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, 2000

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
(Address of principal 11747
executive offices) (Zip Code)

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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Class A common stock, $.01 par value New York Stock Exchange
Class B common stock, $.01 par value New York Stock Exchange

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Securities registered pursuant to Section 12(g) of the Act: None

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 Class A common stock and Class
B common stock held by non-affiliates was approximately $1,197.1 million based
on the closing prices on the New York Stock Exchange for such shares on March
20, 2001.

The Company has two class' of common stock, issued at $.01 par value per
share with 45,812,864 and 10,283,513 shares of Class A common stock and Class B
common stock outstanding, respectively as of March 23, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Shareholder's
Meeting to be held May 24, 2001 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-7
3. Legal Proceedings ........................................................... I-18
4. Submission of Matters to a Vote of Security Holders ......................... I-18
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters ....... II-1
6. Selected Financial Data ..................................................... II-2
Management's Discussion and Analysis of Financial Condition and Results of
7. Operations .................................................................. II-3
7 a. Quantitative and Qualitative Disclosures about Market Risk .................. II-12
8. Financial Statements and Supplementary Data ................................. II-12
Changes in and Disagreements with Accountants on Accounting and Financial
9. 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 suburban and
commercial business district ("CBD") 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, 2000, the Company owned 188 properties (the "Properties")
(including 10 joint venture properties) in the Tri-State Area encompassing
approximately 21.3 million rentable square feet, all of which are managed by the
Company. The Properties consist of 65 Class A office properties (the "Suburban
Office Properties") encompassing approximately 9.1 million rentable square feet,
17 Class A CBD Office Properties) encompassing approximately 5.3 million
rentable square feet (together, the "Office Properties"), 104 industrial
properties (the "Industrial Properties") encompassing approximately 6.8 million
rentable 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, 2000, the Company had approximately $6.4 million
invested in certain mortgage indebtedness encumbering approximately 101 acres of
land, approximately $17 million 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 and $36.5 million under three
notes which are secured by a minority partner's preferred unit interest in the
Operating Partnership (the "Note Receivable Investments"). As of December 31,
2000, the Company is in the process of developing a 315,000 square foot office
building and also owned approximately 290 acres of land in 13 separate parcels
on which the Company can develop approximately 1.4 million square feet of office
space and approximately 224,000 square feet of industrial space.

During 1999 and 2000, the Company made investments in REIT-qualified 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 FrontLine Capital Group
("FrontLine"). The Company has committed up to $100 million for investments in
the form of either (i) RSVP-controlled (REIT-qualified) joint ventures or (ii)
loans to FrontLine for FrontLine's investment in RSVP. As of December 31, 2000,
the Company has invested approximately $41.1 million in RSVP -- controlled
(REIT-qualified) joint ventures. In March 2001, the Company increased the RSVP
Commitment to $110 million and advanced approximately $24 million under the
RSVP Commitment to fund additional RSVP-controlled (REIT-qualified) joint
ventures.

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 Suburban Office
Properties are located in ten planned office parks. The Office Properties are
tenanted by a diverse industry group of national firms which include consumer
products, telecommunication, health care, insurance, financial services 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.

I-1

All of the Company's interests in the Properties, the Note Receivable
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, 2000, owned approximately 88% of the Operating Partnership's
outstanding common units of limited partnership ("OP Units") and Class B common
units of limited partnership interest.

The Company seeks to maintain cash reserves for normal repairs,
replacements, improvements, working capital and other contingencies. The
Company has established an unsecured credit facility (the "Credit Facility")
with a maximum borrowing amount of $575 million scheduled to mature on
September 7, 2003. The Credit Facility requires the Company to comply with a
number of financial and other covenants on an ongoing basis.

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.

In order to protect the Company's ability to qualify as a REIT, ownership
of its common stock by any single stockholder is limited to 9%, subject to
certain exceptions.

The Company's principal 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, 2000, the Company had approximately 317
employees.

RECENT DEVELOPMENTS

Acquisition Activity.

Set forth below is a brief description of the Company's major acquisition
activity during 2000.

On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a
540,000 square foot, 35 story, CBD 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.

On August 15, 2000, the Company acquired 538 Broadhollow Road, a 180,000
square foot Suburban Office Property located in Melville, New York for a
purchase price of approximately $25.6 million. This acquisition was financed,
in part, through a borrowing under the Credit Facility.

In addition, as of December 31, 2000, the Company has invested
approximately $6.4 million in certain mortgage indebtedness encumbering
approximately 101 acres of land. The Company has also loaned approximately $17
million to its minority partner in Omni, its 575,000 square foot flagship Long
Island Suburban Office Property, and effectively increased its economic
interest in the property owning partnership.

