of the surrounding sub-markets.

During 1997, the Company formed FrontLine and RSVP. On June 11, 1998, the
Operating Partnership distributed its 95% common stock interest in FrontLine of
approximately $3 million to its owners, including the Company which, in turn,
distributed the common stock of FrontLine received from the Operating
Partnership to its stockholders. Additionally, during June 1998, the Operating
Partnership established a credit facility with FrontLine (the "FrontLine
Facility") in the amount of $100 million for FrontLine's e-commerce and
e-services operations and other general corporate purposes. As of December 31,
1999, the Company had advanced $79.5 million under the FrontLine Facility. In
addition, the Operating Partnership has approved the funding of investments of
up to $100 million with or in RSVP (the "RSVP Commitment"), through
RSVP-controlled joint venture REIT-qualified investments or advances made to
FrontLine under terms similar to the FrontLine Facility. As of December 31,
1999, approximately $67.2 million had been invested through the RSVP Commitment,
of which $24.8 million represents RSVP-controlled joint venture REIT-qualified
investments and $42.4 million represents advances to FrontLine under the RSVP
Commitment.

I-5

FrontLine identifies, acquires interests in and develops a network of
business to business e-commerce and e-services companies that service small to
medium sized enterprises, independent professionals and entrepreneurs and the
mobile workforce of larger companies. FrontLine serves as the managing member of
RSVP. RSVP was formed to provide the Company with a research and development
vehicle to invest in alternative real estate sectors. RSVP invests primarily in
real estate and real estate related operating companies generally outside of the
Company's core office and industrial focus. RSVP's strategy is to identify and
acquire interests in established entrepreneurial enterprises with experienced
management teams in market sectors which are in the early stages of their growth
cycle or offer unique circumstances for attractive investments as well as a
platform for future growth.

On August 27, 1998 the Company announced the formation of a joint venture
with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of
companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion
Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is
primarily engaged in acquiring, developing and/or owning government-occupied
office buildings and privately operated correctional facilities. Under the
Dominion Venture's operating agreement, RSVP is to invest up to $100 million,
some of which may be invested by the Company (the "RSVP Capital"). The initial
contribution of RSVP Capital was approximately $39 million of which
approximately $10.1 million was invested by a subsidiary of the Company. The
Company's investment was funded through the RSVP Commitment. In addition, the
Company advanced approximately $2.9 million to FrontLine through the RSVP
Commitment for an investment in RSVP which was then invested on a joint venture
basis with the Dominion Group in certain service business activities related to
the real estate activities. As of December 31, 1999, the Company had invested
approximately $17.6 million in the Dominion Venture which had investments in 13
government office buildings and three correctional facilities.

In 1999, the Company invested approximately $7.2 million, through a
subsidiary, in RAP Student Housing Properties, LLC ("RAP -- SHP"), a company
that engages primarily in the acquisition and development of off-campus student
housing projects. The Company's investment was funded through the RSVP
Commitment. In addition, the Company has advanced approximately $3.2 million to
FrontLine through the RSVP Commitment for an additional investment in RSVP which
was invested in certain service business activities related to student housing.
As of December 31, 1999, RAP -- SHP had investments in four off-campus student
housing projects.

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust.

On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc.
("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the
"Merger") into Metropolitan, with Metropolitan surviving the Merger.
Concurrently with the Merger, Tower Realty Operating Partnership, L.P. was
merged with and into a subsidiary of Metropolitan. The consideration issued in
the mergers was comprised of (i) 25% cash (approximately $107.2 million) and
(ii) 75% of shares of Class B Common Stock (valued for GAAP purposes at
approximately $304.1 million).

The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity interest in Metropolitan.
Crescent's interest accrues distributions at a rate of 7.5% per annum for a
two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by
Metropolitan at any time during that period for $85 million, plus an amount
sufficient to provide a 9.5% internal rate of return. If Metropolitan does not
redeem the preferred interest, upon the expiration of the two-year period,
Crescent must convert its $85 million preferred interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
common stock at a conversion price of $24.61 per share.

The Tower portfolio acquired in the Merger consists of three Office
Properties comprising approximately 1.6 million square feet located in New York
City, one Office Property located on Long Island and certain office properties
and other real estate assets located outside the Tri-State Area.

I-6

Prior to the closing of the Merger, the Company arranged for the sale of
four of Tower's Class B New York City properties, comprising approximately
701,000 square feet for approximately $84.5 million. Subsequent to the closing
of the Merger, the Company has sold a real estate joint venture interest and all
of the property located outside the Tri-State Area other than one office
property located in Orlando, Florida for approximately $171.1 million. The
combined consideration consisted of approximately $143.8 million in cash and
approximately $27.3 million of debt relief. Net cash proceeds from the sales
were used primarily to repay borrowings under the Credit Facility. As a result
of incurring certain sales and closing costs in connection with the sale of the
assets located outside the Tri-State Area, the Company has incurred a loss of
approximately $4.4 million which has been included in gain on sales of real
estate on the accompanying consolidated statements of income.

ENVIRONMENTAL MATTERS

Under various Federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The cost of
any required remediation and the owner's liability therefore as to any property
is generally not limited under such enactments and could exceed the value of the
property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs") when such materials are in poor condition, or in the event of
renovation or demolition. Such laws impose liability for release of ACMs into
the air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property.

All of the Office Properties and all of the Industrial Properties have been
subjected to a Phase I or similar environmental audit after April 1, 1994 (which
involved general inspections without soil sampling, ground water analysis or
radon testing and, for the Properties constructed in 1978 or earlier, survey
inspections to ascertain the existence of ACMs were conducted) completed by
independent environmental consultant companies (except for 35 Pinelawn Road
which was originally developed by Reckson and subjected to a Phase 1 in April
1992). These environmental audits have not revealed any environmental liability
that would have a material adverse effect on the Company's business.

I-7

ITEM 2. PROPERTIES

GENERAL

As of December 31, 1999, the Company owned and operated 189 Properties
(including two joint venture office properties but excluding the RSVP --
controlled joint ventures) in the Tri-State Area encompassing approximately 21.4
million square feet. These properties consist of 77 Class A Office Properties
encompassing approximately 13.1 million rentable square feet, 110 Industrial
Properties encompassing approximately 8.3 million rentable square feet and two
free-standing 10,000 square foot retail properties. The Company also owns a
357,000 square foot Class A office building in Orlando, Florida. The rentable
square feet of each property has been determined for these purposes based on the
aggregate leased square footage specified in currently effective leases and,
with respect to vacant space, management's estimate. In addition, as of December
31, 1999, the Company owned approximately 346 acres of land in 16 separate
parcels of which the Company can develop approximately 1.9 million square feet
of office space and approximately 300,000 square feet of industrial space.

Reckson has historically emphasized the development and acquisition of
properties that are part of large scale office and industrial parks and
approximately 54% of the Office Properties and approximately 46% of the
Industrial Properties are located in such parks (measured by rentable square
footage). The Company believes that owning properties in planned office and
industrial parks provides certain strategic advantages, including the following:
(i) certain tenants prefer being located in a park with other high quality
companies to enhance their corporate image, (ii) parks afford tenants certain
aesthetic amenities such as a common landscaping plan, standardization of
signage and common dining and recreational facilities, (iii) tenants may expand
(or contract) their business within a park, enabling them to centralize business
functions and (iv) a park provides tenants with access to other tenants and may
facilitate business relationships between tenants.

Also, as of December 31, 1999, the Company had invested approximately
$298.6 million in certain mortgage indebtedness encumbering three Class A Office
Properties encompassing approximately 1.6 million square feet and approximately
472 acres of land located in New Jersey. In addition, the Company has loaned
approximately $17 million to its minority partner in Omni, its flagship Long
Island Office Property and effectively increased its economic interest in the
property owning partnership.

Set forth below is a summary of certain information relating to the
Properties, categorized by Office and Industrial Properties, as of December 31,
1999.

OFFICE PROPERTIES

General

As of December 31, 1999, the Company owned or had an interest in 77
Tri-State Area Class A Office Properties encompassing approximately 13.1 million
rentable square feet. As of December 31, 1999, these Office Properties were
approximately 95% leased to approximately 1,000 tenants.

The Office Properties are Class A office buildings and are well-located,
well-maintained and professionally managed. In addition, these properties are
modern with high finishes and achieve among the highest rent, occupancy and
tenant retention rates within their sub-markets. Forty-nine of the 73 suburban
Office Properties are located in the following twelve planned office parks: the
North Shore Atrium, the Huntington Melville Corporate Center, the Nassau West
Corporate Center, the Tarrytown Corporate Center, the Landmark Square Office
Complex, the Executive Hill Office Park, the Reckson Executive Park, the
University Square Office Complex, the Summit at Valhalla, the Mt. Pleasant
Corporate Center, the Stamford Towers Office Center, and the Short Hills Office
Complex. The buildings in these office parks offer a full array of amenities
including health clubs, racquetball courts, sun decks, restaurants, computer
controlled HVAC access systems and conference centers. Management believes that
the location, quality of construction and amenities as well as the Company's
reputation for providing a high level of tenant service have enabled the Company
to attract and retain a national tenant base. The office tenants include
national service companies, such as telecommunications firms, "Big Five"
accounting firms, securities brokerage houses, insurance companies and health
care providers.

I-8

The Office Properties are leased to both national and local tenants. Leases
on the Office Properties are typically written for terms ranging from five to
ten years and require: (i) payment of a fixed gross rental amount that excludes
payments on account of real estate tax, operating expense escalations and base
electrical charges ("Base Rent"), (ii) payment of a base electrical charge,
(iii) payment of real estate tax escalations over a base year, (iv) payment of
compounded annual increases to Base Rent and/or payment of operating expense
escalations over a base year, (v) payment of overtime HVAC and electric and (vi)
payment of electric escalations over a base year. In virtually all leases, the
landlord is responsible for structural repairs. Renewal provisions typically
provide for renewal rates at market rates or a percentage thereof, provided that
such rates are not less than the most recent renewal rates.

The following table sets forth certain information as of December 31, 1999
for each of the Office Properties.

OWNERSHIP
INTEREST
(GROUND
LEASE LAND
PERCENTAGE EXPIRATION YEAR AREA
PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES)
- --------------------------------- ------------ ------------ --------------- ---------

Office Properties:
Huntington Melville Corporate
Center, Melville, NY
Leasehold
395 North Service Rd ............ 100% (2081) 1988 7.5
200 Broadhollow Rd. ............. 100% Fee 1981 4.6
48 South Service Rd. ............ 100% Fee 1986 7.3
35 Pinelawn Rd .................. 100% Fee 1980 6.0
275 Broadhollow Rd .............. 100% Fee 1970 5.8
1305 Old Walt Whitman Rd (3) .... 100% Fee 1998 (5) 18.1
----
Total--Huntington Melville
Corporate Center (4) ........... 49.3
----
North Shore Atrium, Syosset, NY
6800 Jericho Turnpike (North
Shore Atrium I) ................ 100% Fee 1977 13.0
6900 Jericho Turnpike (North
Shore Atrium II) ............... 100% Fee 1982 5.0
----
Total--North Shore Atrium ....... 18.0
----
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd.
(Nassau West Corporate Center Leasehold
II) ............................ 100% (2082) 1984 9.1
60 Charles Lindbergh Blvd.
(Nassau West Corporate Center Leasehold
I) ............................. 100% (2082) 1989 7.8
Leasehold
51 Charles Lindbergh Blvd. ...... 100% (2084) 1989 6.6
Leasehold
55 Charles Lindbergh Blvd. ...... 100% (2082) 1982 10.0
333 Earl Ovington Blvd. (The Leasehold
Omni) .......................... 60% (2088) 1991 30.6
Leasehold
90 Merrick Ave. ................. 100% (2084) 1985 13.2
----
Total--Nassau West Corporate
Center ......................... 77.3
----
Tarrytown Corporate Center
Tarrytown, NY
505 White Plains Road ........... 100% Fee 1974 1.4
520 White Plains Road ........... 60% Fee (6) 1981 6.8
555 White Plains Road ........... 100% Fee 1972 4.2
560 White Plains Road ........... 100% Fee 1980 4.0
580 White Plains Road ........... 100% Fee 1977 6.1
660 White Plains Road ........... 100% Fee 1983 10.9
----
Total--Tarrytown Corporate
Center ......................... 33.4
----
Reckson Executive Park
Rye Brook, NY
1 International Dr. ............. 100% Fee 1983 N/A
2 International Dr. ............. 100% Fee 1983 N/A
3 International Dr. ............. 100% Fee 1983 N/A
4 International Dr. ............. 100% Fee 1986 N/A
5 International Dr. ............. 100% Fee 1986 N/A
6 International Dr. ............. 100% Fee 1986 N/A
Total--Reckson Executive Park ... 44.4
----

ANNUAL
BASE
RENT NUMBER
NUMBER RENTABLE PER OF
OF SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES
- --------------------------------- -------- ------------ ----------- ------------- ----------- -------

Office Properties:
Huntington Melville Corporate
Center, Melville, NY
395 North Service Rd ............ 4 187,393 100.0% $ 4,620,998 $ 24.66 5
200 Broadhollow Rd. ............. 4 67,432 88.8% $ 1,298,934 $ 21.68 11
48 South Service Rd. ............ 4 125,372 95.1% $ 2,850,902 $ 23.91 7
35 Pinelawn Rd .................. 2 105,241 94.3% $ 2,088,736 $ 21.05 26
275 Broadhollow Rd .............. 4 124,441 100.0% $ 2,764,076 $ 21.39 17
1305 Old Walt Whitman Rd (3) .... 3 167,400 92.7% $ 3,649,827 $ 23.52 5
------- ----------- --
Total--Huntington Melville
Corporate Center (4) ........... 777,279 96.5% $17,273,473 $ 23.03 71
------- ----------- --
North Shore Atrium, Syosset, NY
6800 Jericho Turnpike (North
Shore Atrium I) ................ 2 209,028 79.0% $ 3,355,388 $ 20.31 37
6900 Jericho Turnpike (North
Shore Atrium II) ............... 4 101,036 92.2% $ 2,054,157 $ 22.05 13
------- ----------- --
Total--North Shore Atrium ....... 310,064 83.3% $ 5,409,545 $ 20.94 50
------- ----------- --
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd.
(Nassau West Corporate Center
II) ............................ 6 211,845 100.0% $ 4,831,982 $ 22.64 22
60 Charles Lindbergh Blvd.
(Nassau West Corporate Center
I) ............................. 2 186,889 100.0% $ 4,004,079 $ 21.37 7
51 Charles Lindbergh Blvd. ...... 1 108,000 100.0% $ 2,167,285 $ 20.07 1
55 Charles Lindbergh Blvd. ...... 2 214,581 100.0% $ 2,535,051 $ 11,81 2
333 Earl Ovington Blvd. (The
Omni) .......................... 10 575,000 87.8% $14,987,850 $ 29.68 28
90 Merrick Ave. ................. 9 221,839 96.4% $ 4,859,277 $ 22.73 21
------- ----------- --
Total--Nassau West Corporate
Center ......................... 1,518,154 95.0% $33,385,524 $ 23.15 81
--------- ----------- --
Tarrytown Corporate Center
Tarrytown, NY
505 White Plains Road ........... 2 26,468 91.5% $ 461,589 $ 19.05 20
520 White Plains Road ........... 6 171,761 100.0% $ 3,192,362 $ 18.59 1
555 White Plains Road ........... 5 121,585 86.5% $ 2,274,121 $ 21.62 6
560 White Plains Road ........... 6 126,471 100.0% $ 1,758,933 $ 13.89 16
580 White Plains Road ........... 6 170,726 100.0% $ 3,236,652 $ 18.92 19
660 White Plains Road ........... 6 258,715 94.7% $ 4,728,353 $ 19.29 45
--------- ----------- --
Total--Tarrytown Corporate
Center ......................... 875,726 96.4% $15,652,010 $ 18.55 107
--------- ----------- ---
Reckson Executive Park
Rye Brook, NY
1 International Dr. ............. 3 90,000 100.0% $ 1,170,000 $ 13.00 1
2 International Dr. ............. 3 90,000 100.0% $ 1,170,000 $ 13.00 1
3 International Dr. ............. 3 91,174 100.0% $ 1,718,469 $ 18.84 5
4 International Dr. ............. 3 86,694 83.8% $ 1,572,288 $ 21.65 9
5 International Dr. ............. 3 90,000 100.0% $ 2,416,482 $ 26.85 1
6 International Dr. ............. 3 94,016 100.0% $ 1,423,951 $ 15.15 8
--------- ----------- ---
Total--Reckson Executive Park ... 541,884 97.4% $ 9,471,190 $ 17.94 25
--------- ----------- ---

I-9

OWNERSHIP
INTEREST
(GROUND
LEASE LAND
PERCENTAGE EXPIRATION YEAR AREA
PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES)
- ------------------------------------ ------------ ------------ --------------- ---------

Summit at Valhalla
Valhalla, NY
100 Summit Dr. ..................... 100% Fee 1988 11.3
200 Summit Dr. ..................... 100% Fee 1990 18.0
500 Summit Dr. ..................... 100% Fee 1986 29.1
----
Total--Summit at Valhalla .......... 58.4
----
Mt. Pleasant Corporate Center
115/117 Stevens Ave. ............... 100% Fee 1984 5.0
----
Total--Mt Pleasant Corporate
Center ............................ 5.0
----
Landmark Square
Stamford, CT
One Landmark Square ................ 100% Fee 1973 N/A
Two Landmark Square ................ 100% Fee 1976 N/A
Three Landmark Square .............. 100% Fee 1978 N/A
Four Landmark Square ............... 100% Fee 1977 N/A
Five Landmark Square ............... 100% Fee 1976 N/A
Six Landmark Square ................ 100% Fee 1984 N/A
Total--Landmark Square ............. 7.2
-----
Stamford Towers
Stamford, CT
680 Washington Blvd. ............... 100% Fee 1989 1.3
750 Washington Blvd. ............... 100% Fee 1989 2.4
-----
Total--Stamford Towers ............. 3.7
-----
Stand-alone Long Island Properties
400 Garden City Plaza
Garden City, NY ................... 100% Fee 1989 5.7
88 Duryea Rd.
Melville, NY ...................... 100% Fee 1986 1.5
310 East Shore Rd.
Great Neck, NY .................... 100% Fee 1981 1.5
333 East Shore Rd. Leasehold
Great Neck, NY .................... 100% (2030) 1976 1.5
520 Broadhollow Rd
Melville, NY ...................... 100% Fee 1978 7.0
1660 Walt Whitman Rd.
Melville, NY ...................... 100% Fee 1980 6.5
125 Baylis Rd.
Melville, NY ...................... 100% Fee 1980 8.2
150 Motor Parkway
Hauppauge, NY ..................... 100% Fee 1984 11.3
1979 Marcus Ave.
Lake Success, NY .................. 100% Fee 1987 8.6
120 Mineola Blvd
Mineola, New York ................. 100% Fee 1989 0.7
-----
Total--Stand-alone Long Island
Properties ........................ 52.5
-----
Stand-alone
Westchester Properties ............
155 White Plains Road,
Tarrytown, NY ..................... 100% Fee 1963 13.2
235 Main Street,
White Plains, NY .................. 100% Fee 1974 (5) .4
245 Main Street
White Plains, NY .................. 100% Fee 1983 .4
120 White Plains Rd.
Tarrytown, NY ..................... 100% Fee 1984 9.7
80 Grasslands
Elmsford, NY ...................... 100% Fee 1989 4.9
360 Hamilton Avenue
White Plains, NY (3) .............. 100% Fee 1977 1.5
140 Grand Street
White Plains, NY .................. 100% Fee 1991 2.2
-----
Total--Stand-alone Westchester
Properties(4) ..................... 32.3
-----
Executive Hill Office Park
West Orange, NJ
100 Executive Dr ................... 100% Fee 1978 10.1
200 Executive Dr ................... 100% Fee 1980 8.2
300 Executive Dr ................... 100% Fee 1984 8.7
10 Rooney Circle ................... 100% Fee 1971 5.2
-----
Total--Executive Hill Office Park .. 32.2
-----

ANNUAL
BASE
RENT NUMBER
NUMBER RENTABLE PER OF
OF SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES
- ------------------------------------ -------- ------------ --------- ------------- --------- -------

Summit at Valhalla
Valhalla, NY
100 Summit Dr. ..................... 4 249,551 72.0% $ 1,745,495 $ 9.72 8
200 Summit Dr. ..................... 4 240,834 84.9% $ 4,890,463 $ 23.92 12
500 Summit Dr. ..................... 4 208,660 100.0% $ 5,633,820 $ 27.00 1
------- ----------- --
Total--Summit at Valhalla .......... 699,045 84.8% $12,269,778 $ 20.70 21
------- ----------- --
Mt. Pleasant Corporate Center
115/117 Stevens Ave. ............... 3 162,004 97.7% $ 3,029,965 $ 19.14 17
------- ----------- --
Total--Mt Pleasant Corporate
Center ............................ 162,004 97.7% $ 3,029,965 $ 19.14 17
------- ----------- --
Landmark Square
Stamford, CT
One Landmark Square ................ 22 296,716 85.5% $ 5,248,069 $ 20.69 62
Two Landmark Square ................ 3 39,701 69.4% $ 588,845 $ 21.38 7
Three Landmark Square .............. 6 128,286 96.5% $ 2,119,202 $ 17.12 22
Four Landmark Square ............... 5 104,446 91.5% $ 2,243,662 $ 23.48 15
Five Landmark Square ............... 3 57,273 92.9% $ 230,185 $ 4.32 2
Six Landmark Square ................ 10 171,899 91.3% $ 3,895,234 $ 24.81 6
------- ----------- --
Total--Landmark Square ............. 798,321 89.0% $14,325,197 $ 20.15 114
------- ----------- ---
Stamford Towers
Stamford, CT
680 Washington Blvd. ............... 11 132,759 99.5% $ 3,634,757 $ 27.52 6
750 Washington Blvd. ............... 11 192,108 99.6% $ 4,565,587 $ 23.87 11
------- ----------- ---
Total--Stamford Towers ............. 324,867 99.5% $ 8,200,344 $ 25.36 17
------- ----------- ---
Stand-alone Long Island Properties
400 Garden City Plaza
Garden City, NY ................... 5 176,073 98.3% $ 3,805,459 $ 21.99 25
88 Duryea Rd.
Melville, NY ...................... 2 25,061 96.2% $ 489,154 $ 20.29 4
310 East Shore Rd.
Great Neck, NY .................... 4 50,000 100.0% $ 1,265,128 $ 25.25 21
333 East Shore Rd.
Great Neck, NY .................... 2 17,715 99.6% $ 483,504 $ 27.39 9
520 Broadhollow Rd
Melville, NY ...................... 1 83,176 87.3% $ 1,486,300 $ 20.48 3
1660 Walt Whitman Rd.
Melville, NY ...................... 1 73,115 99.9% $ 1,420,754 $ 19.45 5
125 Baylis Rd.
Melville, NY ...................... 2 98,329 68.5% $ 1,285,253 $ 19.08 11
150 Motor Parkway
Hauppauge, NY ..................... 4 191,447 96.0% $ 4,028,593 $ 21.92 23
1979 Marcus Ave.
Lake Success, NY .................. 4 326,612 98.0% $ 6,313,637 $ 19.73 28
120 Mineola Blvd
Mineola, New York ................. 6 101,000 88.0% $ 1,826,277 $ 20.54 14
------- ----------- ---
Total--Stand-alone Long Island
Properties ........................ 1,142,528 93.7% $22,404,059 $ 20.93 143
--------- ----------- ---
Stand-alone
Westchester Properties ............
155 White Plains Road,
Tarrytown, NY ..................... 2 60,909 99.6% $ 1,073,536 $ 17.70 5
235 Main Street,
White Plains, NY .................. 6 83,237 89.2% $ 1,310,846 $ 17.66 28
245 Main Street
White Plains, NY .................. 6 73,543 92.0% $ 1,275,897 $ 18.85 17
120 White Plains Rd.
Tarrytown, NY ..................... 6 197,785 100.0% $ 4,404,079 $ 22.25 10
80 Grasslands
Elmsford, NY ...................... 3 85,104 92.9% $ 1,649,669 $ 20.87 5
360 Hamilton Avenue
White Plains, NY (3) .............. 12 382,000 120% $ 1,054,477 $ 22.96 2
140 Grand Street
White Plains, NY .................. 9 130,136 90.9% $ 2,690,489 $ 22.74 16
--------- ----------- ---
Total--Stand-alone Westchester
Properties(4) ..................... 1,012,714 94.8% $13,458,993 $ 20.91 83
--------- ----------- ---
Executive Hill Office Park
West Orange, NJ
100 Executive Dr ................... 3 92,872 97.1% $ 1,609,173 $ 17.85 10
200 Executive Dr ................... 4 102,630 99.3% $ 1,974,468 $ 19.37 17
300 Executive Dr ................... 4 126,196 100.0% $ 2,409,573 $ 19.07 11
10 Rooney Circle ................... 3 69,684 100.0% $ 1,367,232 $ 19.62 2
--------- ----------- ---
Total--Executive Hill Office Park .. 391,382 99.2% $ 7,360,446 $ 18.96 40
--------- ----------- ---

I-10

OWNERSHIP
INTEREST
(GROUND
LEASE LAND
PERCENTAGE EXPIRATION YEAR AREA
PROPERTY OWNERSHIP DATE) (1) CONSTRUCTED (ACRES)
- -------------------------------------- ------------ ------------ ------------- ---------

University Square
Princeton, NJ
100 Campus Dr. ....................... 100% Fee 1987 N/A
104 Campus Dr. ....................... 100% Fee 1987 N/A
115 Campus Dr. ....................... 100% Fee 1987 N/A
Total--University Square ............. 11.0
-----
Short Hills Office Complex
Short Hills, NJ .....................
101 West John F. Kennedy
Parkway ............................. 100% Fee 1981 9.0
101 East John F. Kennedy Parkway 100% Fee 1981 6.0
51 John F Kennedy Parkway ............ 100% Fee 1988 11.0
-----
Total--Short Hills Office Complex 26.0
-----
Stand-alone New Jersey Properties
1 Paragon Drive
Montvale, NJ ........................ 100% Fee 1980 11.0
99 Cherry Hill Road
Parsippany, NJ ...................... 100% Fee 1982 8.8
119 Cherry Hill Road
Parsippany, NJ ...................... 100% Fee 1982 9.3
One Eagle Rock
Hanover, NJ ......................... 100% Fee 1986 10.4
155 Passaic Ave.
Fairfield, NJ ....................... 100% Fee 1984 3.6
3 University Plaza
Hackensack, NJ ...................... 100% Fee 1985 10.6
1255 Broad Street
Clifton, NJ (3) ..................... 100% Fee 1968 11.1
-----
Total--Stand-alone New Jersey
Properties (4) ...................... 64.8
-----
New York City Properties .............
120 W. 45th Street
New York, NY ........................ 100% Fee 1989 0.4
100 Wall Street
New York, NY ........................ 100% Fee 1969 0.5
810 Seventh Avenue
New York, NY ........................ 100% Fee 1970 0.6
919 Third Avenue
New York, NY (7) .................... 100% Fee 1971 1.5
-----
Total--New York City Office
Properties .......................... 3.0
-----
Total--Office Properties (4) ......... 518.5
=====

ANNUAL
BASE
RENT NUMBER
NUMBER RENTABLE PER OF
OF SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FLOORS FEET LEASED RENT (2) SQ. FT. LEASES
- -------------------------------------- -------- ------------ --------- --------------- ----------- -------

University Square
Princeton, NJ
100 Campus Dr. ....................... 1 27,350 99.7% $ 416,230 $ 15.27 3
104 Campus Dr. ....................... 1 70,155 100.0% $ 1,110,829 $ 15.83 1
115 Campus Dr. ....................... 1 33,600 99.9% $ 574,589 $ 17.12 2
------ ------------ -
Total--University Square ............. 131,105 99.9% $ 2,101,648 $ 16.05 6
------- ------------ -
Short Hills Office Complex
Short Hills, NJ .....................
101 West John F. Kennedy
Parkway ............................. 6 185,233 100.0% $ 2,963,700 $ 16.00 1
101 East John F. Kennedy Parkway 4 122,841 100.0% $ 1,965,482 $ 16.00 1
51 John F Kennedy Parkway ............ 5 248,962 96.3% $ 7,680,763 $ 32.04 19
------- ------------ --
Total--Short Hills Office Complex 557,036 98.4% $ 12,609,945 $ 23.02 21
------- ------------ --
Stand-alone New Jersey Properties
1 Paragon Drive
Montvale, NJ ........................ 2 104,599 89.6% $ 1,547,948 $ 16.51 15
99 Cherry Hill Road
Parsippany, NJ ...................... 3 93,250 99.0% $ 1,650,526 $ 17.88 16
119 Cherry Hill Road
Parsippany, NJ ...................... 3 95,724 98.1% $ 1,547,521 $ 16.47 17
One Eagle Rock
Hanover, NJ ......................... 3 140,000 68.2% $ 2,031,710 $ 21.28 7
155 Passaic Ave.
Fairfield, NJ ....................... 4 84,500 29.4% $ 486,739 $ 19.57 3
3 University Plaza
Hackensack, NJ ...................... 6 216,403 97.2% $ 3,495,272 $ 16.61 22
1255 Broad Street
Clifton, NJ (3) ..................... 2 180,000 80.2% $ 4,070,161 $ 28.20 3
------- ------------ --
Total--Stand-alone New Jersey
Properties (4) ...................... 914,476 92.0% $ 14,829,877 $ 19.64 83
------- ------------ --
New York City Properties .............
120 W. 45th Street
New York, NY ........................ 40 443,109 99.6% $ 16,734,846 $ 37.92 42
100 Wall Street
New York, NY ........................ 29 458,626 97.7% $ 8,887,657 $ 19.84 31
810 Seventh Avenue
New York, NY ........................ 42 692,060 95.4% $ 19,935,279 $ 30.20 35
919 Third Avenue
New York, NY (7) .................... 47 1,374,966 99.1% $ 16,876,544 $ 12.38 23
--------- ------------ --
Total--New York City Office
Properties .......................... 2,968,761 98.1% $ 62,434,326 $ 21.44 131
--------- ------------ ---
Total--Office Properties (4) ......... 13,125,346 94.8% $254,216,320 $ 21.09 1,010
========== ============ =====

- ------------------
(1) Ground lease expirations assume exercise of renewal options by the lessee.
(2) Represents Base Rent of signed leases at December 31, 1999 adjusted for
scheduled contractual increases during the 12 months ending December 31,
2000. Total Base Rent for these purposes reflects the effect of any lease
expirations that occur during the 12-month period ending December 31, 2000.
Amounts included in rental revenue for financial reporting purposes have
been determined on a straight-line basis rather than on the basis of
contractual rent as set forth in the foregoing table.
(3) Property is currently under redevelopment.
(4) Percent leases excludes properties under development.
(5) Year renovated.
(6) The actual fee interest in 520 White Plains Road is held by the County of
Westchester Industrial Development Agency. The fee interest in 520 White
Plains Road may be acquired if the outstanding principal under certain loan
agreements and annual basic installments are prepaid in full.
(7) The Company currently holds the first mortgage note secured by this
property. There is a ground lease in place on a small portion of the land
which expires in 2066.

I-11

INDUSTRIAL PROPERTIES

General.

As of December 31, 1999, the Company owned or had an interest in 110
Industrial Properties that encompass approximately 8.3 million rentable square
feet. As of December 31, 1999, the Industrial Properties were approximately 98%
leased to approximately 250 tenants. Many of the Industrial Properties have been
constructed with high ceiling heights (i.e., above 18 feet), upscale office
building facades, parking in excess of zoning requirements, drive-in and/or
loading dock facilities and other features which permit them to be leased for
industrial and/or office purposes.

The Industrial Properties are leased to both national and local tenants.
These tenants utilize the Industrial Properties for distribution, warehousing,
research and development and light manufacturing/assembly activities. Leases on
the Industrial Properties are typically written for terms ranging from three to
seven years and require: (i) payment of a Base Rent, (ii) payments of real
estate tax escalations over a base year, (iii) payments of compounded annual
increases to Base Rent and (iv) reimbursement of all operating expenses.
Electric costs are borne and paid directly by the tenant. Certain leases are
"triple net" (i.e., the tenant is required to pay in addition to annual Base
Rent, all operating expenses and real estate taxes). In virtually all leases,
the landlord is responsible for structural repairs. Renewal provisions typically
provide for renewal rents at market rates, provided that such rates are not less
than the most recent rental rates.

Approximately 71% of the Industrial Properties measured by square footage
are located on Long Island. Sixty five percent of these properties as measured
by square footage were located in the following three Industrial Parks developed
by Reckson: (i) Vanderbilt Industrial Park, (ii) Airport International Plaza and
(iii) County Line Industrial Center.

In addition to the Industrial Properties on Long Island, the Company owns
15 Industrial Properties in the other suburban markets. These properties
encompass approximately 2.4 million square feet and were approximately 97%
leased (excluding properties under redevelopment) as of December 31, 1999.

The following table sets forth certain information as of December 31, 1999
for each of the Industrial Properties.

OWNERSHIP
INTEREST
(GROUND
LEASE LAND CLEARANCE
PERCENTAGE EXPIRATION YEAR AREA HEIGHT
PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1)
- ------------------------------ ------------ ------------ ------------- --------- ------------

Industrial Properties:
Vanderbilt Industrial Park
Hauppauge, NY
360 Vanderbilt Motor
Parkway ..................... 100% Fee 1967 4.2 16
410 Vanderbilt Motor
Parkway ..................... 100% Fee 1965 3.0 15
595 Old Willets Path ......... 100% Fee 1968 3.5 14
611 Old Willets Path ......... 100% Fee 1963 3.0 14
631/641 Old Willets Path ..... 100% Fee 1965 1.9 14
651/661 Old Willets Path ..... 100% Fee 1966 2.0 14
681 Old Willets Path ......... 100% Fee 1961 1.3 14
740 Old Willets Path ......... 100% Fee 1965 3.5 14
325 Rabro Dr. ................ 100% Fee 1967 2.7 14
250 Kennedy Dr. .............. 100% Fee 1979 7.0 16
90 Plant Ave. ................ 100% Fee 1972 4.3 16
110 Plant Ave. ............... 100% Fee 1974 6.8 18
55 Engineers Rd. ............. 100% Fee 1968 3.0 18
65 Engineers Rd. ............. 100% Fee 1969 1.8 22
85 Engineers Rd. ............. 100% Fee 1968 2.3 18
100 Engineers Rd. ............ 100% Fee 1968 5.0 14
150 Engineers Rd. ............ 100% Fee 1969 6.8 22
20 Oser Ave. ................. 100% Fee 1979 5.0 16
30 Oser Ave. ................. 100% Fee 1978 4.4 16
40 Oser Ave. ................. 100% Fee 1974 3.1 16
50 Oser Ave. ................. 100% Fee 1975 4.1 21
60 Oser Ave. ................. 100% Fee 1975 3.3 21
63 Oser Ave. ................. 100% Fee 1974 1.2 20
65 Oser Ave. ................. 100% Fee 1975 1.2 18
73 Oser Ave. ................. 100% Fee 1974 1.2 20

PERCENTAGE ANNUAL
OFFICE/ BASE
RESEARCH RENT NUMBER
AND RENTABLE PER OF
DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- ------------------------------ ------------- ---------- ----------- ------------- --------- -------

Industrial Properties:
Vanderbilt Industrial Park
Hauppauge, NY
360 Vanderbilt Motor
Parkway ..................... 62% 54,000 100.0% $500,580 $ 9.27 1
410 Vanderbilt Motor
Parkway ..................... 7% 41,784 100.0% $207,672 $ 4.97 4
595 Old Willets Path ......... 14% 31,670 100.0% $162,100 $ 5.12 4
611 Old Willets Path ......... 11% 20,000 100.0% $147,601 $ 7.38 2
631/641 Old Willets Path ..... 31% 25,000 100.0% $161,405 $ 6.46 4
651/661 Old Willets Path ..... 45% 25,000 100.0% $156,243 $ 6.25 7
681 Old Willets Path ......... 10% 15,000 100.0% $ 98,475 $ 6.57 1
740 Old Willets Path ......... 5% 30,000 100.0% $ 2,473 $ 0.08 1
325 Rabro Dr. ................ 10% 35,000 100.0% $214,749 $ 6.05 2
250 Kennedy Dr. .............. 9% 127,980 100.0% $455,298 $ 3.56 1
90 Plant Ave. ................ 13% 75,000 99.9% $418,834 $ 5.59 3
110 Plant Ave. ............... 8% 125,000 100.0% $540,000 $ 4.32 1
55 Engineers Rd. ............. 8% 36,000 0% $ 0 $ 0.00 0
65 Engineers Rd. ............. 10% 23,000 100.0% $136,733 $ 5.94 1
85 Engineers Rd. ............. 5% 40,800 100.0% $202,785 $ 4.97 2
100 Engineers Rd. ............ 11% 88,000 100.0% $379,476 $ 4.31 1
150 Engineers Rd. ............ 11% 135,000 100.0% $407,883 $ 3.02 1
20 Oser Ave. ................. 18% 42,000 98.7% $347,517 $ 8.39 2
30 Oser Ave. ................. 21% 42,000 82.1% $221,289 $ 6.41 4
40 Oser Ave. ................. 33% 59,800 85.3% $342,103 $ 6.71 12
50 Oser Ave. ................. 15% 60,000 100.0% $240,000 $ 4.00 1
60 Oser Ave. ................. 19% 48,000 100.0% $192,000 $ 4.00 1
63 Oser Ave. ................. 9% 22,000 100.0% $112,846 $ 5.13 1
65 Oser Ave. ................. 10% 20,000 100.0% $105,263 $ 5.26 1
73 Oser Ave. ................. 15% 20,000 100.0% $113,463 $ 5.67 1

I-12

OWNERSHIP
INTEREST
(GROUND
LEASE LAND CLEARANCE
PERCENTAGE EXPIRATION YEAR AREA HEIGHT
PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1)
- ------------------------------- ------------ ------------ ------------- --------- ------------

80 Oser Ave. .................. 100% Fee 1974 1.1 18
85 Nicon Ct. .................. 100% Fee 1978 6.1 30
90 Oser Ave. .................. 100% Fee 1973 1.1 16
104 Parkway Dr. ............... 100% Fee 1985 1.8 15
110 Ricefield Ln. ............. 100% Fee 1980 2.0 15
120 Ricefield Ln. ............. 100% Fee 1983 2.0 15
125 Ricefield Ln. ............. 100% Fee 1973 2.0 14
135 Ricefield Ln. ............. 100% Fee 1981 2.1 15
85 Adams Dr. .................. 100% Fee 1980 1.8 15
395 Oser Ave .................. 100% Fee 1980 6.1 14
185 Oser Ave .................. 100% Fee 1974 2.0 18
25 Davids Dr. ................. 100% Fee 1975 3.2 20
45 Adams Ave .................. 100% Fee 1979 2.1 18
225 Oser Ave .................. 100% Fee 1977 1.2 14
180 Oser Ave .................. 100% Fee 1978 3.4 16
360 Oser Ave .................. 100% Fee 1981 1.3 18
400 Oser Ave .................. 100% Fee 1982 9.5 16
375 Oser Ave .................. 100% Fee 1981 1.2 18
425 Rabro Drive ............... 100% Fee 1980 4.0 16
390 Motor Parkway (3) ......... 100% Fee 1980 10.0 14
600 Old Willets Path .......... 100% Fee 1965 4.5 14
400 Moreland Road(3) .......... 100% Fee 1967 6.3 17
-----
Total--Vanderbilt
Industrial Park (4) .......... 160.4
-----
Airport International Plaza
Islip, NY
20 Orville Dr. ................ 100% Fee 1978 1.0 16
25 Orville Dr. ................ 100% Fee 1970 2.2 16
50 Orville Dr. ................ 100% Fee 1976 1.6 15
65 Orville Dr. ................ 100% Fee 1971 2.2 14
70 Orville Dr. ................ 100% Fee 1975 2.3 22
80 Orville Dr. ................ 100% Fee 1988 6.5 16
85 Orville Dr. ................ 100% Fee 1974 1.9 14
95 Orville Dr. ................ 100% Fee 1974 1.8 14
110 Orville Dr. ............... 100% Fee 1979 6.4 24
180 Orville Dr. ............... 100% Fee 1982 2.3 16
1101 Lakeland Ave. ............ 100% Fee 1983 4.9 20
1385 Lakeland Ave. ............ 100% Fee 1973 2.4 16
125 Wilbur Place .............. 100% Fee 1977 4.0 16
140 Wilbur Place .............. 100% Fee 1973 3.1 20
160 Wilbur Place .............. 100% Fee 1978 3.9 16
170 Wilbur Place .............. 100% Fee 1979 4.9 16
4040 Veterans Highway ......... 100% Fee 1972 1.0 14
120 Wilbur Place .............. 100% Fee 1972 2.8 16
2004 Orville Dr ............... 100% Fee 1998 7.4 24
2005 Orville Drive ............ 100% Fee 1999 8.7 24
-----
Total--Airport
International Plaza .......... 71.3
-----
County Line Industrial
Center
Melville, NY
5 Hub Dr. ..................... 100% Fee 1979 6.9 20
10 Hub Dr. .................... 100% Fee 1975 6.6 20
30 Hub Drive .................. 100% Fee 1976 5.1 20
265 Spagnoli Rd. .............. 100% Fee 1978 6.0 20
-----
Total--County Line
Industrial Center ............ 24.6
-----
Standalone Long Island
Properties
32 Windsor Pl.
Islip, NY .................... 100% Fee 1971 2.5 18
42 Windsor Pl.
Islip, NY .................... 100% Fee 1972 2.4 18
208 Blydenburgh Rd.
Islandia, NY ................. 100% Fee 1969 2.4 14
210 Blydenburgh Rd.
Islandia, NY ................. 100% Fee 1969 1.2 14
71 Hoffman Ln.
Islandia, NY ................. 100% Fee 1970 5.8 16
135 Fell Ct.
Islip, NY .................... 100% Fee 1965 3.2 16
-----
Subtotal Islip/Islandia ...... 17.5
-----

PERCENTAGE ANNUAL
OFFICE/ BASE
RESEARCH RENT NUMBER
AND RENTABLE PER OF
DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- ------------------------------- ------------- ------------ ----------- ------------- ---------- -------

80 Oser Ave. .................. 25% 19,500 100.0% $ 64,599 $ 3.31 1
85 Nicon Ct. .................. 10% 104,000 100.0% $ 500,189 $ 4.81 1
90 Oser Ave. .................. 26% 37,500 100.0% $ 125,160 $ 3.34 1
104 Parkway Dr. ............... 50% 27,600 100.0% $ 199,091 $ 7.21 1
110 Ricefield Ln. ............. 25% 32,264 100.0% $ 160,599 $ 4.98 1
120 Ricefield Ln. ............. 24% 33,060 100.0% $ 112,000 $ 3.39 1
125 Ricefield Ln. ............. 20% 30,495 100.0% $ 199,983 $ 6.56 1
135 Ricefield Ln. ............. 10% 32,340 100.0% $ 204,037 $ 6.31 1
85 Adams Dr. .................. 90% 20,000 100.0% $ 260,000 $ 13.00 1
395 Oser Ave .................. 100% 50,000 99.0% $ 429,165 $ 8.67 1
185 Oser Ave .................. 40% 30,000 100.0% $ 190,021 $ 6.33 1
25 Davids Dr. ................. 90% 40,000 100.0% $ 340,000 $ 8.50 1
45 Adams Ave .................. 90% 28,000 100.0% $ 212,333 $ 7.58 1
225 Oser Ave .................. 80% 10,000 99.6% $ 111,706 $ 11.22 1
180 Oser Ave .................. 35% 61,868 89.9% $ 379,208 $ 6.82 8
360 Oser Ave .................. 35% 23,000 100.0% $ 128,800 $ 5.60 1
400 Oser Ave .................. 30% 164,936 97.0% $ 1,090,261 $ 6.82 25
375 Oser Ave .................. 40% 20,000 100.0% $ 148,450 $ 7.42 1
425 Rabro Drive ............... 25% 65,641 99.2% $ 586,080 $ 9.00 1
390 Motor Parkway (3) ......... 4% 181,155 27.7% $ 173,916 $ 3.47 1
600 Old Willets Path .......... 25% 69,627 100.0% $ 394,590 $ 5.67 1
400 Moreland Road(3) .......... 10% 56,875 0.0% $ 0 $ 0.00 0
------- -----------
Total--Vanderbilt
Industrial Park (4) .......... 2,379,895 97.0% $11,876,976 $ 5.72 111
--------- ----------- ---
Airport International Plaza
Islip, NY
20 Orville Dr. ................ 50% 12,852 100.0% $ 174,731 $ 13.55 1
25 Orville Dr. ................ 100% 32,300 100.0% $ 475,065 $ 14.12 2
50 Orville Dr. ................ 20% 28,000 99.8% $ 244,538 $ 8.75 3
65 Orville Dr. ................ 13% 32,000 96.9% $ 145,018 $ 4.68 2
70 Orville Dr. ................ 7% 41,508 100.0% $ 301,684 $ 7.27 2
80 Orville Dr. ................ 21% 92,544 100.0% $ 678,929 $ 7.34 9
85 Orville Dr. ................ 20% 25,000 100.0% $ 154,393 $ 6.15 2
95 Orville Dr. ................ 10% 25,000 100.0% $ 120,875 $ 4.84 1
110 Orville Dr. ............... 15% 110,000 100.0% $ 627,733 $ 5.71 1
180 Orville Dr. ............... 18% 37,612 100.0% $ 233,291 $ 6.20 2
1101 Lakeland Ave. ............ 8% 90,411 100.0% $ 515,945 $ 5.71 1
1385 Lakeland Ave. ............ 18% 35,000 100.0% $ 178,398 $ 5.10 3
125 Wilbur Place .............. 31% 62,686 87.1% $ 279,880 $ 5.13 12
140 Wilbur Place .............. 37% 48,500 100.0% $ 290,747 $ 5.99 2
160 Wilbur Place .............. 30% 62,710 100.0% $ 501,034 $ 7.99 2
170 Wilbur Place .............. 28% 72,062 96.5% $ 230,971 $ 3.32 8
4040 Veterans Highway ......... 100% 2,800 100.0% $ 54,061 $ 19.31 1
120 Wilbur Place .............. 15% 35,000 100.0% $ 269,608 $ 7.70 4
2004 Orville Dr ............... 20% 106,515 100.0% $ 703,887 $ 6.61 1
2005 Orville Drive ............ 20% 130,010 100.0% $ 909,593 $ 7.00 1
--------- ----------- ---
Total--Airport
International Plaza .......... 1,082,510 99.1% $ 7,090,381 6.61 60
--------- ----------- ---
County Line Industrial
Center
Melville, NY
5 Hub Dr. ..................... 20% 88,001 100.0% $ 403,596 $ 4.59 2
10 Hub Dr. .................... 15% 95,546 100.0% $ 585,288 $ 6.12 4
30 Hub Drive .................. 18% 73,127 100.0% $ 467,684 $ 6.40 2
265 Spagnoli Rd. .............. 28% 85,500 100.0% $ 647,702 $ 7.57 3
--------- ----------- ---
Total--County Line
Industrial Center ............ 342,174 100.0% $ 2,104,270 $ 6.15 11
--------- ----------- ---
Standalone Long Island
Properties
32 Windsor Pl.
Islip, NY .................... 10% 43,000 100.0% $ 138,583 $ 3.22 1
42 Windsor Pl.
Islip, NY .................... 8% 65,000 100.0% $ 230,315 $ 3.54 1
208 Blydenburgh Rd.
Islandia, NY ................. 17% 24,000 100.0% $ 102,302 $ 4.26 4
210 Blydenburgh Rd.
Islandia, NY ................. 16% 20,000 100.0% $ 110,922 $ 5.55 2
71 Hoffman Ln.
Islandia, NY ................. 10% 30,400 100.0% $ 182,293 $ 6.00 1
135 Fell Ct.
Islip, NY .................... 20% 30,000 100.0% $ 222,750 $ 7.43 1
--------- ----------- ---
Subtotal Islip/Islandia ...... 212,400 100.0% $ 987,165 $ 4.65 10
--------- ----------- ---

I-13

OWNERSHIP
INTEREST
(GROUND
LEASE LAND CLEARANCE
PERCENTAGE EXPIRATION YEAR AREA HEIGHT
PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1)
- ------------------------------ ------------ -------------- ------------- --------- ------------

70 Schmitt Boulevard,
Farmingdale, NY ............. 100% Fee 1975 4.4 18
105 Price Parkway,
Farmingdale, NY ............. 100% Fee 1969 12.0 26
110 Bi County Blvd.
Farmingdale, L.I, ........... 100% Fee 1984 9.5 19
-----
Subtotal Farmingdale ........ 25.9
-----
70 Maxess Rd,
Melville, NY ................ 100% Fee 1969 9.3 15
20 Melville Park Rd,
Melville, NY ................ 100% Fee 1965 4.0 23
45 Melville Park Drive,
Melville, NY ................ 100% Fee 1998 4.2 24
65 Marcus Drive.
Melville, L.I., ............. 100% Fee 1968 5.0 16
50 Marcus Drive, (3)
Melville, NY ................ 100% Fee 1967 7.1 22
-----
Subtotal Melville(4) ........ 29.6
-----
300 Motor Parkway,
Hauppauge, NY ............... 100% Fee 1979 4.2 14
1516 Motor Parkway,
Hauppauge, NY ............... 100% Fee 1981 7.9 24
-----
Subtotal Hauppauge .......... 12.1
-----
933 Motor Parkway
Smithtown, NY ............... 100% Fee 1973 5.6 20
65 S. Service Rd. ,
Plainview, NY(5) ............ 100% Fee 1961 1.6 14
85 S. Service Rd.
Plainview, NY ............... 100% Fee 1961 1.6 14
19 Nicholas Dr.,
Yaphank, NY (6) ............. 100% Fee 1989 29.6 24
48 Harbor Park Dr.,
Port Washington, NY ......... 100% Fee 1976 2.7 16
110 Marcus Dr.,
Huntington, NY .............. 100% Fee 1980 6.1 20
35 Engle St., (3)
Hicksville, NY .............. 100% Leasehold(7) 1966 4.0 24
100 Andrews Rd.,
Hicksville, L.I.,(1) ........ 100% Fee 1954 11.7 25
-----
Subtotal other (4) .......... 62.9
-----
Total Standalone Long
Island Properties (4) ...... 148.0
-----
Standalone Westchester
Properties ..................
100 Grasslands Rd., (3)
Elmsford, NY ................ 100% Fee 1964 3.6 16
2 Macy Rd.,
Harrison, NY ................ 100% Fee 1962 5.7 16
500 Saw Mill Rd.,
Elmsford, NY ................ 100% Fee 1968 7.3 22
-----
Total--Standalone
Westchester Industrial
Properties (4) .............. 16.6
-----
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ........ 100% Fee 1965 13.5 16
400 Cabot Dr.,
Hamilton Township, NJ........ 100% Fee 1989 44.8 30
100 Forge Way,
Rockaway, NJ ................ 100% Fee 1986 3.5 24
200 Forge Way,
Rockaway, NJ ................ 100% Fee 1989 12.7 28
300 Forge Way,
Rockaway, NJ ................ 100% Fee 1989 4.2 24
400 Forge Way,
Rockaway, NJ ................ 100% Fee 1989 12.8 28
5 Henderson Dr.,,
West Caldwell, NJ ........... 100% Fee 1967 15.2 14
492 River Rd,
Nutley, NJ (3) .............. 100% Fee 1952 17.3 13
4 Applegate Drive
Robbinsville, New Jersey 100% Fee 1999 10.0 30
30 Stultz Rd
So. Brunswick, NJ ........... 71.8% Fee 1978 12.6 18
6 Johanna Ct.,(3)
East Brunswick, NJ .......... 71.8% Fee 1978 18.4 18
-----
Total New Jersey
Standalone Industrial
Properties (4) .............. 165.0
-----

PERCENTAGE ANNUAL
OFFICE/ BASE
RESEARCH RENT NUMBER
AND RENTABLE PER OF
DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- ------------------------------ ------------- ------------ ----------- ------------- --------- -------

70 Schmitt Boulevard,
Farmingdale, NY ............. 10% 76,312 100.0% $ 538,147 $ 7.05 1
105 Price Parkway,
Farmingdale, NY ............. 8.5% 297,000 100.0% $ 1,388,515 $ 4.68 1
110 Bi County Blvd.
Farmingdale, L.I, ........... 45% 147,303 96.3% $ 1,285,683 $ 9.07 11
------- ----------- --
Subtotal Farmingdale ........ 520,615 98.9% $ 3,212,345 $ 6.24 13
------- ----------- --
70 Maxess Rd,
Melville, NY ................ 38% 78,000 100.0% $ 666,214 $ 8.48 1
20 Melville Park Rd,
Melville, NY ................ 66% 67,922 100.0% $ 385,625 $ 5.68 1
45 Melville Park Drive,
Melville, NY ................ 22% 40,247 100.0% $ 540,442 $ 13.43 1
65 Marcus Drive.
Melville, L.I., ............. 50% 60,000 100.0% $ 596,328 $ 9.94 1
50 Marcus Drive, (3)
Melville, NY ................ 95% 165,000 0.0% $ 0 $ 0 0
------- ----------- --
Subtotal Melville(4) ........ 411,169 100.0% $ 2,188,609 $ 8.87 4
------- ----------- --
300 Motor Parkway,
Hauppauge, NY ............... 100% 55,942 96.9% $ 856,895 $ 15.81 10
1516 Motor Parkway,
Hauppauge, NY ............... 5% 140,000 100.0% $ 863,800 $ 6.17 1
------- ----------- --
Subtotal Hauppauge .......... 195,942 99.1% $ 1,720,695 $ 8.86 11
------- ----------- --
933 Motor Parkway
Smithtown, NY ............... 26% 48,000 100.0% $ 32,153 $ 0.67 1
65 S. Service Rd. ,
Plainview, NY(5) ............ 10% 10,000 100.0% $ 69,911 $ 6.99 1
85 S. Service Rd.
Plainview, NY ............... 60% 20,000 100.0% $ 79,526 $ 3.98 2
19 Nicholas Dr.,
Yaphank, NY (6) ............. 5% 230,000 100.0% $ 1,222,649 $ 5.32 1
48 Harbor Park Dr.,
Port Washington, NY ......... 100% 35,000 100.0% $ 707,352 $ 20.21 1
110 Marcus Dr.,
Huntington, NY .............. 39% 78,240 100.0% $ 486,653 $ 6.22 1
35 Engle St., (3)
Hicksville, NY .............. 8% 120,000 0.0% $ 0 $ 0.00 0
100 Andrews Rd.,
Hicksville, L.I.,(1) ........ 12% 167,500 100.0% $ 1,105,727 $ 6.59 2
------- ----------- --
Subtotal other (4) .......... 708,740 100.0% $ 3,703,971 $ 6.29 9
------- ----------- --
Total Standalone Long
Island Properties (4) ...... 2,048,866 99.6% $11,812,785 $ 6.29 47
--------- ----------- --
Standalone Westchester
Properties ..................
100 Grasslands Rd., (3)
Elmsford, NY ................ 100% 45,000 0.0% $ 0 $ 0.00 0
2 Macy Rd.,
Harrison, NY ................ 100% 26,000 100.0% $ 422,500 $ 16.25 1
500 Saw Mill Rd.,
Elmsford, NY ................ 17% 92,000 100.0% $ 846,400 $ 9.20 1
--------- ----------- --
Total--Standalone
Westchester Industrial
Properties (4) .............. 163,000 100.0% $ 1,268,900 $ 10.75 2
--------- ----------- --
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ........ 49% 135,000 57.5% $ 1,265,304 $ 16.30 3
400 Cabot Dr.,
Hamilton Township, NJ........ 10% 585,510 100.0% $ 2,739,377 $ 4.68 1
100 Forge Way,
Rockaway, NJ ................ 12% 20,136 100.0% $ 166,775 $ 8.28 5
200 Forge Way,
Rockaway, NJ ................ 23% 72,118 100.0% $ 453,367 $ 6.29 2
300 Forge Way,
Rockaway, NJ ................ 37% 24,000 100.0% $ 180,050 $ 7.44 2
400 Forge Way,
Rockaway, NJ ................ 20% 73,000 100.0% $ 407,666 $ 5.58 2
5 Henderson Dr.,,
West Caldwell, NJ ........... 10% 210,000 100.0% $ 1,324,234 $ 6.29 1
492 River Rd,
Nutley, NJ (3) .............. 100% 128,000 0.00% $ 0 $ 0 0
4 Applegate Drive
Robbinsville, New Jersey 10% 265,000 100.0% $ 1,364,750 $ 5.15 1
30 Stultz Rd
So. Brunswick, NJ ........... 10% 60,617 100.0% $ 200,248 $ 3.12 1
6 Johanna Ct.,(3)
East Brunswick, NJ .......... 10% 214,000 0.0% $ 0 $ 0.00 0
--------- ----------- --
Total New Jersey
Standalone Industrial
Properties (4) .............. 1,787,381 94.9% $ 8,101,771 $ 5.95 18
--------- ----------- --

I-14

OWNERSHIP
INTEREST
(GROUND
LEASE LAND CLEARANCE
PERCENTAGE EXPIRATION YEAR AREA HEIGHT
PROPERTY OWNERSHIP DATE) CONSTRUCTED (ACRES) (FEET) (1)
- -------------------------- ------------ ------------ ------------- --------- ------------

Standalone Connecticut
Industrial Property
710 Bridgeport
Shelton, CT ............. 100% Fee 1971-1979 36.1 22
-----
Total Connecticut
Standalone Industrial
Property ................ 36.1
-----
Total-Industrial
Properties (4) .......... 622.0
=====

PERCENTAGE ANNUAL
OFFICE/ BASE
RESEARCH RENT NUMBER
AND RENTABLE PER OF
DEVELOPMENT SQUARE PERCENT ANNUAL BASE LEASED TENANT
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- -------------------------- ------------- ------------ ----------- ------------- --------- -------

Standalone Connecticut
Industrial Property
710 Bridgeport
Shelton, CT ............. 30% 452,414 100.0% $ 2,911,020 $ 6.43 2
------- ----------- -
Total Connecticut
Standalone Industrial
Property ................ 452,414 100.0% $ 2,911,020 $ 6.43 2
------- ----------- -
Total-Industrial
Properties (4) .......... 8,256,240 98.2% $45,166,103 $ 6.26 251
========= =========== ===

- ----------------
(1) Calculated as the difference from the lowest beam to floor.

(2) Represents Base Rent of signed leases at December 31, 1999 adjusted for
scheduled contractual increases during the 12 months ending December 31,
2000. Total Base Rent for these purposes reflects the effect of any lease
expirations that occur during the 12 month period ending December 31, 2000.
Amounts included in rental revenue for financial reporting purposes have
been determined on a straight-line basis rather than on the basis of
contractual rent as set forth in the foregoing table.

(3) Property under redevelopment.

(4) Percent leased excludes properties under redevelopment.

(5) A tenant has been granted an option exercisable after April 30, 1997 and
prior to October 31, 2002 to purchase this property for $600,000.

(6) The actual fee interest in 19 Nicholas Drive is currently held by the Town
of Brookhaven Industrial Development Agency. The Company may acquire such
fee interest by making a nominal payment to the Town of Brookhaven
Industrial Development Agency.

(7) The Company has entered into a 20 year lease agreement in which it has the
right to sublease the premises.

RETAIL PROPERTIES

As of December 31, 1999, the Company owned two free-standing 10,000 square
foot retail properties located in Great Neck and Huntington, New York and were
100% leased as of December 31, 1999.

DEVELOPMENTS IN PROGRESS

As of December 31, 1999, the Company had invested approximately $130
million in developments in progress. This amount includes approximately $64
million relating to existing buildings encompassing approximately 1.1 million
square feet. The Company estimates that if these projects were to be completed,
total additional development costs would be approximately $25.3 million. In
addition, the Company has also invested approximately $66 million relating to
approximately 346 acres of land which it can develop approximately 2.2 million
square feet. The Company estimates that if these projects were to be completed,
total additional development costs would be approximately $270 million.

THE OPTION PROPERTIES

In connection with the IPO, the Company was granted a ten year option to
acquire ten properties (the "Option Properties") which were not contributed to
the Operating Partnership and are either owned by Reckson or in which Reckson
owns a non controlling minority interest.

As of December 31, 1999, the Company has acquired four of the Option
Properties for an aggregate purchase price of approximately $35 million and the
issuance of approximately 475,000 Units. In addition, during 1998, one of the
Option Properties was sold by Reckson to a third party.

The remaining Option Properties consist of three Class A office properties
encompassing approximately 311,000 square feet and two industrial properties
encompassing approximately 69,000 square feet.

I-15

HISTORICAL NON-INCREMENTAL REVENUE-GENERATING CAPITAL EXPENDITURES, TENANT
IMPROVEMENT COSTS AND LEASING COMMISSIONS

The following table sets forth annual and per square foot recurring,
non-incremental revenue-generating capital expenditures and non-incremental
revenue-generating tenant improvement costs and leasing commissions incurred by
the Company to retain revenues attributable to existing leased space for the
period 1995 through 1999 for the Office Properties and the Industrial
Properties. As noted, incremental revenue-generating tenant improvement costs
and leasing commissions are excluded from the table set forth immediately below.
The historical capital expenditures, tenant improvement costs and leasing
commissions set forth below are not necessarily indicative of future recurring,
non-incremental revenue-generating capital expenditures or non-incremental
revenue-generating tenant improvement costs and leasing commissions.

1995 1996 1997 1998 1999
------------- ------------- --------------- --------------- ---------------

CAPITAL EXPENDITURES
Office Properties
Total .................................... $ 364,545 $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899
Per square foot .......................... $ .19 $ .13 $ .22 $ .23 $ .23
Industrial Properties
Total .................................... $ 290,457 $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688
Per square foot .......................... $ .08 $ .18 $ .15 $ .12 $ .11
NON-INCREMENTAL REVENUE-GENERATING TENANT
IMPROVEMENT COSTS AND LEASING COMMISSIONS
Long Island Office Properties
Annual Tenant Improvement Costs .......... $ 452,057 $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357
Per square foot improved ................ 4.44 4.28 7.00 3.98 4.73
Annual Leasing Commissions .............. 144,925 119,047 415,822 418,191 551,762
Per square foot leased .................. 1.42 .97 4.83 1.46 2.59
Total per square foot ................... $ 5.86 $ 5.25 $ 11.83 $ 5.44 $ 7.32
Westchester Office Properties
Annual Tenant Improvement Costs ......... N/A $ 834,764 $ 1,211,665 $ 711,160 $ 1,316,611
Per square foot improved ................ N/A 6.33 8.90 4.45 5.62
Annual Leasing Commissions .............. N/A 264,388 366,257 286,150 457,730
Per square foot leased .................. N/A 2.00 2.69 1.79 1.96
Total per square foot ................... N/A $ 8.33 $ 11.59 $ 6.24 $ 7.58
Connecticut Office Properties
Annual Tenant Improvement Costs ......... N/A $ 58,000 $ 1,022,421 $ 202,880 $ 179,043
Per square foot improved ................ N/A 12.45 13.39 5.92 4.88
Annual Leasing Commissions .............. N/A 0 256,615 151,063 110,252
Per square foot leased .................. N/A 0 3.36 4.41 3.00
Total per square foot ................... N/A $ 12.45 $ 16.75 $ 10.33 $ 7.88
New Jersey Office Properties
Annual Tenant Improvement Costs ......... N/A N/A N/A $ 654,877 $ 454,054
Per square foot improved ................ N/A N/A N/A 3.78 2.29
Annual Leasing Commissions .............. N/A N/A N/A 396,127 787,065
Per square foot leased .................. N/A N/A N/A 2.08 3.96
Total per square foot ................... N/A N/A N/A $ 5.86 $ 6.25
Industrial Properties
Annual Tenant Improvement Costs ......... $ 210,496 $ 380,334 $ 230,466 $ 283,842 $ 375,646
Per square foot improved ................ .90 .72 .55 .76 .25
Annual Leasing Commissions .............. 107,351 436,213 81,013 200,154 835,108
Per square foot leased .................. .46 .82 .19 .44 .56
Total per square foot ................... $ 1.36 $ 1.54 $ .74 $ 1.20 $ .81

I-16

MORTGAGE INDEBTEDNESS
The following table sets forth certain information regarding the mortgage
debt of the Company, as of December 31, 1999.

PRINCIPAL AMOUNT AMORTIZATION
PROPERTY OUTSTANDING INTEREST RATE MATURITY DATE SCHEDULE
- ------------------------------------ ------------------ ----------------- --------------- -------------
(IN THOUSANDS)

6800 Jericho Turnpike
(North Shore Atrium I) ............ $ 15,001 7.25% 6/10/00 --
6900 Jericho Turnpike
(North Shore Atrium II) ........... 5,279 7.25% 6/10/00 --
200 Broadhollow Road. .............. 6,560 7.75% 6/02/02 30 year
395 North Service Road ............. 20,933 6.45% 10/26/05 (3)
50 Charles Lindbergh Blvd. ......... 15,479 7.50% 7/10/01 --
333 Earl Ovington Blvd.
(The Omni) (1) .................... 56,367 7.72% 08/14/07 25 year
310 East Shore Road. ............... 2,322 8.00% 7/01/02 --
80 Orville Drive ................... 2,616 7.50% (2) 2/01/04 --
580 White Plains Road .............. 8,172 7.375% 9/01/00 20 year
Landmark Square .................... 47,809 8.02% 10/07/06 25 year
110 Bi-County Blvd. ................ 4,221 9.125% 11/30/12 20 year
100 Summit Lake Drive .............. 22,614 8.50% 4/01/07 15 year
200 Summit Lake Drive .............. 20,463 9.25% 1/01/06 25 year
120 West 45th Street ............... 66,933 6.82% 11/01/27 28 year
810 7th Avenue ..................... 86,822 7.73% 8/1/09 25 year
100 Wall Street .................... 37,623 7.73% 8/1/09 25 year
One Orlando Center ................. 39,960 6.82% 11/01/27 28 year
---------
Total .............................. $ 459,174
=========

- ----------
(1) The Company has a 60% general partnership interest in the Omni Partnership.
The Company's proportionate share of the aggregate principal amount of the
mortgage debt on the Omni is approximately $33.8 million.

(2) Interest rate increases to 10.1% at June 2000.

(3) Principal payments of $34,000 per month.

ITEM 3. LEGAL PROCEEDINGS

The Company is not presently subject to any material litigation nor, to the
Company's knowledge, is any litigation threatened against the Company, other
than routine actions for negligence or other claims and administrative
proceedings arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively are
not expected to have a material adverse effect on the liquidity, results of
operations or business or financial condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of stockholders during the fourth
quarter of the year ended December 31, 1999.

I-17

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

COMMON STOCK

The Company's common stock began trading on the New York Stock Exchange
("NYSE") on May 25, 1995, under the symbol "RA". The following table sets forth
the quarterly high and low closing sales prices per share of the Company's
common stock as reported on the NYSE and the distributions paid by the Company
for each respective quarter ended.

HIGH LOW DISTRIBUTION
------------ ------------ ------------------

March 31, 1998 .............. $ 26.438 $ 24.125 $0.3125
June 30, 1998 ............... $ 26.375 $ 22.688 $0.4199 (1)
September 30, 1998 .......... $ 26.000 $ 19.000 $0.3375
December 31, 1998 ........... $ 24.563 $ 20.188 $0.3375
March 31, 1999 .............. $ 24.000 $ 20.375 $.33750
June 30, 1999 ............... $ 26.563 $ 20.438 $.37125 (2)
September 30, 1999 .......... $ 23.500 $ 19.375 $.37125
December 31, 1999 ........... $ 20.813 $ 18.000 $.37125

(1) Commencing with the distribution for the quarter ending June 30, 1998, the
Board of Directors of the Company increased the quarterly distribution to
$.3375 per share, which is equivalent to an annual distribution of $1.35 per
share. In addition, on June 11, 1998, the Company paid a stock dividend
equivalent to $.0824 per share relating to the Operating Partnership's
distribution of its common stock interest in Reckson Service Industries,
Inc. currently D/B/A FrontLine Capital Group to the Company.

(2) Commencing with the distribution for the quarter ending June 30, 1999, the
Board of Directors of the Company increased the quarterly distribution to
$.37125 per share, which is equivalent to an annual distribution of $1.485
per share.

CLASS B COMMON STOCK

The Company's Class B Common Stock began trading on the NYSE on May 25,
1999 under the symbol "RAb". The following table sets forth the quarterly high
and low closing sales prices per share of the Comapny8's Class B Common Stock as
reported on the NYSE and the distributions paid by the Company for each
respective quarter ended.

HIGH LOW DISTRIBUTION
------------ ------------ -----------------

March 31, 1999 .............. N/A N/A N/A
June 30, 1999 ............... $ 27.688 $ 23.875 $ .2364 (1)
September 30, 1999 .......... $ 24.688 $ 20.500 $ .5600
December 31, 1999 ........... $ 22.750 $ 19.438 $ .5600

(1) Represents the period May 24, 1999 through June 30, 1999

II-1

ITEM 6. SELECTED FINANCIAL DATA (in thousands except share and properties data)

RECKSON ASSOCIATES REALTY CORP.
-----------------------------------------------------------
FOR THE YEAR ENDED
-----------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
-------------- -------------- -------------- --------------

OPERATING DATA:
Revenues .................................................. $ 403,153 $ 266,373 $ 153,395 $ 96,141
Total expenses ............................................ 299,111 201,892 107,905 70,951
Income (before preferred dividends and distributions,
minority interests and extraordinary loss) ............... 104,042 64,481 45,490 25,190
Preferred dividends and distributions ..................... 27,001 14,244 -- --
Minority interests ........................................ 16,209 10,672 8,624 6,768
Extraordinary loss (net of minority interests' share) ..... (555) (1,670) (2,230) (895)
Net income available to common shareholders ............... 47,529 37,895 34,636 17,527
Net income available to Class B Common shareholders ....... 12,748 -- -- --
PER SHARE DATA -- COMMON SHAREHOLDERS:
Basic:
Income before extraordinary loss .......................... $ 1.19 $ 1.00 $ 1.13 $ .92
Extraordinary loss ........................................ (.01) (.04) (.07) (.04)
Net income ................................................ 1.18 0.96 1.06 .88
Weighted average shares outstanding ....................... 40,270,000 39,473,000 32,727,000 19,928,000
Diluted:
Income before extraordinary loss .......................... $ 1.18 $ .99 $ 1.11 $ .91
Extraordinary loss ........................................ (.01) (.04) (.07) (.04)
Diluted net income ........................................ 1.17 .95 1.04 .87
Diluted weighted shares outstanding ....................... 40,676,000 40,010,000 33,260,000 20,190,000
PER SHARE DATA -- CLASS B COMMON SHAREHOLDERS:
Basic:
Income before extraordinary loss .......................... $ 1.91 $ -- $ -- $ --
Extraordinary loss ........................................ (.02) -- -- --
Net income ................................................ 1.89 -- -- --
Weighted average shares outstanding ....................... 6,744,000 -- -- --
Diluted:
Income before extraordinary loss .......................... $ 1.26 $ -- $ -- $ --
Extraordinary loss ........................................ -- -- -- --
Diluted net income ........................................ 1.26 -- -- --
Diluted weighted shares outstanding ....................... 6,744,000 -- -- --
BALANCE SHEET DATA: (PERIOD END)
Commercial real estate properties, before accumulated
depreciation ............................................. $ 2,214,872 $ 1,743,223 $ 1,015,282 $ 519,504
Total assets .............................................. 2,724,235 1,854,816 1,113,257 543,758
Mortgage notes payable .................................... 459,174 253,463 180,023 161,513
Unsecured credit facility ................................. 297,600 465,850 210,250 108,500
Unsecured term loan ....................................... 75,000 20,000 -- --
Senior unsecured notes .................................... 449,313 150,000 150,000 --
Market value of equity (2) ................................ 1,726,845 1,332,882 1,141,592 653,606
Total market capitalization including debt (2 and 3) ...... 2,993,756 2,199,936 1,668,800 921,423
OTHER DATA:
Funds from operations (basic) (4) ......................... $ 130,820 $ 97,697 $ 69,548 $ 41,133
Funds from operations (diluted) (4) ....................... $ 161,681 $ 99,450 $ 69,548 $ 41,133
Total square feet (at end of period) ...................... 21,385 21,000 13,645 8,800
Number of properties (at end of period) ................... 189 204 155 110

RECKSON ASSOCIATES
REALTY CORP. RECKSON GROUP
----------------- -------------------
FOR THE PERIOD
JUNE 3, 1995 TO FOR THE PERIOD
DECEMBER 31, JANUARY 1, 1995 TO
1995 (1) JUNE 2, 1995 (1)
----------------- -------------------

OPERATING DATA:
Revenues .................................................. $ 38,455 $ 20,889
Total expenses ............................................ 27,901 20,695
Income (before preferred dividends and distributions,
minority interests and extraordinary loss) ............... 10,554 194
Preferred dividends and distributions ..................... -- --
Minority interests ........................................ 3,067 --
Extraordinary loss (net of minority interests' share) ..... (4,234) --
Net income available to common shareholders ............... 3,253 194
Net income available to Class B Common shareholders ....... -- --
PER SHARE DATA -- COMMON SHAREHOLDERS:
Basic:
Income before extraordinary loss .......................... $ .51 --
Extraordinary loss ........................................ (.29) --
Net income ................................................ .22 --
Weighted average shares outstanding ....................... 14,678,000 --
Diluted:
Income before extraordinary loss .......................... $ .51 --
Extraordinary loss ........................................ (.29) --
Diluted net income ........................................ .22 --
Diluted weighted shares outstanding ....................... 14,725,000 --
PER SHARE DATA -- CLASS B COMMON SHAREHOLDERS:
Basic:
Income before extraordinary loss .......................... $ -- --
Extraordinary loss ........................................ -- --
Net income ................................................ -- --
Weighted average shares outstanding ....................... -- --
Diluted:
Income before extraordinary loss .......................... $ -- --
Extraordinary loss ........................................ -- --
Diluted net income ........................................ -- --
Diluted weighted shares outstanding ....................... -- --
BALANCE SHEET DATA: (PERIOD END)
Commercial real estate properties, before accumulated
depreciation ............................................. $ 290,712 --
Total assets .............................................. 242,728 --
Mortgage notes payable .................................... 98,126 --
Unsecured credit facility ................................. 40,000 --
Unsecured term loan ....................................... -- --
Senior unsecured notes .................................... -- --
Market value of equity (2) ................................ 303,943 --
Total market capitalization including debt (2 and 3) ...... 426,798 --
OTHER DATA:
Funds from operations (basic) (4) ......................... $ 17,246 --
Funds from operations (diluted) (4) ....................... $ 17,246 --
Total square feet (at end of period) ...................... 5,430 4,529
Number of properties (at end of period) ................... 81 72

(1) Represents certain financial information on a consolidated historical basis
for Reckson Associates Realty Corp. and on a combined historical basis for
the Reckson Group.

(2) Based on the sum of:

(i) the market value of the Company's common stock and operating
partnership units (assuming conversion) of 48,076,648, 47,800,049,
44,988,846, 31,119,364 and 20,690,448 at December 31, 1999, 1998,
1997, 1996 and 1995, respectively (based on a per share/unit price
of $20.50, $22.19, $25.38, $21.13 and $14.69 at December 31, 1999,
1998, 1997, 1996 and 1995, respectively),

(ii) the market value of the Company's Class B Common Stock of
10,283,763 shares at December 31,1999 (based on a per share price
of $22.75),

(iii) the liquidation preference value of 15,192,000 and 9,192,000 shares
of the Company's preferred stock at December 31, 1999 and 1998,
respectively (based on a per share value of $25.00),

(iv) the liquidation preference value of 42,518 of the operating
partnership's preferred units at December 31, 1999 and 1998 (based
on a per unit value of $1,000) and

(v) the contributed value of Metropolitan's preferred interest of $85
million at December 31, 1999

(3) Debt amount is net of minority partners' proportionate share plus the
Company's share of unconsolidated joint venture debt.

(4) See "Management's Discussion and Analysis" for a discussion of funds from
operations.

II-2

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the historical
financial statements of Reckson Associates Realty Corp. (the "Company") and
related notes.

The Company considers certain statements set forth herein to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, with respect to the Company's expectations for future periods.
Certain forward-looking statements, including, without limitation, statements
relating to the timing and success of acquisitions, the financing of the
Company's operations, the ability to lease vacant space and the ability to renew
or relet space under expiring leases, involve certain risks and uncertainties.
Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, the actual
results may differ materially from those set forth in the forward-looking
statements and the Company can give no assurance that its expectation will be
achieved. Certain factors that might cause the results of the Company to differ
materially from those indicated by such forward-looking statements include,
among other factors, general economic conditions, general real estate industry
risks, tenant default and bankruptcies, loss of major tenants, the impact of
competition and acquisition, redevelopment and development risks, the ability to
finance business opportunities and local real estate risks such as an oversupply
of space or a reduction in demand for real estate in the Company's real estate
markets. Consequently, such forward-looking statements should be regarded solely
as reflections of the Company's current operating and development plans and
estimates. These plans and estimates are subject to revisions from time to time
as additional information becomes available, and actual results may differ from
those indicated in the referenced statements.

OVERVIEW AND BACKGROUND

The Reckson Group, the predecessor to the Company, was engaged in the
ownership, management, operation, leasing and development of commercial real
estate properties, principally office and industrial buildings, and also owned
certain undeveloped land located primarily on Long Island, New York. In June
1995, the Company completed an Initial Public Offering (the "IPO"), succeeded to
the Reckson Group's real estate business and commenced operations.

The Company is a self-administered and self managed real estate investment
trust ("REIT") specializing in the acquisition, leasing, financing, management
and development of office and industrial properties. The Company's growth
strategy is focused on the real estate markets in and around the New York
tri-state area (the "Tri-State Area").

The Company owns all of the interests in its real estate properties through
Reckson Operating Partnership, L.P. (the "Operating Partnership"). At December
31, 1999, the Company owned and operated 189 properties (the "Properties"),
(including two joint venture properties) encompassing approximately 21.4 million
square feet in the Tri-State Area. The Properties include 77 office properties
(the "Office Properties") containing approximately 13.1 million square feet, 110
industrial properties (the "Industrial Properties") containing approximately 8.3
million square feet and two retail properties containing approximately 20,000
square feet. The Company also owns and operates a 357,000 square foot office
property located in Orlando Florida. In addition, the Company owned
approximately 346 acres of land in 16 separate parcels of which the Company can
develop approximately 1.9 million square feet of office space and approximately
300,000 square feet of industrial space. The Company also has invested
approximately $315.6 million in mortgage notes encumbering three Class A Office
Properties encompassing approximately 1.6 million square feet, approximately 472
acres of land located in New Jersey and in a note receivable secured by a
partnership interest in Omni Partners, L.P., owner of the Omni, a 575,000 square
foot Class A Office Property located in Uniondale, New York.

On January 6, 1998, the Company made its initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to Reckson Morris Operating
Partnership, L. P. ("RMI") in exchange for operating partnership units in RMI.

II-3

On August 9, 1999, the Company executed a contract for the sale, which will
take place in three stages, of its interest in RMI which consisted of 28
properties, comprising approximately 6.1 million square feet and three other big
box industrial properties to Keystone Property Trust ("KTR") (formerly American
Real Estate Investment Corporation). In addition, the Company also entered into
a sale agreement with the Matrix Development Group ("Matrix"), relating to a
first mortgage note and certain industrial land holdings (the "Matrix Sale").
The combined total sale price is $310 million (approximately $42 million of
which is payable to the Morris Companies and its affiliates) and consists of a
combination of (i) cash, (ii) convertible preferred and common stock of KTR,
(iii) preferred units of KTR's operating partnership, (iv) relief of debt and
(v) a purchase money mortgage note secured by certain land that is being sold to
Matrix.

During September 1999, the Matrix Sale and the first stage of the RMI
closing occurred whereby the Company sold its interest in RMI to KTR for a
combined sales price of approximately $164.7 million (net of minority partner's
interest). The combined consideration consisted of approximately (i) $86.3
million in cash, (ii) $40 million of preferred stock of KTR, (iii) $1.5 million
in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v)
approximately $10.2 million in purchase money mortgages. As a result, the
Company incurred a gain of approximately $10.1 million which has been included
in gain on sales of real estate on the Company's consolidated statements of
income. Cash proceeds from the sales were used primarily to repay borrowings
under the Credit Facility.

The second and third stages of the RMI closing are scheduled to be
completed in April 2000. The remaining stages consist of six industrial
buildings and are being sold for total consideration of approximately $98
million.

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust.

On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc.
("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the
"Merger") into Metropolitan, with Metropolitan surviving the Merger.
Concurrently with the Merger, Tower Realty Operating Partnership, L.P. was
merged with and into a subsidiary of Metropolitan. The consideration issued in
the mergers was comprised of (i) 25% cash (approximately $107.2 million) and
(ii) 75% of shares of Class B Exchangeable Common Stock, par value $.01 per
share, of the Company (the "Class B Common Stock") (valued for generally
accepted accounting principles ("GAAP") purposes at approximately $304.1
million).

The Tower portfolio acquired in the Merger consists of three Office
Properties comprising approximately 1.6 million square feet located in New York
City, one Office Property located on Long Island and certain office properties
and other real estate assets located outside the Tri-State Area.

Prior to the closing of the Merger, the Company arranged for the sale of
four of Tower's Class B New York City properties, comprising approximately
701,000 square feet for approximately $84.5 million. Subsequent to the closing
of the Merger, the Company has sold a real estate joint venture interest and all
of the property located outside the Tri-State Area other than one office
property located in Orlando, Florida for approximately $171.1 million. The
combined consideration consisted of approximately $143.8 million in cash and
approximately $27.3 million of debt relief. Net cash proceeds from the sales
were used primarily to repay borrowings under the Company's unsecured credit
facility. As a result of incurring certain sales and closing costs in connection
with the sale of the assets located outside the Tri-State Area, the Company has
incurred a loss of approximately $4.4 million which has been included in gain on
sales of real estate on the Company's consolidated statements of income.

During 1997, the Company formed Reckson Service Industries, Inc. currently
D/B/A FrontLine Capital Group ("FrontLine") and Reckson Strategic Venture
Partners, LLC ("RSVP"). On June 11, 1998, the Operating Partnership distributed
its 95% common stock interest in FrontLine of approximately $3 million to its
owners, including the Company which, in turn, distributed the common stock of
FrontLine received from the Operating Partnership to its stockholders.
Additionally, during June

II-4

1998, the Operating Partnership established a credit facility with FrontLine
(the "FrontLine Facility") in the amount of $100 million for FrontLine's
e-commerce and e-services operations and other general corporate purposes. As of
December 31, 1999, the Company had advanced $79.5 million under the FrontLine
Facility. In addition, the Operating Partnership has approved the funding of
investments of up to $100 million with or in RSVP (the "RSVP Commitment"),
through RSVP-controlled joint venture REIT-qualified investments or advances
made to FrontLine under terms similar to the FrontLine Facility. As of December
31, 1999, approximately $67.2 million had been invested through the RSVP
Commitment, of which $24.8 million represents RSVP-controlled joint venture
REIT-qualified investments and $42.4 million represents advances to FrontLine
under the RSVP Commitment.

During November 1999, the Board of Directors of the Company approved an
amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine
to incur secured debt and to pay interest thereon. In consideration of the
amendments, FrontLine has paid the Operating Partnership a fee of approximately
$3.6 million in the form of shares of FrontLine common stock. Such fee is being
amortized in income over an estimated nine month benefit period.

FrontLine identifies, acquires interests in and develops a network of
business to business e-commerce and e-services companies that service small to
medium sized enterprises, independent professionals and entrepreneurs and the
mobile workforce of larger companies. FrontLine serves as the managing member of
RSVP. RSVP was formed to provide the Company with a research and development
vehicle to invest in alternative real estate sectors. RSVP invests primarily in
real estate and real estate related operating companies generally outside of the
Company's core office and industrial focus. RSVP's strategy is to identify and
acquire interests in established entrepreneurial enterprises with experienced
management teams in market sectors which are in the early stages of their growth
cycle or offer unique circumstances for attractive investments as well as a
platform for future growth.

The Operating Partnership and FrontLine have entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their relationship
and to limit conflicts of interest. Under the Reckson Intercompany Agreement,
FrontLine granted the Operating Partnership a right of first opportunity to make
any REIT -qualified investment that becomes available to FrontLine. In addition,
if a REIT-qualified investment opportunity becomes available to an affiliate of
FrontLine, including RSVP, the Reckson Intercompany Agreement requires such
affiliate to allow the Operating Partnership to participate in such opportunity
to the extent of FrontLine's interest.

Under the Reckson Intercompany Agreement, the Operating Partnership granted
FrontLine a right of first opportunity to provide commercial services to the
Operating Partnership and its tenants. FrontLine will provide services to the
Operating Partnership at rates and on terms as attractive as either the best
available for comparable services in the market or those offered by FrontLine to
third parties. In addition, the Operating Partnership will give FrontLine access
to its tenants with respect to commercial services that may be provided to such
tenants and, under the Reckson Intercompany Agreement, subject to certain
conditions, the Operating Partnership granted FrontLine a right of first refusal
to become the lessee of any real property acquired by the Operating Partnership
if the Operating Partnership determines that, consistent with the Company's
status as a REIT, it is required to enter into a "master" lease agreement.

On August 27, 1998 the Company announced the formation of a joint venture
with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of
companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion
Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is
primarily engaging in acquiring, developing and/or owning government-occupied
office buildings and privately operated correctional facilities. Under the
Dominion Venture's operating agreement, RSVP is to invest up to $100 million,
some of which may be invested by the Company ( the "RSVP Capital"). The initial
contribution of RSVP Capital was approximately $39 million of which
approximately $10.1 million was invested by a subsidiary of the Company. The
Company's investment was funded through the RSVP Commitment. In addition, the
Company advanced approximately $2.9 million to FrontLine through the RSVP

II-5

Commitment for an investment in RSVP which was then invested on a joint venture
basis with the Dominion Group in certain service business activities related to
the real estate activities. As of December 31, 1999, the Company had invested
approximately $17.6 million in the Dominion Venture which had investments in 13
government office buildings and three correctional facilities.

In 1999 the Company invested approximately $7.2 million, through a
subsidiary, in RAP Student Housing Properties, LLC ("RAP -- SHP"), a company
that engages primarily in the acquisition and development of off-campus student
housing projects. The Company's investment was funded through the RSVP
Commitment. In addition, the Company has advanced approximately $3.2 million to
FrontLine through the RSVP Commitment for an additional investment in RSVP which
was invested in certain service business activities related to student housing.
As of December 31, 1999, RAP -- SHP had investments in four off -- campus
student housing projects.

The market capitalization of the Company at December 31, 1999 was
approximately $3 billion. The Company's market capitalization is based on the
sum of (i) the market value of the Company's common stock and common units of
limited partnership interest in the Operating Partnership ("OP Units") (assuming
conversion) of $20.50 per share/unit (based on the closing price of the
Company's common stock on December 31, 1999), (ii) the market value of the
Company's Class B Common Stock of $22.75 per share (based on the closing price
of the Company's Class B Common Stock on December 31, 1999), (iii) the
liquidation preference value of the Company's Series A preferred and Series B
preferred stock of $25 per share, (iv) the liquidation preference value of the
Operating Partnership's preferred units, (v) the contributed value of
Metropolitan's preferred interest of $85 million and (vi) the $1.3 billion
(including its share of joint venture debt and net of minority partners'
interests) of debt outstanding at December 31,1999. As a result, the Company's
total debt to total market capitalization ratio at December 31, 1999 equaled
approximately 42.3%.

RESULTS OF OPERATIONS

The Company's total revenues increased by $136.8 million or 51.4% from 1998
to 1999 and $113 million or 73.7% from 1997 to 1998. Property operating
revenues, which include base rents and tenant escalations and reimbursements
("Property Operating Revenues") increased by $116.7 million or 46.2% from 1998
to 1999 and $108.7 million or 75.6% from 1997 to 1998. The 1999 increase in
Property Operating Revenues is substantially attributable to the Tower portfolio
acquisition on May 24, 1999. The revenue generated from these assets generated
approximately $47.5 million of revenue in 1999. Additionally, approximately
$29.1 million of revenue was generated from the Company's acquisition of the
first mortgage note secured by 919 Third Avenue. Property Operating Revenues
were also positively effected by approximately $9.9 million from increases in
occupancies and rental rates in our "same store" properties and approximately
$27.2 million in additional revenue generated from properties acquired during
1998 and new development activity. The remaining balance of the increase in
total revenues in 1999 is primarily attributable to the gain on sales of real
estate of $10.1 million and approximately $8.7 million in other income related
to interest earned on advances made to FrontLine through the FrontLine Facility
and to RSVP through the RSVP Commitment. The 1998 increase in Property Operating
Revenues is comprised of $2.1 million attributable to increases in rental rates
and changes in occupancies and $106.6 million attributable to acquisitions of
properties. The remaining balance of the increase in total revenues in 1998 is
primarily attributable to increases in interest income on the Company's
investments in mortgage notes and notes receivable and income related to the
Company's interest in its service companies. The Company's base rent reflects
the positive impact of the straight-line rent adjustment of $ 10.7 million in
1999, $7.7 million in 1998 and $4.5 million in 1997.

Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $41.7 million or 49.5% from 1998 to 1999 and by $34.0
million or 67.5% from 1997 to 1998. These increases are primarily due to the
acquisition of the properties included in the Tower portfolio acquisition on May
24, 1999 and the acquisition of the first mortgage note secured by 919 Third
Avenue. Gross operating margins (defined as Property Operating Revenues less
Property Expenses, taken as a percentage of Property Operating Revenues) for
1999, 1998 and 1997 were 65.9%, 66.6% and 65.0%, respectively. The slight
decrease in the gross operating margin percentage from 1998 to 1999 resulted

II-6

from a larger proportionate share of gross operating margin derived from office
properties, which has a lower gross margin percentage, in 1999 compared to 1998.
The higher proportionate share of the gross operating margin attributable to the
office properties was a result of the office properties acquired in the Tower
portfolio acquisition and the disposition of net leased industrial properties in
the "Big Box" industrial transaction. This shift in the composition of the
portfolio was offset by increases in rental rates and operating efficiencies
realized as a result of operating a larger portfolio of properties with
concentration on properties in office and industrial parks or in its established
sub-markets. The increase from 1997 to 1998 in the gross operating margin
percentage resulted from increases realized in rental rates, the Company's
ability to realize certain operating efficiencies as a result of operating a
larger portfolio of properties with concentrations of properties in office and
industrial parks or in its established sub-markets, a stable operating cost
environment and the increased ownership of net leased properties.

Marketing, general and administrative expenses were $24.3 million in 1999,
$16.9 million in 1998 and $8.8 million in 1997. The increase in marketing,
general and administrative expenses is due to the increased costs of opening and
maintaining the Company's New York City division and the increase in corporate
management and administrative costs associated with the growth of the Company.
The Company's business strategy has been to expand further into the Tri-State
Area suburban markets and the New York City market by applying its standards for
high quality office and industrial space and premier tenant service to its New
Jersey, Westchester, Southern Connecticut and New York City divisions. In doing
this, the Company seeks to create a superior franchise value that it enjoys in
its home base of Long Island. Over the past three years the Company has
supported this effort by increasing the marketing programs in the other
divisions and strengthening the resources and operating systems in these
divisions. The cost of these efforts are reflected in both marketing, general
and administrative expenses as well as the revenue growth of the Company.
Marketing, general and administrative expense as a percentage of total revenues
were 6.0% in 1999, 6.3% in 1998 and 5.7% in 1997.

Interest expense was $74.3 million in 1999, $47.8 million in 1998 and $21.6
million in 1997. The increase of $26.5 million from 1998 to 1999 is attributable
to (i)an increase in mortgage debt including approximately $232 million relating
to the Tower portfolio acquisition (ii) the issuance of $300 million of senior
unsecured notes in March 1999 and (iii) an increased average balance on the
Company's credit facilities and term loan. The weighted average balance
outstanding on the Company's credit facilities and term loan was $423.8 million
for 1999, $377.9 million for 1998 and $103.2 million for 1997.

Included in amortization expense is amortized financing costs of $3.4
million in 1999, $1.6 million in 1998 and $.8 million in 1997. The increase of
$1.8 million from 1998 to 1999 is primarily attributable to the increased loan
costs incurred in connection with the Company increasing its unsecured term loan
in January 1999 to $75 million, the issuance of $300 million of senior unsecured
notes in March 1999 and the Company's $130 million unsecured bridge facility
obtained in connection with the Tower portfolio acquisition in May 1999. The
increase of $.8 million from 1997 to 1998 is primarily attributable to loan
costs incurred in connection with the Company's obtaining a $500 million
unsecured credit facility and a $50 million unsecured term loan.

Extraordinary losses, net of minority interest resulted in a $555,000 loss
in 1999, a $1.7 million loss in 1998 and a $2.2 million loss in 1997. The
extraordinary losses were all attributed to the write-offs of certain deferred
loan costs incurred in connection with the Company's restructuring of its
unsecured bridge and credit facilities and term loans.

LIQUIDITY AND CAPITAL RESOURCES

Summary of Cash Flows

Net cash provided by operating activities totaled $154.6 million in 1999,
$117.5 million in 1998 and $75.8 million in 1997. Increases for each year were
primarily attributable to the growth in cash flow provided by the acquisition of
properties and to a lesser extent from interest income from mortgage notes and
notes receivable.

II-7

Net cash used in investing activities totaled $392.9 million in 1999,
$612.6 million in 1998 and $549.3 million in 1997. Cash used in investing
activities related primarily to investments in real estate properties including
development costs and investments in mortgage notes and notes receivable. In
addition, during 1998, the Company purchased $40 million of preferred stock of
Tower Realty Trust, Inc. in connection with the Tower portfolio acquisition.

Net cash provided by financing activities totaled $257.4 million in 1999,
$475.6 million in 1998 and $482.7 million in 1997. Cash provided by financing
activities during 1999, 1998 and 1997 was primarily attributable to proceeds
from the issuances of preferred stock, common stock, senior unsecured notes and
advances under the Company's credit facilities and term loan. Additionally,
during 1999, approximately $126 million in proceeds from secured borrowings was
provided by financing activities.

Investing Activities

On May 24, 1999, the Tower portfolio acquisition was completed with the
Company obtaining title to all of Tower's real estate assets. Simultaneously
with the closing of the Tower acquisition the Company arranged for the sale of
four of Tower's Class B New York City office properties. In addition, the
Company sold, with the exception of one Class A, 357,000 square foot office
building located in Orlando, Florida, all of the assets located outside of the
Tri-State Area. In addition to the aforementioned property in Orlando, Florida,
the Company's remaining assets from the Tower acquisition include three Class A
New York City office properties encompassing approximately 1.6 million square
feet and one Class A office property on Long Island encompassing approximately
101,000 square feet.

On June 15, 1999, the Company acquired the first mortgage note secured by
919 Third Avenue, a 47 story, 1.4 million square foot Class A office property
located in New York City. The first mortgage note entitles the Company to all
the net cash flow of the property and to substantial rights regarding the
operations of the property.

On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a
540,000 square foot, 35 story, Class A office property, located in New York
City, for a purchase price of approximately $126.5 million. This acquisition was
financed through a $70 million secured debt financing and a draw under the
Company's unsecured credit facility.

In June 1998, the Company established the FrontLine Facility in the amount
of $100 million for FrontLine's e-commerce and e-services operations and for
other general corporate purposes. As of December 31, 1999, approximately $79.5
million had been advanced to FrontLine under this facility. In addition, the
Company approved the commitment to fund investments of up to $100 million with
or in RSVP. As of December 31, 1999, the Company has invested approximately
$67.2 million under this commitment, of which $24.8 million represents RSVP --
controlled joint venture REIT -- qualified investments and $42.4 million
represents advances to FrontLine under the RSVP Commitment.

Financing Activities

During 1999, the Company paid cash dividends on its common stock of
approximately $1.42 per share and approximately $.98 per share (representing the
period from May 24, 1999 through October 31, 1999) on its Class B Common Stock.

On March 26, 1999, the Operating Partnership issued $100 million of 7.4%
senior unsecured notes due March 15, 2004 and $200 million of 7.75% senior
unsecured notes due March 15, 2009. Net proceeds of approximately $297.4 million
were used to repay outstanding borrowings under the Company's unsecured credit
facility.

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company issued 11,694,567 shares of Class B Common Stock which were valued for
purposes under GAAP at $26 per share for total consideration of approximately
$304.1 million. The shares of Class B Common Stock are entitled to receive an
initial annual dividend of $2.24 per share, which dividend is subject to
adjustment annually commencing on July 1, 2000. The shares of Class B Common
Stock are exchangeable at any time, at the option of the holder, into an equal
number of shares of common stock, par value $.01 per

II-8

share, of the Company subject to customary antidilution adjustments. The
Company, at its option, may redeem any or all of the Class B Common Stock in
exchange for an equal number of shares of the Company's common stock at any time
following the four year, six-month anniversary of the issuance of the Class B
Common Stock.

The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B Common Stock and has also
authorized the purchase of up to an additional three million shares of the
Company's Class B Common Stock and/or its common stock. The buy-back program
will be effected in accordance with the safe harbor provisions of the Securities
Exchange Act of 1934 and may be terminated by the Company at any time. As of
December 31, 1999, the Company purchased and retired 1,410,804 shares of Class B
Common Stock for approximately $30.3 million.

On June 2, 1999, the Company issued six million shares of Series B
Convertible Cumulative Preferred Stock (the "Series B Preferred Stock") for
aggregate proceeds of $150 million. The Series B Preferred Stock is redeemable
by the Company on or after March 2, 2002 and is convertible into the Company's
common stock at a price of $26.05 per share. The Series B Preferred Stock
accumulate dividends at an initial rate of 7.85% per annum with such rate
increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and
after April 30, 2001. Proceeds from the Series B Preferred Stock offering were
used as partial consideration in the acquisition of the first mortgage note
secured by 919 Third Avenue located in New York City.

As of December 31, 1999 the Company had a three year $500 million unsecured
revolving credit facility (the "Credit Facility") with Chase Manhattan Bank,
Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility
bank group. Interest rates on borrowings under the Credit Facility are priced
off of LIBOR plus a sliding scale ranging from 65 basis points to 90 basis
points based on the Company's investment grade rating on its senior unsecured
debt. On March 16, 1999, the Company received its investment grade rating on its
senior unsecured debt. As a result, the pricing under the Credit Facility was
adjusted to LIBOR plus 90 basis points.

The Company utilizes the Credit Facility primarily to finance the
acquisitions of properties and other real estate investments, fund its
development activities and for working capital purposes. At December 31, 1999,
the Company had availability under the Credit Facility to borrow an additional
$150.1 million (net of $52.3 million of outstanding undrawn letters of credit).

As of December 31, 1999, the Company had outstanding an 18 month, $75
million unsecured term loan (the "Term Loan") from Chase Manhattan Bank.
Interest rates on borrowings under the Term Loan are priced off of LIBOR plus
150 basis points. The Term Loan replaced the Company's previous term loan which
matured on December 17, 1999.

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company obtained a $130 million unsecured bridge facility (The "Bridge
Facility") from UBS AG. Interest rates on borrowings under the Bridge Facility
were priced off of LIBOR plus approximately 214 basis points. On July 23, 1999,
the Bridge Facility was repaid through a long term fixed rate secured borrowing
and an advance under the Credit Facility. As a result, certain deferred loan
costs incurred in connection with the Bridge Facility were written off. Such
amount is reflected as an extraordinary loss in the Company's consolidated
statements of income. The new mortgage note, in the amount of $125 million, is
secured by two office properties with an aggregate carrying value of
approximately $261 million, is for a term of ten years and bears interest at the
rate of 7.73% per annum.

Capitalization

The Company's indebtedness at December 31, 1999 totaled $1.3 billion
(including its share of joint venture debt and net of minority partners'
interests) and was comprised of $297.6 million outstanding under the Credit
Facility, $75 million outstanding under the Term Loan, approximately $449.3
million of senior unsecured notes and approximately $445 million of mortgage
indebtedness with a weighted average interest rate of approximately 7.6% and a
weighted average maturity of approximately 12.1 years. Based on the Company's
total market capitalization of approximately $3 billion at December 31, 1999
(calculated based on the market value of the Company's common stock and OP
Units, assuming

II-9

conversion , the market value of the Company's Class B Common Stock, the
liquidation preference value of the Company's preferred stock, the liquidation
preference value of the Operating Partnership's preferred units, the contributed
value of Metropolitan's preferred interest of $85 million and the $1.3 billion
of debt), the Company's debt represented approximately 42.3% of its total market
capitalization.

Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company. In addition, the Company's
investments in mortgage notes, RSVP and advances under the FrontLine Facility
are expected to produce cash flows. The Company expects to meet its short term
liquidity requirements generally through its net cash provided by operating
activities along with the Credit Facility and Term Loan previously discussed.
The Company expects to meet certain of its financing requirements through
long-term secured and unsecured borrowings and the issuance of debt securities
and additional equity securities of the Company. The Company also expects
certain strategic dispositions of assets or interests in assets to generate cash
flows. The Company will refinance existing mortgage indebtedness or indebtedness
under the Credit Facility at maturity or retire such debt through the issuance
of additional debt securities or additional equity securities. The Company
anticipates that the current balance of cash and cash equivalents and cash flows
from operating activities, together with cash available from borrowings and debt
and equity offerings, will be adequate to meet the capital and liquidity
requirements of the Company in both the short and long-term.

In order to qualify as a REIT for federal income tax purposes, the Company
is required to make distributions to its stockholders of at least 95% of REIT
taxable income. The Company expects to use its cash flow from operating
activities for distributions to stockholders and for payment of expenditures.
The Company intends to invest amounts accumulated for distribution in short-term
investments.

INFLATION

Certain office leases provide for fixed base rent increases or indexed
escalations. In addition, certain office leases provide for separate escalations
of real estate taxes and electric costs over a base amount. The industrial
leases also generally provide for fixed base rent increases, direct pass through
of certain operating expenses and separate real estate tax escalation over a
base amount. The Company believes that inflationary increases in expenses will
generally be offset by contractual rent increases and expense escalations
described above.

The Credit Facility and the Term Loan bear interest at a variable rate,
which will be influenced by changes in short-term interest rates, and are
sensitive to inflation.

IMPACT OF YEAR 2000

During 1999, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In that regard, the Company has completed its
assessment, remediation and testing of its systems in order for those systems to
function properly with respect to dates occurring in the Year 2000 and
thereafter. As a result of those efforts, the Company experienced no significant
disruptions in connection with its building management, mechanical and computer
systems and believes that those systems successfully responded to the Year 2000
date change. The Company has expended approximately one million dollars with
upgrading, replacing or remediating its systems and is not aware of any material
problems resulting from Year 2000 issues. Further, the Company will continue to
monitor its critical building management, mechanical and computer systems
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.

II-10

FUNDS FROM OPERATIONS

Management believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. FFO is defined by the National
Association of Real Estate Investment Trusts (NAREIT) as net income or loss,
excluding gains or losses from debt restructurings and sales of properties, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash generated from
operating activities in accordance with GAAP and is not indicative of cash
available to fund cash needs. FFO should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. (See Selected Financial
Data). In March 1995, NAREIT issued a "White Paper" analysis to address certain
interpretive issues under its definition of FFO. The White Paper provides that
amortization of deferred financing costs and depreciation of non-rental real
estate assets are no longer to be added back to net income to arrive at FFO. In
October 1999, NAREIT revised the definition of FFO to include gains and losses
from sales of properties and non-recurring events. This revised definition is
effective for all periods beginning on or after January 1, 2000.

Since all companies and analysts do not calculate FFO in a similar fashion,
the Company's calculation of FFO presented herein may not be comparable to
similarly titled measures as reported by other companies.

The following table presents the Company's FFO calculation for the years
ended December 31, (in thousands):

1999 1998 1997
---------- ---------- ----------

Income before preferred dividends and distributions, limited partners'
interest in the operating partnership and extraordinary loss ............. $ 97,240 $61,718 $44,683
Less:
Preferred dividends and distributions .................................... 27,001 14,244 --
Extraordinary loss, net of limited partners' interest in the operating
partnership of $74, $323 and $578, respectively ........................ 555 1,670 2,230
Limited Partners' minority interest in the operating partnership ......... 9,407 7,909 7,817
-------- ------- -------
Net Income available to common shareholders ............................... 60,277 37,895 34,636
Adjustments for Funds From Operations
Add:
Limited Partners' minority interest in the operating partnership ......... 9,407 7,909 7,817
Real estate depreciation and amortization 72,124 51,424 26,834
Minority interests' in consolidated partnerships ......................... 6,802 2,763 807
Extraordinary loss, net of limited partners' interest in the operating
partnership of $74, $323 and $578, respectively ........................ 555 1,670 2,230
Less:
Gain on sales of real estate ............................................. 10,052 -- 672
Amount distributed to minority partners in consolidated partnerships ..... 8,293 3,964 2,104
-------- ------- -------
Basic Funds From Operations ............................................... 130,820 97,697 69,548
Add:
Dilutive preferred dividends and distributions ........................... 30,861 1,753 --
-------- ------- -------
Diluted Fund From Operations .............................................. $161,681 $99,450 $69,548
======== ======= =======
Weighted Average Shares/Units outstanding (1) ............................. 54,719 47,201 39,743
======== ======= =======
Diluted Weighted Average Shares/Units outstanding (1) ..................... 70,013 48,651 40,276
======== ======= =======

- ----------
(1) Assumes conversion of limited partnership units of the Operating
Partnership.

II-11

ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The primary market risk facing the Company is interest rate risk on its
long term debt, mortgage notes and notes receivable. The Company does not hedge
interest rate risk using financial instruments nor is the Company subject to
foreign currency risk.

The Company manages its exposure to interest rate risk on its variable rate
indebtedness by borrowing on a short-term basis under its Credit Facility or
Term Loan until such time as it is able to retire the short-term variable rate
debt with a long-term fixed rate debt offering or an equity offering through
accessing the capital markets on terms that are advantageous to the Company.

The following table sets forth the Company's long term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated fair market value ("FMV") at December 31, 1999
(dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL (1) FMV
------------ ------------ ------------ ----------- ------------ ------------ ------------- -----------

Long term debt:
Fixed rate .......... $ 35,145 $ 22,751 $ 16,499 $ 8,350 $ 11,769 $ 814,660 $ 909,174 $909,174
Weighted average
interest rate ..... 7.37% 7.58% 7.79% 7.77% 7.73% 7.53% 7.53% --
Variable rate ....... $ -- $372,600 $ -- $ -- $ -- $ -- $ 372,600 $372,600
Weighted average
interest rate ..... -- 7.27% -- -- -- -- 7.27% --

(1) Includes unamortized issuance discounts of $687,000 on the 5 and 10 year
senior unsecured notes issued on March 26, 1999 which are due at maturity.

In addition, the Company has assessed the market risk for its variable rate
debt, which is based upon LIBOR, and believes that a one percent increase in the
LIBOR rate would have an approximate $3.7 million annual increase in interest
expense based on approximately $372.6 million outstanding at December 31, 1999.

The following table sets forth the Company's mortgage notes and note
receivables by scheduled maturity date, weighted average interest rates and
estimated FMV at December 31, 1999 (dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL (2) F M V
------------- ---------- ------------ ------ ------------ ------------ ------------- -----------

Mortgage notes and notes receivable:
Fixed rate .............. $ 282,857 $ 15 $ 11,306 $-- $ 36,500 $ 16,990 $ 347,668 $347,668
Weighted average
interest rate ......... 9.42% 9.00% 10.35% -- 10.23% 11.65% 9.64% --

(2) Excludes mortgage note receivable acquisition costs and interest receivables
aggregating approximately $4.8 million.

The fair value of the Company's long term debt, mortgage notes and notes
receivable is estimated based on discounting future cash flows at interest rates
that management believes reflects the risks associated with long term debt,
mortgage notes and notes receivable of similar risk and duration.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is included in a separate section of this Form
10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

II-12

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained in the section captioned "Proposal I: Election of
Directors" of the Company's definitive proxy statement for the 2000 annual
meeting of stockholders is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information contained in the section captioned "Executive Compensation"
of the Company's definitive proxy statement for the 2000 annual meeting of
stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained in the section captioned "Principal and
Management Stockholders" of the Company's definitive proxy statement for the
2000 annual meeting of stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in the section captioned "Certain Relationships
and Related Transactions" of the Company's definitive proxy statement for the
2000 annual meeting of the stockholders is incorporated herein by reference.

III-1

PART IV

ITEM 14. FINANCIAL STATEMENTS AND SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K

(a)(1 and 2) Financial Statements and Schedules

The following consolidated financial information is included as a separate
section of this annual report on Form 10-K:

PAGE

------

RECKSON ASSOCIATES REALTY CORP.
Report of Independent Auditors ................................................ IV-5
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ..... IV-6
Consolidated Statements of Income for the years ended December 31, 1999, 1998
and 1997 .................................................................... IV-7
Consolidated Statement of Stockholders' Equity for the years ended December 31,
1999, 1998 and 1997 ......................................................... IV-8
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997 ............................................................... IV-9
Notes to Financial Statements ................................................. IV-10
Schedule III - Real Estate and Accumulated Depreciation ....................... IV-30

IV-1

All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements and notes
thereto.

(3) Exhibits

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- --------- ---------- -----------

3.1 a Amended and Restated Articles of Incorporation
3.1 a Amended and Restated Articles of Incorporation
3.2 Amended and Restated By-Laws of Registrant
3.3 h Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of
Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on April 9, 1998
3.4 Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Class of
Shares of Common Stock filed with the Maryland State Department of Assessments and Taxation on May 24, 1999.
3.5 k Articles Supplementary of the Registrant Establishing and Fixing the Rights and Preferences of a Series of
Shares of Preferred Stock filed with the Maryland State Department of Assessments and Taxation on May 28, 1999
3.6 Articles of Amendment of the Registrant filed with the Maryland State Department of Assessments and Taxation on
January 4, 2000.
3.7 Articles Supplementary of the Registrant filed with the Maryland State Department of Assessments and Taxation
on January 11, 2000.
4.1 b Specimen Share Certificate of Common Stock
4.2 h Specimen Share Certificate of Series A Preferred Stock
4.3 j Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P.
4.4 j Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P.
4.5 j Indenture, dated March 26, 1999, among Reckson Operating Partnership, L.P., the Company, and The Bank of New
York, as trustee
10.1 a Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P.
10.2 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P.
10.3 h Establishing Series A Preferred Units of Limited Partnership Interest Supplement to the Amended and Restated
Agreement of Limited Partnership of Reckson Operating Partnership, L.P. Establishing Series B Preferred Units
of Limited Partnership Interest
10.4 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership,
L.P. Establishing Series C Preferred Units of Limited Partnership Interest
10.5 h Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P.
Establishing Series D Preferred Units of Limited Partnership Interest
10.6 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership,
L.P. Establishing Series B Common Units of Limited Partnership Interest
10.7 Supplement to the Amended and Restated Agreement of Limited Partnership of Reckson Operating Partnership, L.P.
Establishing Series E Preferred Partnership Units of Limited Partnership Interest
10.8 f Third Amended and Restated Agreement of Limited Partnership of Omni Partners, L.P.
10.9 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Donald Rechler
10.10 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Scott Rechler
10.11 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Mitchell Rechler
10.12 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Gregg Rechler
10.13 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and Roger Rechler
10.14 i Amendment and Restatement of Employment and Non-Competition Agreement between Registrant and J. Michael Maturo
10.15 a Purchase Option Agreements relating to the Reckson Option Properties
10.16 a Purchase Option Agreements relating to the Other Option Properties
10.17 c Amended 1995 Stock Option Plan
10.18 c 1996 Employee Stock Option Plan
10.19 b Ground Leases for certain of the properties
10.20 i Third Amended and Restated Agreement of Limited Partnership of Reckson FS Limited Partnership
10.21 a Indemnity Agreement relating to 100 Oser Avenue
10.22 f Amended and Restated 1997 Stock Option Plan
10.23 f 1998 Stock Option Plan
10.24 f Note Purchase Agreement for the Senior Unsecured Notes
10.25 i Amended and Restated Severance Agreement between Registrant and Donald Rechler
10.26 i Amended and Restated Severance Agreement between Registrant and Scott Rechler
10.27 i Amended and Restated Severance Agreement between Registrant and Mitchell Rechler
10.28 i Amended and Restated Severance Agreement between Registrant and Gregg Rechler
10.29 i Amended and Restated Severance Agreement between Registrant and Roger Rechler
10.30 i Amended and Restated Severance Agreement between Registrant and J. Michael Maturo
10.31 d $500 million Credit Agreement dated July 23, 1998 among Reckson Operating Partnership, L.P. and Reckson Morris
Operating Partnership, L.P. and the Chase Manhattan Bank, UBS AG and PNC Bank and other lenders party thereto
10.32 g Agreement and Plan of Merger by and among Tower Realty Trust, Inc., Reckson Associates Realty Corp., Reckson
Operating Partnership, L.P. and Metropolitan Partners LLC, dated December 8, 1998
10.33 g Stock Purchase Agreement by and between Tower Realty Trust, Inc. and Metropolitan Partners LLC, dated December
8, 1998
10.34 g Amended and Restated Operating Agreement of Metropolitan Partners LLC, dated December 8, 1998

IV-2

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- --------- ---------- -----------

10.35 i Intercompany Agreement by and between Reckson Operating Partnership, L.P. and Reckson Service Industries, Inc.,
dated May 13, 1998
10.36 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as
borrower and Reckson Operating Partnership, L.P., as Lender relating to Reckson Strategic Venture Partners, LLC
("RSVP Credit Agreement")
10.37 Amended and Restated Credit Agreement dated as of August 4, 1999 between Reckson Service Industries, Inc., as
borrower and Reckson Operating Partnership, L.P., as Lender relating to the operations of Reckson Service
Industries, Inc. ("RSI Credit Agreement")
10.38 Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement and the RSI Credit Agreement
10.39 j Terms Agreement, dated March 23, 1999, between Reckson Operating Partnership, L.P. and Goldman, Sachs & Co.,
on behalf of itself and the other named underwriters
10.40 k $130 million Credit Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg
Dillon Read and UBS AG, Stamford Branch
10.41 k Guaranty Agreement dated as of May 24, 1999 among Metropolitan Operating Partnership, L.P., Warburg Dillon Read
and UBS AG, Stamford Branch
10.42 k Purchase Agreement dated as of May 27, 1999 among Stichting Pensioenfonds ABP, The Travelers Insurance Company,
The Travelers Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety
Company, Reckson Associates Realty Corp. and Reckson Operating Partnership, L.P. relating to 6,000,000 shares
of Series B Convertible Cumulative Preferred Stock
10.43 k Registration Rights Agreement among Stichting Pensioenfonds ABP, The Travelers Insurance Company, The Travelers
Life and Annuity Company, The Standard Fire Insurance Company, Travelers Casualty and Surety Company and
Reckson Associates Realty Corp. relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock
10.44 l Consolidated, Amended and Restated Fee and Leasehold Mortgage Note relating to 919 Third Avenue
10.45 o Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and Reckson
Operating Partnership, L.P., as Purchaser
10.46 l Side Letter to Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates, L.P., as Seller, and
Reckson Operating Partnership, L.P., as Purchaser
10.47 m Contribution and Exchange Agreement by and between Reckson Morris Industrial Trust, Reckson Morris Industrial
Interim GP, LLC, Reckson Operating Partnership, L.P., Robert Morris, Joseph D. Morris, Ronald Schram, Mark M.
Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris Family Limited
Partnership and Robert Morris Family Limited Partnership, and American Real Estate Investment L.P. and American
Real Estate Corporation
10.48 n Agreement of Purchase and Sale by and among Black Canyon Loop Company LLC, Metropolitan Operating Partnership,
L.P. and Safeway Inc.
10.49 n Purchase and Sale Agreement by and between Corporate Center Associates Limited Partnership and Transwestern
Investment Company, L.L.C.
10.50 n Purchase and Sale Agreement by and between East Broadway 5151 Limited Partnership, Metropolitan Operating
Partnership, L.P., 5750 Associates Limited Partnership, Maitland Associates, Ltd. and Maitland West Associates
Limited Partnership and Praedium Performance Fund IV, L.P.
10.51 n Purchase and Sale Agreement by and between Metropolitan Operating Partnership, L.P. and HUB Properties Trust
10.52 o Contract and Sale Agreement between 54-55 Street Company and Reckson Operating Partnership, L.P.
10.53 p 1999 $75 million Second Amended and Restated Credit Facility Agreement dated as of December 17, 1999
10.54 p 1999 Second Amended and Restated Guaranty Agreement dated as of December 17, 1999
12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries
23.0 Consent of Independent Auditors
24.1 Power of Attorney (included in Part IV of the Form 10-K)
27.0 Financial Data Schedule

- --------
(a) Previously filed as an exhibit to Registration Statement Form S-11 (No.
333-1280) and incorporated herein by reference.

(b) Previously filed as an exhibit to Registration Statement Form S-11 (No.
33-84324) and incorporated herein by reference.

(c) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on November 25, 1996 and incorporated herein by reference.

(d) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on August 14, 1998 and incorporated herein by reference.

(e) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on February 5, 1999 and incorporated herein by reference.

(f) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC
on March 26, 1998 and incorporated herein by reference.

(g) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on December 22, 1998 and incorporated herein by reference.

(h) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on March 1, 1999 and incorporated herein by reference.

(i) Previously filed as an exhibit to the Company's Form 10-K filed with the SEC
on March 16, 1999 and incorporated herein by reference.

(j) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
March 26, 1999 and incorporated herein by reference.

(k) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
June 7, 1999 and incorporated herein by reference.

(l) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
June 25, 1999 and incorporated herein by reference.

(m) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
August 25, 1999 and incorporated herein by reference.

(n) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
October 25, 1999 and incorporated herein by reference.

(o) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
January 14, 2000 and incorporated herein by reference.

(p) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
February 8, 2000 and incorporated herein by reference.

(b) REPORTS ON FORM 8-K

On October 25, 1999, the Company filed reports on Form 8-K relating to:

(i) The completion of the first stage of the RMI closing and the sale of
certain industrial properties to Matrix,

(ii) the Company's Board of Directors authorizing the repurchase of up to
three million shares of Class B Common Stock,

(iii) the Company's sale and disposition of the Tower assets located outside
the Tri-State Area other than one Class A office property located in
Orlando, Florida and

(iv) the Operating Partnership entering into a contract to acquire 1350
Avenue of the Americas, a 540,000 square foot, 35 story, Class A office
property located in New York City for a purchase price of approximately
$126.5 million.

IV-3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 15, 2000.

RECKSON ASSOCIATES REALTY CORP.

By: /s/ Donald J. Rechler
------------------------------
(Donald J. Rechler)
Chairman of the Board, and
Co-Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors
of Reckson Associates Realty Corp., hereby severally constitute Scott H.
Rechler, Mitchell D. Rechler and Michael Maturo, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly, to
sign for us and in our names in the capacities indicated below, the Form 10-K
filed herewith and any and all amendments to said Form 10-K, and generally to do
all such things in our names and in our capacities as officers and directors to
enable Reckson Associates Realty Corp. to comply with the provisions of the
Securities Exchange Act of 1934, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Form 10-K and any and
all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 15, 2000.

NAME TITLE NAME TITLE
- --------------------------- -------------------------------- ------------------------ ---------

/s/ Donald J. Rechler Chairman of the Board, /s/ Leonard Feinstein Director
----------------------- Co-Chief Executive Officer ------------------------
(Donald J. Rechler) and Director (principal (Leonard Feinstein)
executive officer)

/s/ Scott Rechler President /s/ John V.N. Klein Director
----------------------- Co-Chief Executive Officer -------------------------
(Scott Rechler) and Director (John V.N. Klein)

/s/ Roger M. Rechler Vice Chairman of the Board, /s/ Conrad Stephenson Director
----------------------- Executive Vice President -------------------------
(Roger M. Rechler) and Director (Conrad Stephenson)

/s/ Michael Maturo Executive Vice President, /s/ Herve A. Kevenides Director
----------------------- Treasurer and Chief -------------------------
(Michael Maturo) Financial Officer (principal (Herve A. Kevenides)
financial officer and
principal accounting officer)

/s/ Mitchell D. Rechler Executive Vice President, Co - /s/ Lewis S. Ranieri Director
------------------------ Chief Operating Officer -------------------------
(Mitchell D. Rechler) and Director (Lewis S. Ranieri)

/s/ Harvey R. Blau Director
------------------------
(Harvey R. Blau)

IV-4

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Reckson Associates Realty Corp.

We have audited the accompanying consolidated balance sheets of Reckson
Associates Realty Corp. as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. We have also audited
the financial statement schedule listed in the index at item 14(a). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Reckson Associates
Realty Corp. at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.

ERNST & YOUNG LLP

New York, New York
February 15, 2000

IV-5

RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

DECEMBER 31,
-----------------------------
1999 1998
------------- -------------

ASSETS

Commercial real estate properties, at cost: (Notes 2, 3, 5, 6 and 8)
Land ........................................................................ $ 276,204 $ 212,540
Buildings and improvements .................................................. 1,802,611 1,372,549
Developments in progress:
Land ........................................................................ 60,894 69,143
Development costs ........................................................... 68,690 82,901
Furniture, fixtures and equipment ........................................... 6,473 6,090
---------- ----------
2,214,872 1,743,223
Less accumulated depreciation ........................................... (218,385) (159,049)
---------- ----------
1,996,487 1,584,174
Investments in real estate joint ventures (Note 8) .......................... 31,531 15,104
Investment in mortgage notes and notes receivable (Note 6) .................. 352,466 99,268
Cash and cash equivalents (Note 12) ......................................... 21,368 2,349
Tenant receivables .......................................................... 5,117 5,159
Investments in and advances to affiliates (Note 8) .......................... 178,695 53,329
Deferred rents receivable ................................................... 22,489 22,526
Prepaid expenses and other assets (Note 6) .................................. 66,977 46,372
Contract and land deposits and pre-acquisition costs ........................ 9,585 2,253
Deferred lease and loan costs, less accumulated amortization of $24,484
and $18,170, respectively .................................................. 39,520 24,282
---------- ----------
Total Assets ................................................................ $2,724,235 $1,854,816
========== ==========
LIABILITIES
Mortgage notes payable (Note 2) ............................................. $ 459,174 $ 253,463
Unsecured credit facility (Note 3) .......................................... 297,600 465,850
Unsecured term loan (Note 3) ................................................ 75,000 20,000
Senior unsecured notes (Note 4) ............................................. 449,313 150,000
Accrued expenses and other liabilities (Note 5) ............................. 72,436 50,960
Dividends and distributions payable ......................................... 27,166 19,663
---------- ----------
Total Liabilities ........................................................... 1,380,689 959,936
---------- ----------
Minority interests' in consolidated partnerships ............................ 93,086 52,173
Preferred unit interest in the operating partnership (Note 6) ............... 42,518 42,518
Limited Partners' minority interest in the operating partnership ............ 90,986 94,125
---------- ----------
226,590 188,816
---------- ----------
Commitments and other comments (Notes 9, 10 and 13) ......................... -- --

STOCKHOLDERS' EQUITY (Note 7)
Preferred Stock, $.01 par value, 25,000,000 shares authorized
Series A preferred stock, 9,192,000 shares issued and outstanding .......... 92 92
Series B preferred stock, 6,000,000 and 0 shares issued and outstanding,
respectively ............................................................. 60 --
Common Stock, $.01 par value, 100,000,000 shares authorized
Common stock, 40,375,506 and 40,035,419 shares issued and
outstanding, respectively ................................................ 401 400
Class B Common Stock, 10,283,763 and 0 shares issued and outstanding,
respectively ............................................................. 103 --
Additional paid in capital .................................................. 1,116,300 705,572
---------- ----------
Total Stockholders' Equity .................................................. 1,116,956 706,064
---------- ----------
Total Liabilities and Stockholders' Equity .................................. $2,724,235 $1,854,816
========== ==========

(see accompanying notes to financial statements)

IV-6

RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------

REVENUES (Note 10):
Base rents ................................................................ $ 324,146 $ 224,703 $ 128,778
Tenant escalations and reimbursements ..................................... 44,989 27,744 14,981
Equity in earnings of service companies and real estate joint ventures 2,148 1,836 514
Interest income on mortgage notes and notes receivable .................... 7,944 7,739 5,437
Gain on sales of real estate (Note 6) ..................................... 10,052 -- 672
Investment and other income ............................................... 13,874 4,351 3,013
----------- ----------- -----------
Total Revenues ............................................................ 403,153 266,373 153,395
----------- ----------- -----------
EXPENSES:
Property operating expenses ............................................... 125,994 84,280 50,316
Marketing, general and administrative ..................................... 24,293 16,860 8,767
Interest .................................................................. 74,320 47,795 21,585
Depreciation and amortization ............................................. 74,504 52,957 27,237
----------- ----------- -----------
Total Expenses ............................................................ 299,111 201,892 107,905
----------- ----------- -----------
Income before preferred dividends and distributions, minority
interests and extraordinary loss ......................................... 104,042 64,481 45,490
Minority partners' interests in consolidated partnerships ................. (6,802) (2,763) (807)
Distributions to preferred unit holders ................................... (2,641) (1,753) --
Limited partners' minority interest in the operating partnership .......... (9,407) (7,909) (7,817)
----------- ----------- -----------
Income before extraordinary loss and dividends to preferred
shareholders ............................................................. 85,192 52,056 36,866
Extraordinary loss on extinguishment of debts, net of limited partners'
minority interest share of $74, $323 and $578, respectively (Note 3) (555) (1,670) (2,230)
Dividends to preferred shareholders ....................................... (24,360) (12,491) --
----------- ----------- -----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS ............................... $ 60,277 $ 37,895 $ 34,636
=========== =========== ===========
Net Income available to:
Common shareholders ...................................................... $ 47,529 $ 37,895 $ 34,636
Class B common shareholders .............................................. 12,748 -- --
----------- ----------- -----------
Total ..................................................................... $ 60,277 $ 37,895 $ 34,636
=========== =========== ===========
Basic net income per weighted average common share before extraordinary loss:
Common shareholders ...................................................... $ 1.19 $ 1.00 $ 1.13
Extraordinary loss per common share ...................................... ( .01) ( .04) ( .07)
----------- ----------- -----------
Basic net income per weighted average common share ....................... $ 1.18 $ .96 $ 1.06
=========== =========== ===========
Class B common shareholders .............................................. $ 1.91 $ -- $ --
Extraordinary loss per Class B common share .............................. ( .02) -- --
----------- ----------- -----------
Basic net income per weighted average Class B common share ............... $ 1.89 $ -- $ --
=========== =========== ===========
Weighted average common shares outstanding:
Common shareholders ...................................................... 40,270,000 39,473,000 32,727,000
Class B common shareholders .............................................. 6,744,000 -- --
Diluted net income per weighted average common share:
Common shareholders ...................................................... $ 1.17 $ .95 $ 1.04
Class B common shareholders .............................................. $ 1.26 $ -- $ --
Diluted weighted average common shares outstanding:
Common shareholders ...................................................... 40,676,000 40,010,000 33,260,000
Class B common shareholders .............................................. 6,744,000 -- --

(see accompanying notes to financial statements)

IV-7

RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

LIMITED
CLASS B SERIES A SERIES B ADDITIONAL TOTAL PARTNERS'
COMMON COMMON PREFERRED PREFERRED PAID IN RETAINED STOCKHOLDERS' MINORITY
STOCK STOCK STOCK STOCK CAPITAL EARNINGS EQUITY INTEREST
-------- --------- ----------- ----------- -------------- ------------ --------------- ------------

Stockholder's equity,
January 1, 1997 ............. $244 $ -- $-- $-- $ 186,623 $ -- $ 186,867 $ 51,879
Two for one stock split ...... 50 -- -- -- (50) -- -- --
Net proceeds from
common stock offerings 80 -- -- -- 256,564 -- 256,644 33,925
Issuance of operating
partnership units ........... -- -- -- -- 9,473 -- 9,473 1,236
Net proceeds from long
term compensation
issuances ................... 4 -- -- -- 1,706 -- 1,710 178
Net Income ................... -- -- -- -- -- 34,636 34,636 7,239
Dividends and
distributions paid and
payable ..................... -- -- -- -- (6,029) (34,636) (40,665) (8,707)
---- ----- --- --- ---------- ---------- ---------- ----------
Stockholders' equity,
December 31, 1997 ........... 378 -- -- -- 448,287 -- 448,665 85,750
Net proceeds from
preferred stock offering -- -- 92 -- 220,708 -- 220,800 --
Conversions of preferred
stock ....................... -- -- -- -- (31) -- (31) 31
Net proceeds from Class
B Common Stock
offering .................... 21 -- -- -- 41,340 -- 41,361 8,785
Issuance of operating
partnership units ........... -- -- -- -- 11,576 -- 11,576 2,458
Net proceeds from long
term compensation
issuances ................... 1 -- -- -- 990 -- 991 210
Net income ................... -- -- -- -- -- 37,895 37,895 7,586
Dividends and
distributions paid and
payable ..................... -- -- -- -- (17,298) (37,895) (55,193) (10,695)
---- ----- --- --- ---------- ---------- ---------- ----------
Stockholders' equity,
December 31, 1998 ........... 400 -- 92 -- 705,572 -- 706,064 94,125
Net proceeds from
preferred stock offering -- -- -- 60 149,940 -- 150,000 --
Net proceeds from Class
B Common Stock
offering .................... -- 117 -- -- 302,536 -- 302,653 --
Repurchases of Class B
Common Stock ................ -- (14) -- -- (30,273) -- (30,287) --
Redemption of operating
partnership units ........... -- -- -- -- -- -- -- (1,485)
Net proceeds from long
term compensation
issuances ................... 1 -- -- -- 1,596 -- 1,597 --
Net income ................... -- -- -- -- -- 60,277 60,277 9,333
Dividends and
distributions paid and
payable ..................... -- -- -- -- (13,071) (60,277) (73,348) (10,987)
---- ----- --- --- ---------- ---------- ---------- ----------
Stockholders' equity
December 31, 1999 ........... $401 $ 103 $92 $60 $1,116,300 $ -- $1,116,956 $ 90,986
==== ===== === === ========== ========== ========== ==========

(see accompanying notes to financial statements)

IV-8

RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
------------ --------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income available to common Shareholders .................................. $ 60,277 $ 37,895 $ 34,636
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................................ 74,504 52,957 27,237
Extraordinary loss, net of minority interests ................................ 555 1,670 2,230
Minority partners' interests in consolidated partnerships .................... 6,802 2,763 807
Limited partners' interest in the operating partnership ...................... 9,407 7,909 7,817
Gain on sale of interest in Reckson Executive Centers, LLC ................... -- (9) --
Gain on sales of real estate, securities and mortgage repayment .............. (9,657) (43) (672)
Distribution from investments in real estate joint ventures .................. 442 470 408
Equity in earnings of service companies and real estate joint ventures ....... (2,148) (1,836) (514)
Changes in operating assets and liabilities: increase (decrease) .............
Deferred rents receivable .................................................... (2,158) (7,553) (4,500)
Prepaid expenses and other assets ............................................ (23,722) (7,199) (1,931)
Tenant and affiliate receivables ............................................. 42 (184) (1,183)
Accrued expenses and other liabilities ....................................... 40,248 30,667 11,427
---------- ----------- ----------
Net cash provided by operating activities .................................... 154,592 117,507 75,762
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of commercial real estate properties ............................... (284,741) (449,241) (429,379)
Investment in mortgage notes and notes receivable ............................ (295,048) 4,072 (50,282)
Interest receivables ......................................................... (692) 2,602 (2,392)
(Increase) decrease in contract deposits and preacquisition costs ............ (12,650) 8,839 (1,303)
Additions to developments in progress ........................................ (9,615) (97,570) (40,367)
Additions to commercial real estate properties ............................... (28,135) (21,181) (12,038)
Payment of leasing costs ..................................................... (16,467) (8,802) (5,417)
Investments in securities .................................................... -- (42,299) (1,756)
Additions to furniture, fixtures and equipment ............................... (461) (2,071) (1,159)
Investments in real estate joint ventures .................................... (15,033) (7,773) (1,734)
Investment in and distributions from service companies ....................... -- 15 (4,241)
Proceeds from sales of real estate, securities and mortgage repayment ........ 269,916 809 725
---------- ----------- ----------
Net cash (used in) investing activities ...................................... (392,926) (612,600) (549,343)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured borrowings ............................................. 125,548 -- --
Principal payments on secured borrowings ..................................... (4,714) (4,735) (1,624)
Proceeds from issuance of senior unsecured notes , net of issuance costs ..... 299,262 -- 150,000
Proceeds from issuance of preferred stock, net of issuance costs ............. 148,000 220,800 --
Proceeds from mortgage refinancings, net of refinancing costs ................ -- 11,458 20,134
Payment of loan and equity issuance costs .................................... (8,264) (4,738) (4,983)
Investments in and advances to affiliates .................................... (125,007) (23,452) (20,513)
Proceeds from unsecured credit facilities and term loans ..................... 397,500 413,100 421,000
Principal payments on unsecured credit facilities ............................ (510,750) (137,500) (319,250)
Repurchases of Class B common Stock .......................................... (30,287) -- --
Proceeds from issuance of common stock and exercise of options, net of
issuance costs .............................................................. 1,512 51,934 299,991
Contributions by minority partners in consolidated partnerships .............. 75,500 10,000 --
Distributions to minority partners in consolidated partnerships .............. (6,701) (3,570) (5,355)
Distributions to limited partners in the operating partnership ............... (11,177) (7,576) (8,707)
Distributions to preferred unit holders ...................................... (2,641) (1,312) --
Dividends to common and Class B common shareholders .......................... (68,031) (39,157) (47,972)
Dividends to preferred shareholders .......................................... (22,397) (9,638) --
---------- ----------- ----------
Net cash provided by financing activities .................................... 257,353 475,614 482,721
---------- ----------- ----------
Net increase (decrease) in cash and cash equivalents ......................... 19,019 (19,479) 9,140
Cash and cash equivalents at beginning of period ............................. 2,349 21,828 12,688
---------- ----------- ----------
Cash and cash equivalents at end of period ................................... $ 21,368 $ 2,349 $ 21,828
========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ..................................... $ 77,014 $ 52,622 $ 20,246
========== =========== ==========

(see accompanying notes to financial statements)

IV-9

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Reckson Associates Realty Corp. (the "Company") is a self-administered and
self managed real estate investment trust ("REIT") engaged in the ownership,
management, operation, leasing and development of commercial real estate
properties, principally office and industrial buildings and also owns land for
future development (collectively, the "Properties") located in the New York
tri-state area (the "Tri-State Area").

ORGANIZATION AND FORMATION OF THE COMPANY

The Company was incorporated in Maryland in September 1994. In June 1995,
the Company completed an Initial Public Offering (the "IPO") and commenced
operations. The aggregate proceeds to the Company, net of underwriters'
discount, advisory fees and other offering costs were approximately $162
million.

The Company became the sole general partner of Reckson Operating
Partnership, L.P. (the "Operating Partnership") by contributing substantially
all of the net proceeds of the IPO, in exchange for an approximate 73% interest
in the Operating Partnership. All Properties acquired by the Company are held by
or through the Operating Partnership. In conjunction with the IPO, the Operating
Partnership executed various option and purchase agreements whereby it issued
common units of limited partnership interest in the Operating Partnership
("Units") to certain continuing investors in exchange for (i) interests in
certain property partnerships, (ii) fee simple and leasehold interests in
properties and development land, (iii) certain business assets of executive
center entities and (iv) 100% of the non-voting preferred stock of the
management and construction companies.

During 1997, the Company formed Reckson Service Industries, Inc. currently
D/B/A FrontLine Capital Group ("FrontLine") and Reckson Strategic Venture
Partners, LLC ("RSVP"). On June 11, 1998, the Operating Partnership distributed
its 95% common stock interest in FrontLine of approximately $3 million to its
owners, including the Company which, in turn, distributed the common stock of
FrontLine received from the Operating Partnership to its stockholders.
Additionally, during June 1998, the Operating Partnership established a credit
facility with FrontLine (the "FrontLine Facility") in the amount of $100 million
for FrontLine's e-commerce and e-services operations and other general corporate
purposes. As of December 31, 1999, the Company had advanced $79.5 million under
the FrontLine Facility. In addition, the Operating Partnership has approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint venture REIT-qualified investments
or advances made to FrontLine under terms similar to the FrontLine Facility. As
of December 31, 1999, approximately $67.2 million had been invested through the
RSVP Commitment, of which $24.8 million represents RSVP-controlled joint venture
REIT-qualified investments and $42.4 million represents advances to FrontLine
under the RSVP Commitment.

During November 1999, the Board of Directors of the Company approved an
amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine
to incur secured debt and to pay interest thereon. In consideration of the
amendments, FrontLine has paid the Operating Partnership a fee of approximately
$3.6 million in the form of shares of FrontLine common stock. Such fee is being
recognized in income over an estimated nine month benefit period.

FrontLine identifies, acquires interests in and develops a network of
business to business e-commerce and e-services companies that service small to
medium sized enterprises, independent professionals and entrepreneurs and the
mobile workforce of larger companies. FrontLine serves as the managing member of
RSVP. RSVP was formed to provide the Company with a research and development
vehicle to invest in alternative real estate sectors. RSVP invests primarily in
real estate and real estate related operating companies generally outside of the
Company's core office and industrial

IV-10

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

focus. RSVP's strategy is to identify and acquire interests in established
entrepreneurial enterprises with experienced management teams in market sectors
which are in the early stages of their growth cycle or offer unique
circumstances for attractive investments as well as a platform for future
growth.

On January 6, 1998, the Company made its initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to Reckson Morris Operating
Partnership, L. P. ("RMI") in exchange for operating partnership units in RMI.
On September 27, 1999, the Company sold its interest in RMI to Keystone Property
Trust ("KTR") (formerly American Real Estate Investment Corporation) (see note
6).

During July 1998, the Company formed Metropolitan Partners, LLC
("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc.
("Tower"). On May 24, 1999 the Company completed the merger with Tower and
acquired three Class A office properties located in New York City totaling 1.6
million square feet and one office property located on Long Island totaling
approximately 101,000 square feet. In addition, pursuant to the merger, the
Company also acquired certain office properties, a property under development
and land located outside of the Tri-State Area. All of the assets acquired in
the merger, located outside of the Tri-State Area, other than a 357,000 square
foot office property located in Orlando, Florida, have been sold (see note 6).

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership at December 31,
1999 and 1998 and the results of their operations and their cash flows for each
of the three years in the period ended December 31,1999. The Operating
Partnership's investments in Metropolitan and Omni Partners, L. P. ("Omni") are
reflected in the accompanying financial statements on a consolidated basis with
a reduction for minority partners' interest. The Operating Partnership's
investment in RMI was reflected in the accompanying financial statements on a
consolidated basis with a reduction for minority partner's interest through
September 26, 1999. On September 27, 1999, the Operating Partnership sold its
interest in RMI to KTR (see note 6). The operating results of Reckson Executive
Centers, L.L.C., ("REC"), a service business of the Operating Partnership were
reflected in the accompanying financial statements on the equity method of
accounting through March 31, 1998. On April 1, 1998, the Operating Partnership
sold its 9.9% interest in REC to FrontLine. Additionally, the operating results
of FrontLine were reflected in the accompanying financial statements on the
equity method of accounting through June 10, 1998. On June 11, 1998 the
Operating Partnership distributed its 95% common stock interest in FrontLine to
its owners, including the Company which, in turn, distributed the common stock
of FrontLine to its stockholders. The operating results of the service
businesses currently conducted by Reckson Management Group, Inc.("RMG"), and
Reckson Construction Group, Inc.("RCG"), are reflected in the accompanying
financial statements on the equity method of accounting. The Operating
Partnership also invests in real estate joint ventures where it may own less
than a controlling interest, such investments are also reflected in the
accompanying financial statements on the equity method of accounting. All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.

The merger with Tower (see note 6) was accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16. Accordingly, the
fair value of the consideration given by the Company, in accordance with
generally accepted accounting principles ("GAAP"), was used as the valuation
basis for the merger. The assets acquired and liabilities assumed by the Company
were recorded at the fair value as of the closing date of the merger and the
excess of the purchase price over the historical basis of the net assets
acquired was allocated primarily to operating real estate properties and real
estate properties which have been sold.

IV-11

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

The minority interests at December 31, 1999 represent an approximate 13%
limited partnership interest in the Operating Partnership, an approximate 28%
interest in certain industrial joint venture properties formerly owned by RMI, a
convertible preferred interest in Metropolitan and a 40% interest in Omni.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Real Estate

Depreciation is computed utilizing the straight-line method over the
estimated useful lives of ten to thirty years for buildings and improvements and
five to ten years for furniture, fixtures and equipment. Tenant improvements,
which are included in buildings and improvements, are amortized on a
straight-line basis over the term of the related leases.

Cash Equivalents

The Company considers highly liquid investments with a maturity of three
months or less when purchased, to be cash equivalents.

Deferred Costs

Tenant leasing commissions and related costs incurred in connection with
leasing tenant space are capitalized and amortized over the life of the related
lease. In addition, loan costs incurred are capitalized and amortized over the
term of the related loan.

Costs incurred in connection with stock offerings are charged to
stockholders equity when incurred.

Income Taxes

The Company generally will not be subject to federal income taxes as long
as it qualifies as a REIT. A REIT will generally not be subject to federal
income taxation on that portion of income that qualifies as REIT taxable income
and to the extent that it distributes such taxable income to its stockholders
and complies with certain requirements. As a REIT, the Company is allowed to
reduce taxable income by all or a portion of distributions to stockholders and
must distribute at least 95% of its taxable income to qualify as a REIT. As
distributions, for federal income tax purposes, have exceeded taxable income, no
federal income tax provision has been reflected in the accompanying consolidated
financial statements. State income taxes are not significant.

During 1999, the Company paid cash dividends on its common stock of
approximately $1.42 per share and approximately $.98 per share (representing the
period from May 24, 1999 through October 31, 1999) on its Class B Common Stock.
During 1998, the Company paid cash dividends on its common stock of $.99 per
share (representing dividends for three quarters). In addition, on June 11,
1998, the Company paid a stock dividend equivalent to $.0824 per share relating
to the Operating Partnership's distribution of its common stock interest in
FrontLine to the Company. All of the dividends paid on the Company's common
stock during 1998 were considered ordinary income for federal tax purposes. For
1999, approximately 92.75% of the dividends paid on the Company's common stock
and Class B Common Stock were considered ordinary income for federal tax
purposes. The remaining 7.25% of the dividends paid were treated as a capital
gain distribution, subject to a 20% tax rate for individuals and certain other
taxpayers.

IV-12

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Revenue Recognition

Minimum rental income is recognized on a straight-line basis over the term
of the lease. The excess of rents recognized over amounts contractually due are
included in deferred rents receivable on the accompanying balance sheets.
Contractually due but unpaid rents are included in tenant receivables on the
accompanying balance sheets. Certain lease agreements provide for reimbursement
of real estate taxes, insurance, common area maintenance costs and indexed
rental increases, which are recorded on an accrual basis.

The Company records interest income on investments in mortgage notes and
notes receivable on an accrual basis of accounting. The Company does not accrue
interest on impaired loans where, in the judgment of management, collection of
interest according to the contractual terms is considered doubtful. Among the
factors the Company considers in making an evaluation of the collectibility of
interest are: the status of the loan, the value of the underlying collateral,
the financial condition of the borrower and anticipated future events. Loan
discounts are amortized over the life of the real estate using the constant
interest method.

Gains from sales of real estate are recorded when title is conveyed to the
buyer, subject to the buyer's financial commitment being sufficient to provide
economic substance to the sale.

Earnings Per Share

In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 128, "Earnings per Share" ("Statement 128") which replaced the calculation
of primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements. The conversion of Units into common stock would not have a
significant effect on per share amounts as the Units share proportionately with
the common stock in the results of the Operating Partnership's operations.

Stock Options

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," ("Statement 123") requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, no compensation expense was recognized because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant (see Note 7).

Comprehensive Income

In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement 130") which is effective for fiscal years beginning after
December 15, 1997. Statement 130 established standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements. Statement 130 requires that all components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The adoption of this standard
had no impact on the Company's financial position or results of operations.

IV-13

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Segment Reporting

In 1997, the FASB issued Statement No. 131 "Disclosures about segments of
an Enterprise and Related Information" ("Statement 131") which is effective for
fiscal years beginning after December 15, 1997. Statement 131 establishes
standards for reporting information about operating segments in annual financial
statements and in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The adoption of this standard had no impact on the Company's
financial position or results of operations but did affect the disclosure of
segment information. See Note 11.

Recent Pronouncements

In June 1999, the FASB issued Statement No. 137, amending Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
extended the required date of adoption to the years beginning after June 15,
2000. The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt the new Statement
effective January 1, 2001. The Company does not anticipate that the adoption of
this Statement will have any effect on its results of operations or financial
position.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

2. MORTGAGE NOTES PAYABLE

At December 31, 1999, there were 17 mortgage notes payable with an
aggregate outstanding principal amount of approximately $459.2 million.
Properties with an aggregate carrying value at December 31, 1999 of
approximately $808 million are pledged as collateral against the mortgage notes
payable. In addition, $47.8 million of the $459.2 million are recourse to the
Company. The mortgage notes bear interest at rates ranging from 6.45% to 9.25%,
and mature between 2000 and 2027. The weighted average interest rates on the
outstanding mortgage notes payable at December 31, 1999, 1998 and 1997 were
approximately 7.6%, 7.8% and 7.7%, respectively. Certain of the mortgage notes
payable are guaranteed by certain minority partners in the Operating
Partnership.

Scheduled principal repayments during the next five years and thereafter
are as follows (in thousands):

YEAR ENDED DECEMBER 31,
- --------------------------------
2000 ......................... $ 35,145
2001 ......................... 22,751
2002 ......................... 16,499
2003 ......................... 8,350
2004 ......................... 11,769
Thereafter ................... 364,660
--------
$459,174
========

3. UNSECURED CREDIT FACILITIES AND UNSECURED TERM LOAN

As of December 31, 1999, the Company had a three year $500 million
unsecured revolving credit facility (the "Credit Facility") from Chase Manhattan
Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit
Facility bank group. Interest rates on borrowings under the Credit Facility

IV-14

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

3. UNSECURED CREDIT FACILITIES AND UNSECURED TERM LOAN - (CONTINUED)

are priced off of LIBOR plus a sliding scale ranging from 65 basis points to 90
basis points based on the Company's investment grade rating on its senior
unsecured debt. On March 16, 1999, the Company received its investment grade
rating on its senior unsecured debt. As a result, the pricing under the Credit
Facility was adjusted to LIBOR plus 90 basis points.

The Company utilizes the Credit Facility primarily to finance the
acquisitions of properties and other real estate investments, fund its
development activities and for working capital purposes. At December 31, 1999,
the Company had availability under the Credit Facility to borrow an additional
$150.1 million (net of $52.3 million of outstanding undrawn letters of credit).

As of December 31, 1999, the Company had outstanding an 18 month, $75
million unsecured term loan (the "Term Loan") from Chase Manhattan Bank.
Interest rates on borrowings under the Term Loan are priced off of LIBOR plus
150 basis points. The Term Loan replaced the Company's previous term loan which
matured on December 17, 1999.

On May 24, 1999, in conjunction with the Tower portfolio acquisition (see
Note 6), the Company obtained a $130 million unsecured bridge facility (The
"Bridge Facility") from UBS AG. Interest rates on borrowings under the Bridge
Facility were priced off of LIBOR plus approximately 214 basis points. On July
23, 1999, the Bridge Facility was repaid through a long term fixed rate secured
borrowing and an advance under the Credit Facility. As a result, certain
deferred loan costs incurred in connection with the Bridge Facility were written
off. Such amount is reflected as an extraordinary loss in the accompanying
consolidated statements of income.

The Company capitalized interest incurred on borrowings to fund certain
acquisition and development costs in the amount of $9.8 million, $7.3 million
and $2.4 million for the years ended December 31, 1999, 1998 and 1997,
respectively.

4. SENIOR UNSECURED NOTES

As of December 31, 1999, the Operating Partnership had outstanding
approximately $449.3 million (net of issuance discounts) of senior unsecured
notes (the "Senior Unsecured Notes"). The following table sets forth the
Operating Partnership's Senior Unsecured Notes and other related disclosures
(dollars in thousands):

FACE COUPON
ISSUANCE AMOUNT RATE TERM MATURITY
- ----------------------- ----------- ---------- ---------- ----------------

August 27, 1997 $150,000 7.20% 10 years August 28, 2007
March 26, 1999 $100,000 7.40% 5 years March 15, 2004
March 26, 1999 $200,000 7.75% 10 years March 15, 2009

Interest on the Senior Unsecured Notes is payable semiannually with
principal and unpaid interest due on the scheduled maturity dates. In addition,
the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate
discount of $738,000.

Net proceeds of approximately $297.4 million received from the issuance of
the March 26, 1999 Senior Unsecured Notes were used to repay outstanding
borrowings under the Company's Credit Facility.

5. LAND LEASES

The Company leases, pursuant to noncancellable operating leases, the land
on which ten of its buildings were constructed. The leases, which contain
renewal options, expire between 2018 and 2080. The leases either contain
provisions for scheduled increases in the minimum rent at specified intervals or

IV-15

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

5. LAND LEASES - (CONTINUED)

for adjustments to rent based upon the fair market value of the underlying land
or other indexes at specified intervals. Minimum ground rent is recognized on a
straight-line basis over the terms of the leases. The excess of amounts
recognized over amounts contractually due is approximately $2.6 million and $2.3
million at December 31, 1999 and 1998, respectively. These amounts are included
in accrued expenses and other liabilities on the accompanying balance sheets.

Future minimum lease commitments relating to the land leases during the
next five years and thereafter are as follows (in thousands):

YEAR ENDED DECEMBER 31,
- --------------------------------
2000 ......................... $ 1,833
2001 ......................... 1,850
2002 ......................... 1,869
2003 ......................... 1,818
2004 ......................... 1,942
Thereafter ................... 48,232
-------
$57,544
=======

6. COMMERCIAL REAL ESTATE INVESTMENTS

The Tower Merger

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC, a Delaware limited liability company ("Metropolitan"), with Crescent Real
Estate Equities Company, a Texas real estate investment trust ("Crescent").

On December 8, 1998, the Company, Metropolitan and Tower Realty Trust, Inc.
("Tower") executed a merger agreement and on May 24, 1999 Tower was merged (the
"Merger") into Metropolitan, with Metropolitan surviving the Merger.
Concurrently with the Merger, Tower Realty Operating Partnership, L.P. ("Tower
OP") was merged with and into a subsidiary of Metropolitan. The consideration
issued in the mergers was comprised of (i) 25% cash (approximately $107.2
million) and (ii) 75% of shares of Class B Exchangeable Common Stock, par value
$.01 per share, of the Company (the "Class B Common Stock") (valued for GAAP
purposes at approximately $304.1 million).

Under the terms of the transaction, Metropolitan effectively paid for each
share of Tower common stock and each unit of limited partnership interest of
Tower OP the sum of (i) $5.75 in cash, and (ii) 0.6273 of a share of Class B
Common Stock. The shares of Class B Common Stock are entitled to receive an
initial annual dividend of $2.24 per share, which dividend is subject to
adjustment annually commencing on July 1, 2000. The shares of Class B Common
Stock are exchangeable at any time, at the option of the holder, into an equal
number of shares of common stock, par value $.01 per share, of the Company
subject to customary antidilution adjustments. The Company, at its option, may
redeem any or all of the Class B Common Stock in exchange for an equal number of
shares of the Company's common stock at any time following the four year,
six-month anniversary of the issuance of the Class B Common Stock.

The Board of Directors of the Company has authorized a purchase buy back
program for the Company's Class B Common Stock (see note 7).

The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity interest in Metropolitan.
Crescent's interest accrues distributions at a rate of 7.5% per annum for a
two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by

IV-16

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED)

Metropolitan at any time during that period for $85 million, plus an amount
sufficient to provide a 9.5% internal rate of return. If Metropolitan does not
redeem the preferred interest, upon the expiration of the two-year period,
Crescent must convert its $85 million preferred interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
common stock at a conversion price of $24.61 per share.

The Tower portfolio acquired in the Merger consists of three office
properties comprising approximately 1.6 million square feet located in New York
City, one office property located on Long Island and certain office properties
and other real estate assets located outside the Tri-State Area.

Prior to the closing of the Merger, the Company arranged for the sale of
four of Tower's Class B New York City properties, comprising approximately
701,000 square feet for approximately $84.5 million. Subsequent to the closing
of the Merger, the Company has sold a real estate joint venture interest and all
of the property located outside the Tri-State Area other than one office
property located in Orlando, Florida for approximately $171.1 million. The
combined consideration consisted of approximately $143.8 million in cash and
approximately $27.3 million of debt relief. Net cash proceeds from the sales
were used primarily to repay borrowings under the Credit Facility. As a result
of incurring certain sales and closing costs in connection with the sale of the
assets located outside the Tri-State Area, the Company has incurred a loss of
approximately $4.4 million which has been included in gain on sales of real
estate on the accompanying consolidated statements of income.

"Big Box" Industrial Investment Activity

On January 6, 1998, the Company made an initial investment in the Morris
Companies, a New Jersey developer and owner of "Big Box" warehouse facilities.
In connection with the transaction the Morris Companies contributed 100% of
their interests in certain industrial properties to RMI in exchange for
operating partnership units in RMI.

During 1999, the Company purchased approximately 68.1 acres of vacant land
in Northern New Jersey for approximately $2.6 million. In addition, RMI
purchased 74.6 acres of vacant land for approximately $3.7 million and a 846,000
square foot industrial property located in Cranbury, New Jersey for
approximately $34 million. These assets were sold to KTR and the Matrix
Development Group ("Matrix") as discussed below.

On August 9, 1999, the Company executed a contract for the sale, which will
take place in three stages, of its interest in RMI which consisted of 28
properties, comprising approximately 6.1 million square feet and three other big
box industrial properties to KTR. In addition, the Company also entered into a
sale agreement with Matrix relating to a first mortgage note and certain
industrial land holdings (the "Matrix Sale"). The combined total sale price is
$310 million (approximately $42 million of which is payable to the Morris
Companies and its affiliates) and consists of a combination of (i) cash, (ii)
convertible preferred and common stock of KTR, (iii) preferred units of KTR's
operating partnership, (iv) relief of debt and (v) a purchase money mortgage
note secured by certain land that is being sold to Matrix.

During September 1999, the Matrix Sale and the first stage of the RMI
closing occurred whereby the Company sold its interest in RMI to KTR for a
combined sales price of approximately $164.7 million (net of minority partner's
interest). The combined consideration consisted of approximately (i) $86.3
million in cash, (ii) $40 million of preferred stock of KTR, (iii) $1.5 million
in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v)
approximately $10.2 million in purchase money mortgages. As a result, the
Company incurred a gain of approximately $10.1 million which has been included
in gain on sales of real estate on the accompanying consolidated statements of
income. In

IV-17

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED)

addition, the $41.5 million of common and preferred stock of KTR has been
included in prepaid expenses and other assets on the accompanying consolidated
balance sheet. Cash proceeds from the sales were used primarily to repay
borrowings under the Credit Facility.

The second and third stages of the RMI closing are scheduled to be
completed in April 2000. The remaining stages consist of six industrial
buildings and are being sold for total consideration of approximately $98
million .

Other Real Estate Investment Activity

During 1998, the Company acquired three office properties encompassing
approximately 674,000 square feet, two industrial properties encompassing
approximately 200,000 square feet and approximately 79.9 acres of vacant land
which allows for approximately 816,000 square feet of future development
opportunities on Long Island for an aggregate purchase price of approximately
$82.8 million.

During 1998, the Company acquired four office properties encompassing
approximately 522,000 square feet, six industrial properties encompassing
approximately 985,000 square feet and approximately 112.2 acres of vacant land
which allows for approximately 815,000 square feet of future development
opportunities in New Jersey for an aggregate purchase price of approximately
$138.1 million.

During 1998, the Company acquired Stamford Towers located in Stamford,
Connecticut for approximately $61.3 million. Stamford Towers is a Class A office
complex consisting of two eleven story towers totaling approximately 325,000
square feet.

During 1998, the Company acquired a portfolio of six office properties
encompassing approximately 980,000 square feet in Westchester County, New York
from Cappelli Enterprises and affiliated entities ("Cappelli") for a purchase
price of approximately $173 million. The Cappelli acquisition includes a five
building, 850,000 square foot Class A office park located in Valhalla, New York
and Court House Square, a 130,000 square foot Class A office building located in
White Plains, New York. The Company also obtained from Cappelli the remaining
50% interest in 360 Hamilton Avenue, a 365,000 square foot vacant office tower
in downtown White Plains for $10 million plus the return of his capital
contributions of approximately $1.5 million. In addition, the Company received
an option from Cappelli to acquire the remaining development parcels within the
Valhalla office park on which up to 875,000 square feet of office space can be
developed. These acquisitions were financed in part through proceeds from a draw
under the Credit Facility, the issuance of 42,518 (approximately $42.5 million)
preferred operating partnership units (the "Cappelli Preferred Units"), and the
assumption of approximately $47.1 million of mortgage debt. Additionally, as of
December 31, 1999, the Company issued and advanced to Cappelli $36.5 million
under three liquidity loans (the "Cappelli Liquidity Loans"). The Cappelli
Liquidity Loans bear interest at rates ranging from 10% to 10.5% per annum and
are secured by Cappelli's right, title and interest in the Cappelli Preferred
Units. Such amounts have been included in investments in mortgage notes and
notes receivable on the accompanying balance sheets.

On April 13, 1999, the Company received approximately $25.8 million from
the repayment of a mortgage note receivable which had been acquired at a
discount and secured three office properties located in Garden City, Long
Island, encompassing approximately 400,000 square feet. As a result, the Company
recognized a gain of approximately $4.3 million. Such gain has been included in
gain on sales of real estate on the accompanying consolidated statements of
income.

On June 7, 1999 the Company sold a 24,000 square foot office property
located in Ossining, New York for approximately $1.5 million. As partial
consideration for the sale, the Company obtained a $1.2 million, three year
purchase money mortgage.

IV-18

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED)

On June 15, 1999, the Company acquired the first mortgage note secured by a
47 story, 1.4 million square foot Class A office property located at 919 Third
Avenue in New York City for approximately $277.5 million. The first mortgage
note entitles the Company to all the net cash flow of the property and to
substantial rights regarding the operations of the property, with the Company
anticipating to ultimately obtain title to the property. This acquisition was
financed with proceeds from the issuance of six million shares of Series B
Convertible Cumulative Preferred Stock (see note 7) and through an advance under
the Credit Facility. Current financial accounting guidelines provide that where
a lender has virtually the same risks and potential rewards as those of a real
estate owner it should recognize the full economic effect associated with the
operations of the property. As such, the Company has included the real estate
operations of 919 Third Avenue in the accompanying consolidated statements of
income from the date of acquisition.

In addition, as of December 31, 1999, the Company has invested
approximately $15.7 million in certain mortgage indebtedness encumbering one
Class A office property encompassing approximately 177,000 square feet and
approximately 472 acres of land located in New Jersey. The Company has also
loaned approximately $17 million to its minority partner in Omni, its 575,000
square foot flagship Long Island office property, and effectively increased its
economic interest in the property owning partnership.

7. STOCKHOLDERS' EQUITY

A Unit and a share of common stock have essentially the same economic
characteristics as they effectively share equally in the net income or loss and
distributions of the Operating Partnership. Subject to certain holding periods
Units may either be redeemed for cash or, at the election of the Company, for
shares of common stock on a one-for-one basis.

On February 18, 1998, the Company sold 791,152 shares of the Company's
common stock at $25.44 per share for an aggregate consideration of approximately
$20.1 million before deducting offering expenses.

During April 1998, the Company completed a preferred stock offering and
sold 9,200,000 shares (including 1,200,000 shares related to the exercise of the
underwriters over allotment option) of 7.625% Series A Convertible Cumulative
Preferred Stock (the "Series A Preferred Stock") at a price of $25.00 per share
for an aggregate consideration of $230 million before deducting offering
expenses. The Series A Preferred Stock is convertible to the Company's common
stock at a conversion rate of .8769 shares of common stock for each share of
Series A Preferred Stock. As of December 31, 1999, 8,000 shares of the Series A
Preferred Stock were converted into the Company's common stock.

On April 29, 1998, the Company completed a common stock offering and sold
1,093,744 common shares at a price of $24.38 per share for an aggregate
consideration of approximately $26.7 million before deducting offering expenses.

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company issued 11,694,567 shares of Class B Common Stock which were valued for
GAAP purposes at $26 per share for total consideration of approximately $304.1
million. The shares of Class B Common Stock are entitled to receive an initial
annual dividend of $2.24 per share, which dividend is subject to adjustment
annually. The shares of Class B Common Stock are exchangeable at any time, at
the option of the holder, into an equal number of shares of common stock, par
value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
Common Stock in exchange for an equal number of shares of the Company's common
stock at any time following the four year, six-month anniversary of the issuance
of the Class B Common Stock.

On June 2, 1999, the Company issued six million shares of Series B
Convertible Cumulative Preferred Stock (the "Series B Preferred Stock") for
aggregate proceeds of $150 million. The Series B Preferred Stock is redeemable
by the Company on or after March 2, 2002 and is convertible into the

IV-19

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

7. STOCKHOLDERS' EQUITY - (CONTINUED)

Company's common stock at a price of $26.05 per share. The Series B Preferred
Stock accumulates dividends at an initial rate of 7.85% per annum with such rate
increasing to 8.35% per annum on April 30, 2000 and to 8.85% per annum from and
after April 30, 2001. Proceeds from the Series B Preferred Stock offering were
used as partial consideration in the acquisition of the first mortgage note
secured by 919 Third Avenue located in New York City.

The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B Common Stock and has also
authorized the purchase of up to an additional three million shares of the
Company's Class B Common Stock and/or its common stock. The buy-back program
will be effected in accordance with the safe harbor provisions of the Securities
Exchange Act of 1934 and may be terminated by the Company at any time. As of
December 31, 1999, the Company purchased and retired 1,410,804 shares of its
Class B Common Stock for approximately $30.3 million.

The Company has made loans to certain executive officers to purchase
545,393 shares of common stock at market prices ranging from $20.56 per share to
$27.13 per share. The loans bear interest at the mid-term Applicable Federal
Rate and are secured by the shares purchased. Such loans including accrued
interest will be forgiven each year on the annual anniversary of the grant date
based upon amortization periods ranging from four to ten years. In addition, the
loans which are secured by 310,834 shares of common stock are due with a balloon
payment on the fifth anniversary of the grant date and loans which are secured
by 47,059 and 187,500 shares of common stock are forgiven over terms of four and
seven years, respectively. As of December 31, 1999, the loan balances aggregated
approximately $11.1 million and have been included as a reduction of additional
paid in capital on the accompanying consolidated statement of stockholders'
equity.

The Company has established the 1995, 1996, 1997 and 1998 Employee Stock
Option Plans (the "Plans") for the purpose of attracting and retaining executive
officers, directors and other key employees. As of December 31, 1999, 1,500,000,
400,000, 3,000,000 and 3,000,000 of the Company's authorized shares have been
reserved for issuance under the 1995, 1996, 1997 and 1998 plans, respectively.

The following table sets forth the options granted under the Plans and
their corresponding exercise price range per share:

EXERCISE PRICE RANGE
----------------------
OPTIONS
GRANTED(1) FROM (1) TO(1)
------------ ---------- -----------
1995 Employee Stock Option Plan 1,495,538 $ 12.04 $ 25.56
1996 Employee Stock Option Plan 182,350 $ 19.67 $ 26.13
1997 Employee Stock Option Plan 2,485,965 $ 22.67 $ 27.04
1998 Employee Stock Option Plan 1,494,001 $ 18.19 $ 25.67
---------
Total .......................... 5,657,854
=========

- ----------
(1) Exercise prices have been split adjusted, where applicable.

Options granted to new employees vest in three equal installments on the
first, second and third anniversaries of the date of the grant. Options granted
to existing employees are generally exercisable on the date of the grant.

The independent directors of the Company have been granted options to
purchase 129,000 shares pursuant to the 1995 Employee Stock Option Plan at
exercise prices ranging from $12.04 to $25.56 per share and options to purchase
3,000 shares pursuant to the 1997 Employee Stock Option Plan at an exercise
price of $25.23 per share. The options granted to the independent directors were
exercisable on the date of the grant.

IV-20

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

7. STOCKHOLDERS' EQUITY - (CONTINUED)

During 1999 and 1998, employees exercised 88,308 and 74,837 options,
respectively resulting in proceeds to the Company of approximately $1.2 million
and $1.1 million, respectively.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
Statement 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free
interest rate of 5%; dividend yields of 7.25 %, 6.19% and 5.59%; volatility
factors of the expected market price of the Company's common stock of .197 and a
weighted-average expected life of the option of five years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.

The following table sets forth the Company's pro forma information for the
years ended December 31:

1999 1998 1997
------------ ------------ ------------

Pro forma net income (in thousands) ........... $ 46,744 $ 32,846 $ 34,287
======== ======== ========
Basic pro forma earnings per share ............ $ 1.16 $ .83 $ 1.05
======== ======== ========
Diluted pro forma earnings per share .......... $ 1.15 $ .82 $ 1.03
======== ======== ========

The following table summarizes the Company's stock option activity and
related information:

WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE(1)
------------- ------------------

Outstanding -- January 1, 1997 ........... 1,421,214 $ 14.28
Granted .................................. 1,123,300 $ 26.67
Exercised ................................ (126,429) $ 14.94
Forfeited ................................ (10,319) $ 16.33
---------
Outstanding -- December 31, 1997 ......... 2,407,766 $ 20.16
Granted .................................. 2,431,132 $ 24.03
Exercised ................................ (74,837) $ 14.76
Forfeited ................................ (30,417) $ 25.44
---------
Outstanding -- December 31, 1998 ......... 4,733,644 $ 22.22
Granted .................................. 619,217 $ 20.82
Exercised ................................ (88,308) $ 13.99
Forfeited ................................ (90,632) $ 23.44
---------
Outstanding -- December 31, 1999 ......... 5,173,921 $ 22.17
=========

- ----------
(1) Exercise prices have been split adjusted, where applicable.

IV-21

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

7. STOCKHOLDERS' EQUITY - (CONTINUED)

The weighted average fair value of options granted for the years ended
December 31, 1997, 1998 and 1999 was $1.47, $2.06 and $2.10, respectively. In
addition, there were 1,758,534 options at a weighted average per share exercise
price of $20.16, 4,527,144 options at a weighted average per share exercise
price of $22.22 and 5,137,588 options at a weighted average per share exercise
price of $22.17 exercisable at December 31, 1997, 1998 and 1999, respectively.

Exercise prices for options outstanding as of December 31, 1999 ranged from
$12.04 per share to $27.04 per share. The weighted-average remaining contractual
life of those options is approximately 7.74 years.

The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average common
share and the computation of basic and diluted earnings per share for the
Company's common stock as required by Statement 128 for the years ended December
31, (in thousands except for earnings per share data):

1999 1998 1997
------------ ------------ ----------

Numerator:
Income before extraordinary loss, dividends to
preferred shareholders and income allocated to
Class B shareholders ............................ $ 85,192 $ 52,056 $ 36,866
Dividends to preferred shareholders .............. (24,360) (12,491) --
Extraordinary loss (net of share applicable to
limited partners and Class B Common
shareholders) ................................... (389) (1,670) (2,230)
Income allocated to Class B shareholders ......... (12,914) -- --
--------- --------- --------
Numerator for basic and diluted earnings per
share ........................................... $ 47,529 $ 37,895 $ 34,636
========= ========= ========
Denominator:
Denominator for basic earnings per share-
weighted-average common shares .................. 40,270 39,473 32,727
Effect of dilutive securities:
Employee stock options .......................... 406 537 533
--------- --------- --------
Denominator for diluted earnings per common
share adjusted weighted-average shares and
assumed conversions ............................. 40,676 40,010 33,260
========= ========= ========
Basic earnings per common share:
Income before extraordinary loss ................ $ 1.19 $ 1.00 $ 1.13
Extraordinary loss .............................. ( .01) ( .04) ( .07)
--------- --------- --------
Net income per common share ..................... $ 1.18 $ .96 $ 1.06
========= ========= ========
Diluted earnings per common share:
Income before extraordinary loss ................ $ 1.18 $ .99 $ 1.11
Extraordinary loss .............................. ( .01) ( .04) ( .07)
--------- --------- --------
Diluted net income per common share ............. $ 1.17 $ .95 $ 1.04
========= ========= ========

IV-22

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

7. STOCKHOLDERS' EQUITY - (CONTINUED)

The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average Class B
common share and the computation of basic and diluted earnings per share for the
Company's Class B Common Stock as required by Statement 128. (in thousands
except for earnings per share data):

YEAR ENDED
DECEMBER 31, 1999
------------------

Numerator:
Income before extraordinary loss, dividends to preferred
shareholders and income allocated to common shareholders . $ 85,192
Dividends to preferred shareholders .............................. (24,360)
Extraordinary loss (net of share applicable to limited partners
and common shareholders) ....................................... (166)
Income allocated to common shareholders .......................... (47,918)
---------
Numerator for basic earnings per share ........................... 12,748
Add back:
Income allocated to common shareholders .......................... 47,529
Limited partners' interest in the operating partnership .......... 9,407
---------
Numerator for diluted earnings per share .......................... $ 69,684
=========
Denominator:
Denominator for basic earnings per share- weighted-average
Class B common shares .......................................... 6,744
Effect of dilutive securities:
Weighted average common shares outstanding ....................... 40,270
Weighted average limited partnership Units outstanding ........... 7,705
Employee stock options ........................................... 406
---------
Denominator for diluted earnings per Class B common
share-adjusted weighted average shares and assumed
conversions ...................................................... 55,125
=========
Basic earnings per Class B common share:
Income before extraordinary loss ................................. $ 1.91
Extraordinary loss ............................................... ( .02)
---------
Net income per Class B common share .............................. $ 1.89
=========
Diluted earnings per Class B common share:
Income before extraordinary loss ................................. $ 1.26
Extraordinary loss ............................................... (--)
Diluted net income per Class B common share ...................... $ 1.26
=========

The Company's computation for purposes of calculating the diluted weighted
average Class B common shares outstanding is based on the assumption that the
Class B Common Stock is converted to the Company's common stock.

IV-23

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

8. RELATED PARTY TRANSACTIONS

The Company, through its subsidiaries and affiliates, provides management,
leasing and other tenant related services to the Properties. Certain executive
officers of the Company have continuing ownership interests in the
unconsolidated service companies.

In connection with the IPO, the Company was granted a ten year option
period to acquire ten properties which are either owned by the Reckson Group,
the predecessor to the Company, or in which the Reckson Group owns a
non-controlling minority interest. During 1998, one of these properties was sold
by the Reckson Group to a third party. In addition, as of December 31, 1999, the
Company has acquired four of these properties for a aggregate purchase price of
approximately $35 million, which included the issuance of approximately 475,000
Units valued at approximately $8.8 million.

The Operating Partnership and FrontLine have entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their relationship
and to limit conflicts of interest. Under the Reckson Intercompany Agreement,
FrontLine granted the Operating Partnership a right of first opportunity to make
any REIT -qualified investment that becomes available to FrontLine. In addition,
if a REIT-qualified investment opportunity becomes available to an affiliate of
FrontLine, including RSVP, the Reckson Intercompany Agreement requires such
affiliate to allow the Operating Partnership to participate in such opportunity
to the extent of FrontLine's interest.

Under the Reckson Intercompany Agreement, the Operating Partnership granted
FrontLine a right of first opportunity to provide commercial services to the
Operating Partnership and its tenants. FrontLine will provide services to the
Operating Partnership at rates and on terms as attractive as either the best
available for comparable services in the market or those offered by FrontLine to
third parties. In addition, the Operating Partnership will give FrontLine access
to its tenants with respect to commercial services that may be provided to such
tenants and, under the Reckson Intercompany Agreement, subject to certain
conditions, the Operating Partnership granted FrontLine a right of first refusal
to become the lessee of any real property acquired by the Operating Partnership
if the Operating Partnership determines that, consistent with the Company's
status as a REIT, it is required to enter into a "master" lease agreement.

On August 27, 1998 the Company announced the formation of a joint venture
with RSVP and the Dominion Group, an Oklahoma-based, privately-owned group of
companies that focuses on the development, acquisition and ownership of
government occupied office buildings and correctional facilities. The new
venture, Dominion Properties LLC (the "Dominion Venture"), is owned by Dominion
Venture Group LLC, and by a subsidiary of the Company. The Dominion Venture is
primarily engaged in acquiring, developing and/or owning government-occupied
office buildings and privately operated correctional facilities. Under the
Dominion Venture's operating agreement, RSVP is to invest up to $100 million,
some of which may be invested by the Company ( the "RSVP Capital"). The initial
contribution of RSVP Capital was approximately $39 million of which
approximately $10.1 million was invested by a subsidiary of the Company. The
Company's investment was funded through the RSVP Commitment. In addition, the
Company advanced approximately $2.9 million to FrontLine through the RSVP
Commitment for an investment in RSVP which was then invested on a joint venture
basis with the Dominion Group in certain service business activities related to
the real estate activities. As of December 31, 1999, the Company had invested
approximately $17.6 million in the Dominion Venture which had investments in 13
government office buildings and three correctional facilities.

During 1998, the Company made investments in and advances to RMG of
approximately $29.5 million. Such investments and advances were used by RMG in
connection with RMG's acquisition of an approximate 64% ownership interest in an
executive office suite business. Concurrently with RMG's investment, FrontLine
received an option to purchase RMG's interest at cost plus 8%. RMG is owned 97%
by the Company and 3% by an entity owned by certain officers of the Company. On
November 9,

IV-24

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

8. RELATED PARTY TRANSACTIONS - (CONTINUED)

1998, FrontLine exercised its option and, as a result, RMG earned income during
the period of ownership of approximately $707,000. In addition, FrontLine
assumed the outstanding debt plus accrued interest owing to the Company.

During July 1999, the Company sold its interest in a 852,000 square foot
development property to RCG in exchange for a $12.3 million note. The note
accrues interest annually at the rate of 12%, has a five year maturity and is
prepayable in whole or in part. During October 1999, RCG made a payment to the
Company, in the form of 97 shares of its preferred stock, valued at
approximately $4.0 million, towards accrued interest and principal due under the
note.

In 1999 the Company invested approximately $7.2 million, through a
subsidiary, in RAP Student Housing Properties, LLC ("RAP - SHP"), a company that
engages primarily in the acquisition and development of off-campus student
housing projects. The Company's investment was funded through the RSVP
Commitment. In addition, the Company has advanced approximately $3.2 million to
FrontLine through the RSVP Commitment for an additional investment in RSVP which
was invested in certain service business activities related to student housing.
As of December 31, 1999, RAP - SHP had investments in 4 off -- campus student
housing projects.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with FASB Statement No. 107, "Disclosures About Fair Value of
Financial Instruments", management has made the following disclosures of
estimated fair value at December 31, 1999 as required by FASB Statement No. 107.

Cash equivalents and variable rate debt are carried at amounts which
reasonably approximate their fair values.

The fair value of the Company's long term debt, mortgage notes and notes
receivable is estimated based on discounting future cash flows at interest rates
that management believes reflects the risks associated with long term debt,
mortgage notes and notes receivable of similar risk and duration. In addition,
management believes that the estimated aggregate fair value of these assets and
liabilities approximates their carrying values.

Considerable judgment is necessary to interpret market data and develop
estimated fair value. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

10. RENTAL INCOME

The Properties are being leased to tenants under operating leases. The
minimum rental amount due under certain leases are generally either subject to
scheduled fixed increases or indexed escalations. In addition, the leases
generally also require that the tenants reimburse the Company for increases in
certain operating costs and real estate taxes above base year costs.

Included in base rents and tenant escalations and reimbursements in the
accompanying statements of income are amounts from Reckson Executive Centers,
LLC, a service business of the Company through March 31, 1998 and, a related
party as follows (in thousands):

TENANT
ESCALATIONS AND
FOR THE PERIODS BASE RENTS REIMBURSEMENTS
- ------------------------------------------------- ------------ ----------------

January 1 through March 31, 1998 ......... $ 597 $149
Year ended December 31, 1997 ............. $2,154 $441

IV-25

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

10. RENTAL INCOME - (CONTINUED)

Expected future minimum rents to be received over the next five years and
thereafter from leases in effect at December 31, 1999 are as follows (in
thousands):

2000 ......................... $ 312,654
2001 ......................... 295,862
2002 ......................... 293,714
2003 ......................... 257,655
2004 ......................... 230,477
Thereafter ................... 1,286,533
----------
$2,676,895
==========

11. SEGMENT DISCLOSURE

The Company's portfolio consists of Class A office properties located
within the New York City metropolitan area and Class A suburban office and
industrial properties located and operated within the Tri-State Area (the "Core
Portfolio"). In addition, the Company's portfolio also includes one office
property located in Orlando, Florida and for the period commencing January 6,
1998 and ending September 26, 1999, industrial properties which were owned by
RMI. The Company has managing directors who report directly to the Chief
Operating Officer and Chief Financial Officer who have been identified as the
Chief Operating Decision Makers because of their final authority over resource
allocation, decisions and performance assessment.

In addition, as the Company expects to meet its short term liquidity
requirements in part through the Credit Facility and Term Loan, interest
incurred on borrowings under the Credit Facility and Term Loan is not considered
as part of property operating performance. Further, the Company does not
consider the property operating performance of the office property located in
Orlando, Florida as a part of its Core Portfolio.

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.

The following tables set forth the components of the Company's revenues and
expenses and other related disclosures, as required by Statement 131, for the
years ended December 31, 1999 and 1998 (in thousands):

YEAR ENDED
-----------------------------------------------------
DECEMBER 31, 1999
-----------------------------------------------------
CORE CONSOLIDATED
PORTFOLIO RMI OTHER TOTALS
------------- ---------- ------------- --------------

REVENUES:
Base rents, tenant escalations
and reimbursements ........... $ 340,293 $15,394 $ 13,448 $ 369,135
Equity in earnings of real
estate joint ventures and
service companies ............ --- --- 2,148 2,148
Other income .................. 448 9 31,413 31,870
Total Revenues ................ 340,741 15,403 47,009 403,153
EXPENSES:
Property expenses ............. 119,270 2,406 4,318 125,994
Marketing, general and
administrative ............... 16,981 548 6,764 24,293
Interest ...................... 25,167 445 48,708 74,320
Depreciation and amortization 64,097 3,663 6,744 74,504
---------- ------- --------- ----------
Total Expenses ................ 225,515 7,062 66,534 299,111
---------- ------- --------- ----------
Income before preferred
dividends and distributions,
minority interests and
extraordinary loss ........... $ 115,226 $ 8,341 $ (19,525) $ 104,042
========== ======= ========= ==========
Total assets .................. $2,142,696 $ 0 $ 581,539 $2,724,235
========== ======= ========= ==========

YEAR ENDED
----------------------------------------------------
DECEMBER 31, 1998
----------------------------------------------------
CORE CONSOLIDATED
PORTFOLIO RMI OTHER TOTALS
------------- ---------- ------------- -------------

REVENUES:
Base rents, tenant escalations
and reimbursements ........... $ 237,105 $ 15,137 $ 205 $ 252,447
Equity in earnings of real
estate joint ventures and
service companies ............ --- --- 1,836 1,836
Other income .................. 460 --- 11,630 12,090
Total Revenues ................ 237,565 15,137 13,671 266,373
EXPENSES:
Property expenses ............. 80,489 2,587 1,204 84,280
Marketing, general and
administrative ............... 11,699 456 4,705 16,860
Interest ...................... 16,651 1,101 30,043 47,795
Depreciation and amortization 43,701 3,491 5,765 52,957
---------- -------- --------- ----------
Total Expenses ................ 152,540 7,635 41,717 201,892
---------- -------- --------- ----------
Income before preferred
dividends and distributions,
minority interests and
extraordinary loss ........... $ 85,025 $ 7,502 $ (28,046) $ 64,481
========== ======== ========= ==========
Total assets .................. $1,424,472 $156,430 $ 273,914 $1,854,816
========== ======== ========= ==========

IV-26

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

12. NON-CASH INVESTING AND FINANCING ACTIVITIES

Additional supplemental disclosures of non-cash investing and financing
activities are as follows:

During 1998, the Company issued 584,062 Units in connection with the
acquisition of three office and two industrial properties encompassing
approximately 580,000 square feet for a total non cash investment of
approximately $13.7 million. In addition, in connection with the acquisitions of
the Cappelli portfolio and 360 Hamilton Avenue located in White Plains, New
York, the Company assumed approximately $47.1 million of indebtedness and issued
42,518 preferred units with a stated value of approximately $42.5 million for a
total non cash investment of approximately $89.6 million.

On June 11, 1998, the Operating Partnership distributed its 95% common
stock interest in FrontLine of approximately $3 million to its owners, including
the Company which, in turn, distributed the common stock of FrontLine to its
shareholders.

During 1998, in connection with the Company's investment in the Morris
Companies, the Company assumed approximately $23 million of indebtedness ($16.9
million net of minority partners interest). In addition, the Morris Companies
contributed net assets of approximately $36 million to the Company in exchange
for an approximate 28.2% minority partners interest in RMI.

On May 24, 1999, in conjunction with the Tower portfolio acquisition, the
Company issued 11,694,567 shares of Class B Common Stock which were valued for
GAAP purposes at approximately $304.1 million and assumed approximately $133.4
million of indebtedness for a total non cash investment of approximately $437.5
million.

During June 1999, in connection with the sale of an office property, the
Company obtained a $1.2 million purchase money mortgage as partial consideration
for the sale.

During July 1999, the Company sold its interest in a 852,000 square foot
development property to RCG in exchange for a $12.3 million note. During October
1999, the Company accepted 97 shares of preferred stock of RCG as payment of
$4.0 million of principal and interest due under the note.

During September 1999, in connection with the Matrix Sale and the first
stage closing of RMI, the Company received as partial consideration for the sale
$41.5 million of common and preferred stock of KTR and approximately $10.2
million in purchase money mortgages from Matrix. In addition, the Company was
also relieved of approximately $26.7 million of secured indebtedness.

During November 1999, the Company received approximately $3.6 million of
common stock of FrontLine as consideration for amending the FrontLine Facility
and the RSVP Commitment.

13. COMMITMENTS AND OTHER COMMENTS

The Company has entered into employment agreements with its chairman and
five executive officers. The agreements are for five years and expire on May 31,
2003.

The Company sponsors a defined contribution savings plan pursuant to
section 401(k) of the Internal Revenue Code. Under such plan, there are no prior
service costs. Employees are generally eligible to participate in the plan after
six months of service. Employer contributions are based on a discretionary
amount determined by the Company's management. During 1999 and 1998 the Company
made no contributions.

The Company had outstanding undrawn letters of credit against its Credit
Facility of approximately $52.3 million and $26.1 million at December 31, 1999
and 1998, respectively.

IV-27

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following summary represents the Company's results of operations for
each quarter during 1999 and 1998 (in thousands, except share amounts):

1999
----------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
--------------- ---------------- --------------- ---------------

Total revenues ................................ $ 76,108 $ 91,239 $ 125,345 $ 110,461
=========== =========== =========== ===========
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ........................... $ 19,774 $ 20,626 $ 35,220 $ 28,422
Preferred dividends and distributions ......... (5,041) (5,989) (7,985) (7,986)
Minority interests ............................ (3,409) (3,442) (5,164) (4,194)
Extraordinary loss ............................ -- -- (555) --
----------- ----------- ----------- -----------
Net income available to common
shareholders ................................. $ 11,324 $ 11,195 $ 21,516 $ 16,242
=========== =========== =========== ===========
Net Income available to:
Common shareholders .......................... $ 11,324 $ 9,464 $ 15,066 $ 11,675
Class B common shareholders .................. -- 1,731 6,450 4,567
----------- ----------- ----------- -----------
Total ......................................... $ 11,324 $ 11,195 $ 21,516 $ 16,242
=========== =========== =========== ===========
Basic net income per weighted average common
share before extraordinary loss:
Common shareholders .......................... $ .28 $ .23 $ .38 $ .29
Extraordinary loss per common share . -- -- (.01) --
----------- ----------- ----------- -----------
Basic net income per weighted average
common share ............................... $ .28 $ .23 $ .37 $ .29
=========== =========== =========== ===========
Class B common shareholders .................. $ -- $ .35 $ .57 $ .44
Extraordinary loss per Class B
common share ............................... -- -- (.01) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class B common share ....................... $ -- $ .35 $ .56 $ .44
=========== =========== =========== ===========
Weighted average common shares outstanding:
Common shareholders .......................... 40,049,079 40,284,511 40,367,161 40,374,658
Class B common shareholders .................. -- 4,883,446 11,456,931 10,468,600
Diluted net income per weighted average common
share:
Common shareholders .......................... $ .28 $ .23 $ .37 $ .29
Class B common shareholders .................. $ -- $ .24 $ .41 $ .32
Diluted weighted average common shares outstanding:
Common shareholders .......................... 40,450,296 40,704,147 40,796,597 40,747,826
Class B common shareholders .................. -- 4,883,446 11,456,931 10,468,600

IV-28

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED) - (CONTINUED)

1998
----------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
--------------- ---------------- --------------- ---------------

Total revenues ................................ $ 55,063 $ 66,319 $ 71,600 $ 73,391
=========== =========== =========== ===========
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ........................... $ 12,097 $ 17,524 $ 17,143 $ 17,717
Preferred dividends and distributions ......... -- (4,168) (5,034) (5,042)
Minority interests ............................ (2,524) (3,445) (1,874) (2,829)
Extraordinary loss ............................ -- -- (1,670) --
----------- ----------- ----------- -----------
Net income available to common
shareholders ................................. $ 9,573 $ 9,911 $ 8,565 $ 9,846
=========== =========== =========== ===========
Basic net income per weighted average common
share:
Income before extraordinary loss ............. $ .25 $ .25 $ .25 $ .25
Extraordinary loss ........................... -- -- (.04) --
----------- ----------- ----------- -----------
Net income per weighted average
common share ............................... $ .25 $ .25 $ .21 $ .25
=========== =========== =========== ===========
Weighted average common shares
outstanding .................................. 38,182,577 39,636,815 40,011,627 40,034,781
=========== =========== =========== ===========
Diluted net income per common share:
Income before extraordinary loss ............. $ .25 $ .25 $ .25 $ .24
Extraordinary loss ........................... -- -- (.04) --
----------- ----------- ----------- -----------
Diluted net income per weighted
average common share ....................... $ .25 $ .25 $ .21 $ .24
=========== =========== =========== ===========
Diluted weighted average common
shares outstanding ......................... 38,767,454 40,178,083 40,533,540 40,533,023
=========== =========== =========== ===========

15. PRO FORMA RESULTS (UNAUDITED)

The following unaudited pro forma operating results of the Company for the
year ended December 31, 1999 have been prepared as if the property acquisitions
made during 1999 had occurred on January 1, 1999. Unaudited pro forma financial
information is presented for informational purposes only and may not be
indicative of what the actual results of operations of the Company would have
been had the events occurred as of January 1, 1999, nor does it purport to
represent the results of operations for future periods (in thousands except per
share data):

Total Revenues .............................................. $ 455,663
=========
Income before preferred dividends and distributions, minority
interests and extraordinary loss ........................... $ 118,319
=========
Net Income available to common shareholders ................. $ 54,712
=========
Net Income per common share ................................. $ 1.36
=========
Net income available to Class B common shareholders ......... $ 14,675
=========
Net Income per Class B common share ......................... $ 2.18
=========

16. SUBSEQUENT EVENT

On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a
540,000 square foot, 35 story, Class A office property, located in New York
City, for a purchase price of approximately $126.5 million. This acquisition was
financed through a $70 million secured debt financing and a draw under the
Credit Facility.

IV-29

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C COLUMN D
- ------------------------------------------------------ ---------------- ------------------------- ----------------------
COST CAPITALIZED,
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------------------- ----------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
- ------------------------------------------------------ ---------------- --------- --------------- ------ ---------------

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................ B $1,940 $ 9,955 -- 10,082
Airport International Plaza, Islip, New York (17
buildings in an industrial park) .................... 2,616 (C) 1,263 13,608 -- 10,895
County Line Industrial Center, Huntington, New
York (3 buildings in an industrial park) ............ B 628 3,686 -- 2,693
32 Windsor Place, Islip, New York .................... B 32 321 -- 46
42 Windsor Place, Islip, New York .................... B 48 327 -- 548
505 Walt Whitman Rd., Huntington, New York ........... B 140 42 -- 59
1170 Northern Blvd., N. Great Neck, New York ......... B 30 99 -- 34
50 Charles Lindbergh Blvd., Mitchel Field, New
York ................................................ 15,479 A 12,089 -- 5,286
200 Broadhollow Road, Melville, New York ............. 6,560 338 3,354 -- 3,057
48 South Service Road, Melville, New York ............ B 1,652 10,245 -- 4,733
395 North Service Road, Melville, New York ........... 20,933 A 15,551 -- 6,852
6800 Jericho Turnpike, Syosset, New York ............. 15,001 582 6,566 -- 8,126
6900 Jericho Turnpike, Syosset, New York ............. 5,279 385 4,228 -- 3,359
300 Motor Parkway, Hauppauge, New York ............... B 276 1,136 -- 1,510
88 Duryea Road, Melville, New York ................... B 200 1,565 -- 690
210 Blydenburgh Road, Islandia, New York ............. B 11 158 -- 156
208 Blydenburgh Road, Islandia, New York ............. B 12 192 -- 147
71 Hoffman Lane, Islandia, New York .................. B 19 260 -- 172
933 Motor Parkway, Hauppauge, New York ............... B 106 375 -- 356
65 and 85 South Service Road Plainview, New York ..... B 40 218 -- 17
333 Earl Ovington Blvd., Mitchel Field, New York
(Omni) .............................................. 56,367 A 67,221 -- 18,521
135 Fell Court Islip, New York ....................... B 462 1,265 -- 52
40 Cragwood Road, South Plainfield, New Jersey ....... B 725 7,131 -- 5,593
110 Marcus Drive, Huntington, New York ............... B 390 1,499 -- 107
333 East Shore Road, Great Neck, New York ............ B A 564 -- 200
310 East Shore Road, Great Neck, New York ............ 2,322 485 2,009 -- 1,458
70 Schmitt Blvd., Farmingdale, New York .............. B 727 3,408 -- 33

COLUMN A COLUMN E COLUMN F COLUMN G
- ------------------------------------------------------ ---------------------------------- -------------- --------------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
----------------------------------
BUILDINGS AND ACCUMULATED DATE OF
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- ------------------------------------------------------ --------- --------------- -------- -------------- --------------

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................ $1,940 20,037 21,977 13,495 1961-1979
Airport International Plaza, Islip, New York (17
buildings in an industrial park) .................... 1,263 24,503 25,766 14,637 1970-1988
County Line Industrial Center, Huntington, New
York (3 buildings in an industrial park) ............ 628 6,379 7,007 4,333 1975-1979
32 Windsor Place, Islip, New York .................... 32 367 399 336 1971
42 Windsor Place, Islip, New York .................... 48 875 923 717 1972
505 Walt Whitman Rd., Huntington, New York ........... 140 101 241 81 1950
1170 Northern Blvd., N. Great Neck, New York ......... 30 133 163 127 1947
50 Charles Lindbergh Blvd., Mitchel Field, New
York ................................................ 0 17,375 17,375 9,110 1984
200 Broadhollow Road, Melville, New York ............. 338 6,411 6,749 3,774 1981
48 South Service Road, Melville, New York ............ 1,652 14,978 16,630 7,277 1986
395 North Service Road, Melville, New York ........... 0 22,403 22,403 11,094 1988
6800 Jericho Turnpike, Syosset, New York ............. 582 14,692 15,274 8,631 1977
6900 Jericho Turnpike, Syosset, New York ............. 385 7,587 7,972 3,699 1982
300 Motor Parkway, Hauppauge, New York ............... 276 2,646 2,922 1,381 1979
88 Duryea Road, Melville, New York ................... 200 2,255 2,455 1,261 1980
210 Blydenburgh Road, Islandia, New York ............. 11 314 325 297 1969
208 Blydenburgh Road, Islandia, New York ............. 12 339 351 337 1969
71 Hoffman Lane, Islandia, New York .................. 19 432 451 414 1970
933 Motor Parkway, Hauppauge, New York ............... 106 731 837 592 1973
65 and 85 South Service Road Plainview, New York ..... 40 235 275 224 1961
333 Earl Ovington Blvd., Mitchel Field, New York
(Omni) .............................................. 0 85,742 85,742 19,681 1990
135 Fell Court Islip, New York ....................... 462 1,317 1,779 330 1965
40 Cragwood Road, South Plainfield, New Jersey ....... 725 12,724 13,449 6,839 1970
110 Marcus Drive, Huntington, New York ............... 390 1,606 1,996 1,190 1980
333 East Shore Road, Great Neck, New York ............ 0 764 764 525 1976
310 East Shore Road, Great Neck, New York ............ 485 3,467 3,952 1,527 1981
70 Schmitt Blvd., Farmingdale, New York .............. 727 3,441 4,168 497 1965

COLUMN A COLUMN H COLUMN I
- ------------------------------------------------------ ------------ --------------
LIFE ON WHICH
DATE DEPRECIATION
DESCRIPTION ACQUIRED IS COMPUTED
- ------------------------------------------------------ ------------ --------------

Vanderbilt Industrial Park, Hauppauge, New York
(27 buildings in an industrial park) ................ 1961-1979 10-30 Years
Airport International Plaza, Islip, New York (17
buildings in an industrial park) .................... 1970-1988 10-30 Years
County Line Industrial Center, Huntington, New
York (3 buildings in an industrial park) ............ 1975-1979 10-30 Years
32 Windsor Place, Islip, New York .................... 1971 10-30 Years
42 Windsor Place, Islip, New York .................... 1972 10-30 Years
505 Walt Whitman Rd., Huntington, New York ........... 1968 10-30 Years
1170 Northern Blvd., N. Great Neck, New York ......... 1962 10-30 Years
50 Charles Lindbergh Blvd., Mitchel Field, New
York ................................................ 1984 10-30 Years
200 Broadhollow Road, Melville, New York ............. 1981 10-30 Years
48 South Service Road, Melville, New York ............ 1986 10-30 Years
395 North Service Road, Melville, New York ........... 1988 10-30 Years
6800 Jericho Turnpike, Syosset, New York ............. 1978 10-30 Years
6900 Jericho Turnpike, Syosset, New York ............. 1982 10-30 Years
300 Motor Parkway, Hauppauge, New York ............... 1979 10-30 Years
88 Duryea Road, Melville, New York ................... 1980 10-30 Years
210 Blydenburgh Road, Islandia, New York ............. 1969 10-30 Years
208 Blydenburgh Road, Islandia, New York ............. 1969 10-30 Years
71 Hoffman Lane, Islandia, New York .................. 1970 10-30 Years
933 Motor Parkway, Hauppauge, New York ............... 1973 10-30 Years
65 and 85 South Service Road Plainview, New York ..... 1961 10-30 Years
333 Earl Ovington Blvd., Mitchel Field, New York
(Omni) .............................................. 1995 10-30 Years
135 Fell Court Islip, New York ....................... 1992 10-30 Years
40 Cragwood Road, South Plainfield, New Jersey ....... 1983 10-30 Years
110 Marcus Drive, Huntington, New York ............... 1980 10-30 Years
333 East Shore Road, Great Neck, New York ............ 1976 10-30 Years
310 East Shore Road, Great Neck, New York ............ 1981 10-30 Years
70 Schmitt Blvd., Farmingdale, New York .............. 1995 10-30 Years

Continued

IV-30

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C COLUMN D
- ------------------------------------------------------- ------------- ------------------------ ----------------------
COST CAPITALIZED,
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------------------ ----------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
- ------------------------------------------------------- ------------- -------- --------------- ------ ---------------

19 Nicholas Drive, Yaphank, New York .................. B 160 7,399 -- 4,731
1516 Motor Parkway, Hauppauge, New York ............... B 603 6,722 -- 127
125 Baylis Road, Melville, New York ................... B 1,601 8,626 -- 1,443
35 Pinelawn Road, Melville, New York .................. B 999 7,073 -- 2,067
520 Broadhollow Road, Melville, New York .............. B 457 5,572 -- 1,574
1660 Walt Whitman Road, Melville, New York ............ B 370 5,072 -- 350
70 Maxess Road, Melville, New York .................... B 367 1,859 95 2,879
85 Nicon Court, Hauppauge, New York ................... B 797 2,818 -- 64
104 Parkway Drive So., Hauppauge, New York ............ B 54 804 -- 136
20 Melville Park Rd., Melville, New York .............. B 391 2,650 -- 202
105 Price Parkway, Hauppauge, New York ................ B 2,030 6,327 -- 469
48 Harbor Park Drive, Hauppauge, New York ............ B 1,304 2,247 -- 89
125 Ricefield Lane, Hauppauge, New York ............... B 13 852 -- 330
110 Ricefield Lane, Hauppauge, New York ............... B 33 1,043 -- 57
120 Ricefield Lane, Hauppauge, New York ............... B 16 1,051 -- 74
135 Ricefield Lane, Hauppauge, New York ............... B 24 906 -- 473
30 Hub Drive, Huntington, New York .................... B 469 1,571 -- 312
60 Charles Lindbergh, Mitchel Field, New York ......... B A 20,800 -- 1,654
155 White Plains Rod., Tarrytown, New York ............ B 1,613 2,542 -- 874
235 Main Street, Tarrytown, New York .................. B 933 5,375 -- 881
245 Main Street, Tarrytown, New York .................. B 1,235 7,284 -- 614
505 White Plains Road, Tarrytown, New York ............ B 210 1,332 -- 209
555 White Plains Road, Tarrytown, New York ............ B 712 4,133 51 4,233
560 White Plains Road, Tarrytown, New York ............ B 1,521 8,756 -- 1,788
580 White Plains Road, Tarrytown, New York ............ 8,172 2,414 14,595 -- 2,203
660 White Plains Road, Tarrytown, New York ............ B 3,929 22,640 45 3,447
Landmark Square, Stamford, Connecticut ................ 47,809 11,603 64,466 769 20,723
110 Bi-County Blvd., Farmingdale, New York ............ 4,221 2,342 6,665 -- 170
RREEF Portfolio, Hauppauge, New York (10
additional buildings in Vanderbuilt Industrial Park) B 930 20,619 -- 2,845
275 Broadhollow Road, Melville, New York .............. B 5,250 11,761 -- 594
One Eagle Rock, East Hanover, New Jersey .............. B 803 7,563 -- 2,099

COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
- ------------------------------------------------------- --------------------------------- -------------- -------------- ----------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
---------------------------------
BUILDINGS AND ACCUMULATED DATE OF DATE
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED
- ------------------------------------------------------- -------- --------------- -------- -------------- -------------- ----------

19 Nicholas Drive, Yaphank, New York .................. 160 12,130 12,290 1,147 1989 1995
1516 Motor Parkway, Hauppauge, New York ............... 603 6,849 7,452 1,012 1981 1995
125 Baylis Road, Melville, New York ................... 1,601 10,069 11,670 1,353 1980 1995
35 Pinelawn Road, Melville, New York .................. 999 9,140 10,139 1,508 1980 1995
520 Broadhollow Road, Melville, New York .............. 457 7,146 7,603 1,461 1978 1995
1660 Walt Whitman Road, Melville, New York ............ 370 5,422 5,792 802 1980 1995
70 Maxess Road, Melville, New York .................... 462 4,738 5,200 585 1967 1995
85 Nicon Court, Hauppauge, New York ................... 797 2,882 3,679 383 1984 1995
104 Parkway Drive So., Hauppauge, New York ............ 54 940 994 124 1985 1996
20 Melville Park Rd., Melville, New York .............. 391 2,852 3,243 316 1965 1996
105 Price Parkway, Hauppauge, New York ................ 2,030 6,796 8,826 871 1969 1996
48 Harbor Park Drive, Hauppauge, New York ............ 1,304 2,336 3,640 299 1976 1996
125 Ricefield Lane, Hauppauge, New York ............... 13 1,182 1,195 229 1973 1996
110 Ricefield Lane, Hauppauge, New York ............... 33 1,100 1,133 150 1980 1996
120 Ricefield Lane, Hauppauge, New York ............... 16 1,125 1,141 125 1983 1996
135 Ricefield Lane, Hauppauge, New York ............... 24 1,379 1,403 284 1981 1996
30 Hub Drive, Huntington, New York .................... 469 1,883 2,352 269 1976 1996
60 Charles Lindbergh, Mitchel Field, New York ......... 0 22,454 22,454 3,041 1989 1996
155 White Plains Rod., Tarrytown, New York ............ 1,613 3,416 5,029 390 1963 1996
235 Main Street, Tarrytown, New York .................. 933 6,256 7,189 868 1974 1996
245 Main Street, Tarrytown, New York .................. 1,235 7,898 9,133 1,163 1983 1996
505 White Plains Road, Tarrytown, New York ............ 210 1,541 1,751 270 1974 1996
555 White Plains Road, Tarrytown, New York ............ 763 8,366 9,129 1,551 1972 1996
560 White Plains Road, Tarrytown, New York ............ 1,521 10,544 12,065 2,155 1980 1996
580 White Plains Road, Tarrytown, New York ............ 2,414 16,798 19,212 2,618 1997 1996
660 White Plains Road, Tarrytown, New York ............ 3,974 26,087 30,061 3,974 1983 1996
Landmark Square, Stamford, Connecticut ................ 12,372 85,189 97,561 8,489 1973-1984 1996
110 Bi-County Blvd., Farmingdale, New York ............ 2,342 6,835 9,177 723 1984 1997
RREEF Portfolio, Hauppauge, New York (10
additional buildings in Vanderbuilt Industrial Park) 930 23,464 24,394 2,358 1974-1982 1997
275 Broadhollow Road, Melville, New York .............. 5,250 12,355 17,605 1,191 1970 1997
One Eagle Rock, East Hanover, New Jersey .............. 803 9,662 10,465 1,077 1986 1997

COLUMN A COLUMN I
- ------------------------------------------------------- --------------
LIFE ON WHICH
DEPRECIATION
DESCRIPTION IS COMPUTED
- ------------------------------------------------------- --------------

19 Nicholas Drive, Yaphank, New York .................. 10-30 Years
1516 Motor Parkway, Hauppauge, New York ............... 10-30 Years
125 Baylis Road, Melville, New York ................... 10-30 Years
35 Pinelawn Road, Melville, New York .................. 10-30 Years
520 Broadhollow Road, Melville, New York .............. 10-30 Years
1660 Walt Whitman Road, Melville, New York ............ 10-30 Years
70 Maxess Road, Melville, New York .................... 10-30 Years
85 Nicon Court, Hauppauge, New York ................... 10-30 Years
104 Parkway Drive So., Hauppauge, New York ............ 10-30 Years
20 Melville Park Rd., Melville, New York .............. 10-30 Years
105 Price Parkway, Hauppauge, New York ................ 10-30 Years
48 Harbor Park Drive, Hauppauge, New York ............ 10-30 Years
125 Ricefield Lane, Hauppauge, New York ............... 10-30 Years
110 Ricefield Lane, Hauppauge, New York ............... 10-30 Years
120 Ricefield Lane, Hauppauge, New York ............... 10-30 Years
135 Ricefield Lane, Hauppauge, New York ............... 10-30 Years
30 Hub Drive, Huntington, New York .................... 10-30 Years
60 Charles Lindbergh, Mitchel Field, New York ......... 10-30 Years
155 White Plains Rod., Tarrytown, New York ............ 10-30 Years
235 Main Street, Tarrytown, New York .................. 10-30 Years
245 Main Street, Tarrytown, New York .................. 10-30 Years
505 White Plains Road, Tarrytown, New York ............ 10-30 Years
555 White Plains Road, Tarrytown, New York ............ 10-30 Years
560 White Plains Road, Tarrytown, New York ............ 10-30 Years
580 White Plains Road, Tarrytown, New York ............ 10-30 Years
660 White Plains Road, Tarrytown, New York ............ 10-30 Years
Landmark Square, Stamford, Connecticut ................ 10-30 Years
110 Bi-County Blvd., Farmingdale, New York ............ 10-30 Years
RREEF Portfolio, Hauppauge, New York (10
additional buildings in Vanderbuilt Industrial Park) 10-30 Years
275 Broadhollow Road, Melville, New York .............. 10-30 Years
One Eagle Rock, East Hanover, New Jersey .............. 10-30 Years

Continued

IV-31

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C COLUMN D
- --------------------------------------------- ------------- ------------------------ ----------------------
COST CAPITALIZED,
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------------------ ----------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
- --------------------------------------------- ------------- -------- --------------- ------ ---------------

710 Bridgeport Avenue, Shelton, Connecticut . B 5,405 21,620 7 623
101 JFK Expressway, Short Hills, New Jersey . B 7,745 43,889 -- 1,134
10 Rooney Circle, West Orange, New Jersey ... B 1,302 4,615 1 421
Executive Hill Office Park, West Orange, New
Jersey ..................................... B 7,629 31,288 4 1,073
3 University Plaza, Hackensack, New Jersey .. B 7,894 11,846 --- 1,068
400 Garden City Plaza, Garden City, New York B 13,986 10,127 --- 1,275
425 Rabro Drive, Hauppauge, New York ........ B 665 3,489 --- 71
One Paragon Drive, Montvale, New Jersey ..... B 2,773 9,901 --- 533
90 Merrick Avenue, East Meadow, New York .... B A 19,193 --- 3,350
150 Motor Parkway, Hauppauge, New York ...... B 1,114 20,430 --- 2,588
390 Motor Parkway, Hauppauge, New York ...... B 240 4,459 -- 249
Reckson Executive Park, Ryebrook, New York .. B 18,343 55,028 -- 1,299
120 White Plains Road, Tarrytown, New York .. B 3,355 24,605 -- 182
University Square, Princeton, New Jersey .... B 3,288 8,888 -- 111
100 Andrews Road Hicksville, New York ....... B 2,337 1,711 155 5,707
2 Macy Road, Harrison, New York ............. B 642 2,131 -- 47
80 Grasslands, Elmsford, New York ........... B 1,208 6,728 -- 242
65 Marcus Drive, Melville, New York ......... B 295 1,966 57 885
400 Cabot Drive, Hamilton, New Jersey ....... B 2,068 18,614 -- 71
51 JFK Parkway, Short Hills, New York ....... B 8,732 58,437 -- 874
Triad V -- 1979 Marcus Ave. Lake Success, New
York ....................................... B 3,528 31,786 -- 5,897
100 Forge Way, Rockaway, New Jersey ......... B 315 902 -- 89
200 Forge Way, Rockaway, New Jersey ......... B 1,128 3,228 -- 178
300 Forge Way, Rockaway, New Jersey ......... B 376 1,075 -- 254
400 Forge Way, Rockaway, New Jersey ......... B 1,142 3,267 -- 179
51-55 Charles Lindergh Blvd., Uniondale, New
York ....................................... B A 27,975 -- 4,174
155 Passaic Avenue, Fairfield, New Jersey ... B 3 3,538 -- 1,418
100 Summit Drive Vahalla, New York .......... 22,614 3,007 41,351 -- 2,769

COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
- --------------------------------------------- --------------------------------- -------------- -------------- ----------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
---------------------------------
BUILDINGS AND ACCUMULATED DATE OF DATE
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED
- --------------------------------------------- -------- --------------- -------- -------------- -------------- ----------

710 Bridgeport Avenue, Shelton, Connecticut . 5,412 22,243 27,655 2,091 1971-1979 1997
101 JFK Expressway, Short Hills, New Jersey . 7,745 45,023 52,768 3,970 1981 1997
10 Rooney Circle, West Orange, New Jersey ... 1,303 5,036 6,339 505 1971 1997
Executive Hill Office Park, West Orange, New
Jersey ..................................... 7,633 32,361 39,994 2,782 1978-1984 1997
3 University Plaza, Hackensack, New Jersey .. 7,894 12,914 20,808 1,157 1985 1997
400 Garden City Plaza, Garden City, New York 13,986 11,402 25,388 938 1989 1997
425 Rabro Drive, Hauppauge, New York ........ 665 3,560 4,225 305 1980 1997
One Paragon Drive, Montvale, New Jersey ..... 2,773 10,434 13,207 870 1980 1997
90 Merrick Avenue, East Meadow, New York .... 0 22,543 22,543 1,817 1985 1997
150 Motor Parkway, Hauppauge, New York ...... 1,114 23,018 24,132 1,999 1984 1997
390 Motor Parkway, Hauppauge, New York ...... 240 4,708 4,948 386 1980 1997
Reckson Executive Park, Ryebrook, New York .. 18,343 56,327 74,670 4,140 1983-1986 1997
120 White Plains Road, Tarrytown, New York .. 3,355 24,787 28,142 1,717 1984 1997
University Square, Princeton, New Jersey .... 3,288 8,999 12,287 625 1987 1997
100 Andrews Road Hicksville, New York ....... 2,492 7,418 9,910 826 1954 1996
2 Macy Road, Harrison, New York ............. 642 2,178 2,820 158 1962 1997
80 Grasslands, Elmsford, New York ........... 1,208 6,970 8,178 516 1989/1964 1997
65 Marcus Drive, Melville, New York ......... 352 2,851 3,203 310 1968 1996
400 Cabot Drive, Hamilton, New Jersey ....... 2,068 18,685 20,753 1,255 1989 1998
51 JFK Parkway, Short Hills, New York ....... 8,732 59,311 68,043 3,643 1988 1998
Triad V -- 1979 Marcus Ave. Lake Success, New
York ....................................... 3,528 37,683 41,211 2,669 1987 1998
100 Forge Way, Rockaway, New Jersey ......... 315 991 1,306 67 1986 1998
200 Forge Way, Rockaway, New Jersey ......... 1,128 3,406 4,534 227 1989 1998
300 Forge Way, Rockaway, New Jersey ......... 376 1,329 1,705 101 1989 1998
400 Forge Way, Rockaway, New Jersey ......... 1,142 3,446 4,588 230 1989 1998
51-55 Charles Lindergh Blvd., Uniondale, New
York ....................................... 0 32,149 32,149 3,232 1981 1998
155 Passaic Avenue, Fairfield, New Jersey ... 3 4,956 4,959 296 1984 1998
100 Summit Drive Vahalla, New York .......... 3,007 44,120 47,127 2,614 1988 1998

COLUMN A COLUMN I
- --------------------------------------------- --------------
LIFE ON WHICH
DEPRECIATION
DESCRIPTION IS COMPUTED
- --------------------------------------------- --------------

710 Bridgeport Avenue, Shelton, Connecticut.. 10-30 Years
101 JFK Expressway, Short Hills, New Jersey... 10-30 Years
10 Rooney Circle, West Orange, New Jersey .... 10-30 Years
Executive Hill Office Park, West Orange, New
Jersey ..................................... 10-30 Years
3 University Plaza, Hackensack, New Jersey .. 10-30 Years
400 Garden City Plaza, Garden City, New York 10-30 Years
425 Rabro Drive, Hauppauge, New York ........ 10-30 Years
One Paragon Drive, Montvale, New Jersey ..... 10-30 Years
90 Merrick Avenue, East Meadow, New York .... 10-30 Years
150 Motor Parkway, Hauppauge, New York ...... 10-30 Years
390 Motor Parkway, Hauppauge, New York ...... 10-30 Years
Reckson Executive Park, Ryebrook, New York .. 10-30 Years
120 White Plains Road, Tarrytown, New York .. 10-30 Years
University Square, Princeton, New Jersey .... 10-30 Years
100 Andrews Road Hicksville, New York ....... 10-30 Years
2 Macy Road, Harrison, New York ............. 10-30 Years
80 Grasslands, Elmsford, New York ........... 10-30 Years
65 Marcus Drive, Melville, New York ......... 10-30 Years
400 Cabot Drive, Hamilton, New Jersey ....... 10-30 Years
51 JFK Parkway, Short Hills, New York ....... 10-30 Years
Triad V -- 1979 Marcus Ave. Lake Success, New
York ....................................... 10-30 Years
100 Forge Way, Rockaway, New Jersey ......... 10-30 Years
200 Forge Way, Rockaway, New Jersey ......... 10-30 Years
300 Forge Way, Rockaway, New Jersey ......... 10-30 Years
400 Forge Way, Rockaway, New Jersey ......... 10-30 Years
51-55 Charles Lindergh Blvd., Uniondale, New
York ....................................... 10-30 Years
155 Passaic Avenue, Fairfield, New Jersey ... 10-30 Years
100 Summit Drive Vahalla, New York .......... 10-30 Years

Continued

IV-32

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C COLUMN D
- -------------------------------------------------- ------------- --------------------------- -------------------------
COST CAPITALIZED,
SUBSEQUENT TO
INITIAL COST ACQUISITION
--------------------------- -------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
- -------------------------------------------------- ------------- ----------- --------------- --------- ---------------

115/117 Stevens Avenue, Valhalla, New York ....... B 1,094 22,490 -- 628
200 Summit Lake Drive, Valhalla, New York ........ 20,463 4,343 37,305 -- 541
140 Grand Street., Valhalla, New York ............ B 1,932 18,744 -- 153
500 Summit Lake Drive, Valhalla, New York ........ B 7,052 37,309 -- 7,547
5 Henderson Drive, West Caldwell, New Jersey ..... B 2,450 6,984 4 690
Stamford Towers, Stamford, Connecticut ........... B 13,557 47,916 -- 3,377
99 Cherry Hill Road, Parsippany, New Jersey ...... B 2,360 7,508 -- 339
119 Cherry Hill Road, Parsipanny, New Jersey ..... B 2,512 7,622 -- 577
120 Wilbur Place, Bohemia, New York .............. B 202 1,154 8 114
45 Melville Park Road, Melville, New York ........ B 355 1,487 -- 1,813
500 Saw Mill River Road, Elmsford, New York ...... B 1,542 3,796 -- 178
2004 Orville Drive, No. Bohemia, New York ........ B 633 4,226 -- 1,407
2005 Orville Drive North Bohemia, New York ....... B 984 5,410 -- 489
120 W. 45th Street New York, New York ............ 66,933 28,757 162,809 -- 338
4 Appelgate Drive Robbinsville, New Jersey ....... B 544 7,623 -- 1,503
1305 Walt Whitman Road Melville, New York ........ B 2,885 15,029 -- 3,448
600 Old Willets Path Hauppauge, New York ......... B 295 3,521 -- 723
1255 Broad Street Clifton, New Jersey ............ B 1,329 15,869 -- 2,806
810 Seventh Avenue New York, New York ............ 86,822 26,984 152,767 -- 2,036
120 Mineola Blvd. Mineola, New York .............. B 1,869 10,603 -- 41
100 Wall Street, New York, New York .............. 37,623 11,749 66,517 -- 1,020
One Orlando, Orlando, Florida .................... 39,960 9,386 51,136 -- 0
Land held for development ........................ B 60,894 --- -- 0
Developments in progress ......................... --- --- 68,690 -- --
Other property ................................... B --- --- -- 5,482
------ ------ ------- -- -----
Total ............................................ $459,174 $335,902 $1,656,797 $1,196 214,504
======== ======== ========== ====== =======

COLUMN A COLUMN E COLUMN F COLUMN G
- -------------------------------------------------- ---------------------------------------- -------------- --------------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
----------------------------------------
BUILDINGS AND ACCUMULATED DATE OF
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------------------------------------------- ----------- --------------- ------------ -------------- --------------

115/117 Stevens Avenue, Valhalla, New York ....... 1,094 23,118 24,212 1,309 1984
200 Summit Lake Drive, Valhalla, New York ........ 4,343 37,846 42,189 2,133 1990
140 Grand Street., Valhalla, New York ............ 1,932 18,897 20,829 1,059 1991
500 Summit Lake Drive, Valhalla, New York ........ 7,052 44,856 51,908 1,779 1986
5 Henderson Drive, West Caldwell, New Jersey ..... 2,454 7,674 10,128 363 1967
Stamford Towers, Stamford, Connecticut ........... 13,557 51,293 64,850 2,686 1989
99 Cherry Hill Road, Parsippany, New Jersey ...... 2,360 7,847 10,207 375 1982
119 Cherry Hill Road, Parsipanny, New Jersey ..... 2,512 8,199 10,711 385 1982
120 Wilbur Place, Bohemia, New York .............. 210 1,268 1,478 64 1972
45 Melville Park Road, Melville, New York ........ 355 3,300 3,655 229 1998
500 Saw Mill River Road, Elmsford, New York ...... 1,542 3,974 5,516 264 1968
2004 Orville Drive, No. Bohemia, New York ........ 633 5,633 6,266 522 1998
2005 Orville Drive North Bohemia, New York ....... 984 5,899 6,883 58 1999
120 W. 45th Street New York, New York ............ 28,757 163,147 191,904 3,603 1998
4 Appelgate Drive Robbinsville, New Jersey ....... 544 9,126 9,670 300 1999
1305 Walt Whitman Road Melville, New York ........ 2,885 18,477 21,362 579 1999
600 Old Willets Path Hauppauge, New York ......... 295 4,244 4,539 143 1999
1255 Broad Street Clifton, New Jersey ............ 1,329 18,675 20,004 175 1999
810 Seventh Avenue New York, New York ............ 26,984 154,803 181,787 3,398 1970
120 Mineola Blvd. Mineola, New York .............. 1,869 10,644 12,513 234 1977
100 Wall Street, New York, New York .............. 11,749 67,537 79,286 1,477 1969
One Orlando, Orlando, Florida .................... 9,386 51,136 60,522 702 1987
Land held for development ........................ 60,894 0 60,894 0 N/A
Developments in progress ......................... -- 68,690 68,690 0
Other property ................................... -- 5,482 5,482 637
------ ------- ------- -----
Total ............................................ $337,098 1,871,301 2,208,399 215,112
======== ========= ========= =======

COLUMN A COLUMN H COLUMN I
- -------------------------------------------------- ---------- --------------
LIFE ON WHICH
DATE DEPRECIATION
DESCRIPTION ACQUIRED IS COMPUTED
- -------------------------------------------------- ---------- --------------

115/117 Stevens Avenue, Valhalla, New York ....... 1998 10-30 Years
200 Summit Lake Drive, Valhalla, New York ........ 1998 10-30 Years
140 Grand Street., Valhalla, New York ............ 1998 10-30 Years
500 Summit Lake Drive, Valhalla, New York ........ 1998 10-30 Years
5 Henderson Drive, West Caldwell, New Jersey ..... 1998 10-30 Years
Stamford Towers, Stamford, Connecticut ........... 1998 10-30 Years
99 Cherry Hill Road, Parsippany, New Jersey ...... 1998 10-30 Years
119 Cherry Hill Road, Parsipanny, New Jersey ..... 1998 10-30 Years
120 Wilbur Place, Bohemia, New York .............. 1998 10-30 Years
45 Melville Park Road, Melville, New York ........ 1998 10-30 Years
500 Saw Mill River Road, Elmsford, New York ...... 1998 10-30 Years
2004 Orville Drive, No. Bohemia, New York ........ 1998 10-30 Years
2005 Orville Drive North Bohemia, New York ....... 1999 10-30 Years
120 W. 45th Street New York, New York ............ 1999 10-30 Years
4 Appelgate Drive Robbinsville, New Jersey ....... 1999 10-30 Years
1305 Walt Whitman Road Melville, New York ........ 1999 10-30 Years
600 Old Willets Path Hauppauge, New York ......... 1999 10-30 Years
1255 Broad Street Clifton, New Jersey ............ 1999 10-30 Years
810 Seventh Avenue New York, New York ............ 1999 10-30 Years
120 Mineola Blvd. Mineola, New York .............. 1999 10-30 Years
100 Wall Street, New York, New York .............. 1999 10-30 Years
One Orlando, Orlando, Florida .................... 1999 10-30 Years
Land held for development ........................ Various N/A
Developments in progress .........................
Other property ...................................
Total ............................................

- --------------

A These land parcels are leased (see Note 4).
B There are no encumbrances on these properties.
C The Encumbrance of $2,616 is related to one property.
The aggregate cost for Federal Income Tax purposes was approximately $1,728
million at December 31, 1999.

IV-33

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
(IN THOUSANDS)

The changes in real estate for each of the periods in the three years ended
December 31, 1999 are as follows:

1999 1998 1997
------------- ------------- --------------

Real estate balance at beginning
of period ....................... $1,737,133 $1,011,228 $ 516,768
Improvements ..................... 57,571 134,582 37,778
Disposal, including write-off of
fully depreciated building
improvements .................... (317,864) -- (154)
Acquisitions ..................... 731,559 591,323 456,836
---------- ---------- ----------
Balance at end of period ......... $2,208,399 $1,737,133 $1,011,228
========== ========== ==========

The changes in accumulated depreciation, exclusive of amounts relating to
equipment, autos, furniture and fixtures, for each of the periods in the three
years ended December 31, 1999 are as follows:

1999 1998 1997
----------- ----------- ------------

Balance at beginning of period ...... $156,231 $108,652 $ 86,344
Depreciation for period ............. 65,471 47,579 22,442
Disposal, including write-off of
fully depreciated building
improvements ....................... (6,590) -- (134)
-------- -------- --------
Balance at end of period ............ $215,112 $156,231 $108,652
======== ======== ========

IV-34

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- --------- ----------- --------------------------------------------------------------------------------

3.1 a Amended and Restated Articles of Incorporation
3.2 Amended and Restated By-Laws of Registrant
3.3 h Articles Supplementary of the Registrant Establishing and Fixing the Rights and
Preferences of a Series of Shares of Preferred Stock filed with the Maryland
State Department of Assessments and Taxation on April 9, 1998
3.4 Articles Supplementary of the Registrant Establishing and Fixing the Rights and
Preferences of a Class of Shares of Common Stock filed with the Maryland State
Department of Assessments and Taxation on May 24, 1999.
3.5 k Articles Supplementary of the Registrant Establishing and Fixing the Rights and
Preferences of a Series of Shares of Preferred Stock filed with the Maryland
State Department of Assessments and Taxation on May 28, 1999
3.6 Articles of Amendment of the Registrant filed with the Maryland State
Department of Assessments and Taxation on January 4, 2000.
3.7 Articles Supplementary of the Registrant filed with the Maryland State
Department of Assessments and Taxation on January 11, 2000.
4.1 b Specimen Share Certificate of Common Stock
4.2 h Specimen Share Certificate of Series A Preferred Stock
4.3 j Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P.
4.4 j Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P.
4.5 j Indenture, dated March 26, 1999, among Reckson Operating Partnership, L.P.,
the Company, and The Bank of New York, as trustee
10.1 a Amended and Restated Agreement of Limited Partnership of Reckson
Operating Partnership, L.P.
10.2 h Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series A Preferred Units of
Limited Partnership Interest
10.3 h Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series B Preferred Units of
Limited Partnership Interest
10.4 h Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series C Preferred Units of
Limited Partnership Interest
10.5 h Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series D Preferred Units of
Limited Partnership Interest
10.6 Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series B Common Units of
Limited Partnership Interest
10.7 Supplement to the Amended and Restated Agreement of Limited Partnership
of Reckson Operating Partnership, L.P. Establishing Series E Preferred
Partnership Units of Limited Partnership Interest
10.8 f Third Amended and Restated Agreement of Limited Partnership of Omni
Partners, L.P.
10.9 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and Donald Rechler
10.10 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and Scott Rechler

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- ---------- ----------- ------------------------------------------------------------------------------

10.11 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and Mitchell Rechler
10.12 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and Gregg Rechler
10.13 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and Roger Rechler
10.14 i Amendment and Restatement of Employment and Non-Competition
Agreement between Registrant and J. Michael Maturo
10.15 a Purchase Option Agreements relating to the Reckson Option Properties
10.16 a Purchase Option Agreements relating to the Other Option Properties
10.17 c Amended 1995 Stock Option Plan
10.18 c 1996 Employee Stock Option Plan
10.19 b Ground Leases for certain of the properties
10.20 i Third Amended and Restated Agreement of Limited Partnership of Reckson FS
Limited Partnership
10.21 a Indemnity Agreement relating to 100 Oser Avenue
10.22 f Amended and Restated 1997 Stock Option Plan
10.23 f 1998 Stock Option Plan
10.24 f Note Purchase Agreement for the Senior Unsecured Notes
10.25 i Amended and Restated Severance Agreement between Registrant and Donald
Rechler
10.26 i Amended and Restated Severance Agreement between Registrant and Scott
Rechler
10.27 i Amended and Restated Severance Agreement between Registrant and Mitchell
Rechler
10.28 i Amended and Restated Severance Agreement between Registrant and Gregg
Rechler
10.29 i Amended and Restated Severance Agreement between Registrant and Roger
Rechler
10.30 i Amended and Restated Severance Agreement between Registrant and J.
Michael Maturo
10.31 d $500 million Credit Agreement dated July 23, 1998 among Reckson Operating
Partnership, L.P. and Reckson Morris Operating Partnership, L.P. and the
Chase Manhattan Bank, UBS AG and PNC Bank and other lenders party
thereto
10.32 g Agreement and Plan of Merger by and among Tower Realty Trust, Inc.,
Reckson Associates Realty Corp., Reckson Operating Partnership, L.P. and
Metropolitan Partners LLC, dated December 8, 1998
10.33 g Stock Purchase Agreement by and between Tower Realty Trust, Inc. and
Metropolitan Partners LLC, dated December 8, 1998
10.34 g Amended and Restated Operating Agreement of Metropolitan Partners LLC,
dated December 8, 1998
10.35 i Intercompany Agreement by and between Reckson Operating Partnership, L.P.
and Reckson Service Industries, Inc., dated May 13, 1998
10.36 Amended and Restated Credit Agreement dated as of August 4, 1999 between
Reckson Service Industries, Inc., as borrower and Reckson Operating
Partnership, L.P., as Lender relating to Reckson Strategic Venture Partners,
LLC ("RSVP Credit Agreement")
10.37 Amended and Restated Credit Agreement dated as of August 4, 1999 between
Reckson Service Industries, Inc., as borrower and Reckson Operating
Partnership, L.P., as Lender relating to the operations of Reckson Service
Industries, Inc. ("RSI Credit Agreement")

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- ---------- ----------- -----------------------------------------------------------------------------------

10.38 Letter Agreement, dated November 30, 1999, amending the RSVP Credit
Agreement and the RSI Credit Agreement
10.39 j Terms Agreement, dated March 23, 1999, between Reckson Operating
Partnership, L.P. and Goldman, Sachs & Co., on behalf of itself and the other
named underwriters
10.40 k $130 million Credit Agreement dated as of May 24, 1999 among Metropolitan
Operating Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford
Branch
10.41 k Guaranty Agreement dated as of May 24, 1999 among Metropolitan Operating
Partnership, L.P., Warburg Dillon Read and UBS AG, Stamford Branch
10.42 k Purchase Agreement dated as of May 27, 1999 among Stichting Pensioenfonds
ABP, The Travelers Insurance Company, The Travelers Life and Annuity
Company, The Standard Fire Insurance Company, Travelers Casualty and
Surety Company, Reckson Associates Realty Corp. and Reckson Operating
Partnership, L.P. relating to 6,000,000 shares of Series B Convertible Cumulative
Preferred Stock
10.43 k Registration Rights Agreement among Stichting Pensioenfonds ABP, The
Travelers Insurance Company, The Travelers Life and Annuity Company, The
Standard Fire Insurance Company, Travelers Casualty and Surety Company and
Reckson Associates Realty Corp. relating to 6,000,000 shares of Series B
Convertible Cumulative Preferred Stock
10.44 l Consolidated, Amended and Restated Fee and Leasehold Mortgage Note
relating to 919 Third Avenue
10.45 o Agreement of Purchase and Sale, between NBBRE 919 Third Avenue
Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as
Purchaser
10.46 l Side Letter to Agreement of Purchase and Sale, between NBBRE 919 Third
Avenue Associates, L.P., as Seller, and Reckson Operating Partnership, L.P., as
Purchaser
10.47 m Contribution and Exchange Agreement by and between Reckson Morris
Industrial Trust, Reckson Morris Industrial Interim GP, LLC, Reckson
Operating Partnership, L.P., Robert Morris, Joseph D. Morris, Ronald Schram,
Mark M. Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith
Morris Trust, Joseph D. Morris Family Limited Partnership and Robert Morris
Family Limited Partnership, and American Real Estate Investment L.P. and
American Real Estate Corporation
10.48 n Agreement of Purchase and Sale by and among Black Canyon Loop Company
LLC, Metropolitan Operating Partnership, L.P. and Safeway Inc.
10.49 n Purchase and Sale Agreement by and between Corporate Center Associates
Limited Partnership and Transwestern Investment Company, L.L.C.
10.50 n Purchase and Sale Agreement by and between East Broadway 5151 Limited
Partnership, Metropolitan Operating Partnership, L.P., 5750 Associates Limited
Partnership, Maitland Associates, Ltd. and Maitland West Associates Limited
Partnership and Praedium Performance Fund IV, L.P.
10.51 n Purchase and Sale Agreement by and between Metropolitan Operating
Partnership, L.P. and HUB Properties Trust
10.52 o Contract and Sale Agreement between 54-55 Street Company and Reckson
Operating Partnership, L.P.
10.53 p 1999 $75 million Second Amended and Restated Credit Facility Agreement
dated as of December 17, 1999
10.54 p 1999 Second Amended and Restated Guaranty Agreement dated as of
December 17, 1999

EXHIBIT FILING
NUMBER REFERENCE DESCRIPTION
- -------- ----------- ---------------------------------------------------------

12.1 Statement of Ratios of Earnings to Fixed Charges
21.1 Statement of Subsidiaries
23.0 Consent of Independent Auditors
24.1 Power of Attorney (included in Part IV of the Form 10-K)
27.0 Financial Data Schedule

- ----------
(a) Previously filed as an exhibit to Registration Statement Form S-11 (No.
333-1280) and incorporated herein by reference.

(b) Previously filed as an exhibit to Registration Statement Form S-11 (No.
33-84324) and incorporated herein by reference.

(c) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on November 25, 1996 and incorporated herein by reference.

(d) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on August 14, 1998 and incorporated herein by reference.

(e) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on February 5, 1999 and incorporated herein by reference.

(f) Previously filed as an exhibit to the Company's Form 10-K filed with the
SEC on March 26, 1998 and incorporated herein by reference.

(g) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on December 22, 1998 and incorporated herein by reference.

(h) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on March 1, 1999 and incorporated herein by reference.

(i) Previously filed as an exhibit to the Company's Form 10-K filed with the
SEC on March 16, 1999 and incorporated herein by reference.

(j) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
March 26, 1999 and incorporated herein by reference.

(k) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
June 7, 1999 and incorporated herein by reference.

(l) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
June 25, 1999 and incorporated herein by reference.

(m) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
August 25, 1999 and incorporated herein by reference.

(n) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
October 25, 1999 and incorporated herein by reference.

(o) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
January 14, 2000 and incorporated herein by reference.

(p) Previously filed as an exhibit to the Company's Form 8-K filed with SEC on
February 8, 2000 and incorporated herein by reference.