On August 9, 1999, the Company executed a contract for the sale, which
took place in three stages, of its interest in Reckson Morris Operating
Partnership, L. P. ("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"). 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 sales price of $310 million ($52 million of
which is attributable to the Morris Companies and its affiliates in the form of
$41.6 million of preferred units of KTR's operating partnership and $10.4
million of debt relief) consisted of (i) approximately $159.7 million in cash,
(ii) $41.5 million in convertible preferred and common stock of KTR, (iii)
$61.6 million in preferred units of KTR's operating partnership, (iv)
approximately $37.1 million of debt relief and (v) approximately $10.1 million
in purchase money mortgage notes secured by certain land that is being sold to
Matrix.

As of December 31, 2000, the Matrix Sale and the sale of the Company's
interest in RMI was completed. As a result, the Company realized a gain of
approximately $16.7 million. Such gain has been included in gain on
dispositions of real estate on the Company's consolidated statements of income.
Cash proceeds from the sales were used primarily to repay borrowings under the
Company's Credit Facility.

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In addition, the Company redeemed approximately $20 million of the preferred
stock of KTR and received principal repayments of approximately $7.2 million
related to the purchase money mortgage notes, all of which was used primarily
for general operating expenditures.

Leasing Activity

During the year ended December 31, 2000, the Company leased approximately
800,000 square feet at the CBD 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 $32.80 per square foot,
approximately 1.9 million square feet at the Suburban Office Properties at an
average effective rent of $22.90 per square foot and approximately 1.3 million
square feet at the Industrial Properties at an average effective rent of $7.29
per square foot. Included in this leasing data is 753,701 square feet at the
Long Island Suburban Office Properties at an average effective rent of $24.07;
590,022 square feet at the Westchester Suburban Office Properties at an average
effective rent of $23.01; 319,174 square feet at the Westchester CBD Office
Properties at an average effective rent of $23.77; 149,301 square feet at the
Connecticut CBD Office Properties at an average effective rent of $26.25;
548,878 square feet at the New Jersey Suburban Office Properties at an average
effective rent of $21.19 and 331,442 square feet at the New York City CBD
Office Properties at an average effective rent of $44.44. Also included in this
leasing data is 1,222,932 square feet at the Long Island Industrial Properties
at an average effective rent of $6.88; 48,568 square feet at the Westchester
Industries Properties at an average effective rent of $17.26 and 16,150 square
feet at the New Jersey Industrial Properties at an average effective rent of
$8.96.

Financing Activities

On September 7, 2000, the Company obtained its three year $575 million
unsecured revolving Credit Facility from The Chase Manhattan Bank, as
administrative agent, UBS Warburg LLC as syndication agent and Deutsche Bank as
documentation agent. The Credit Facility matures in September, 2003 and
borrowings under the Credit Facility are currently priced off of LIBOR plus 105
basis points.

The Credit Facility replaced the Company's existing $500 million unsecured
credit facility (together with the Credit Facility, the "Credit Facility") and
$75 million term loan. As a result, certain deferred loan costs incurred in
connection with such unsecured credit facility and term loan were written off.
Such amount is reflected as an extraordinary loss in the Company's consolidated
statements of income.

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At December 31, 2000, the Company had availability under the
Credit Facility to borrow an additional $358.4 million (of which, $51.3 million
has been allocated for outstanding undrawn letters of credit).

Other Financing Activities

On January 13, 2000, in connection with the acquisition of 1350 Avenue of
the Americas, the Company obtained a secured $70 million first mortgage
commitment which matures in August 2001 and bears interest at LIBOR plus 165
basis points

On November 2, 2000, the Company obtained a three year secured $250
million first mortgage commitment on the property located at 919 Third Avenue,
New York N. Y. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis points based
upon the outstanding balance. At closing, $200 million was funded under the
commitment at an interest rate of LIBOR plus 120 basis points. In addition, in
connection with the $200 million initial funding, the Company purchased a LIBOR
interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The
initial funding was used primarily to repay outstanding borrowings under the
Company's Credit Facility.

Stock Offerings

On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.

I-3

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, 2000, the Company's debt ratio was approximately 40.6%. 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.

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 the Long Island, Westchester, New Jersey and
Southern Connecticut suburban office and industrial markets remain strong with
supply constrained markets management believes the Company is well positioned to
benefit from rental revenue growth through: (i) contractual annual compounding
of 3-4% Base Rent increases (defined as fixed gross rental amounts that excludes
payments on account of real estate taxes, 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 and space is re-leased at the higher rents that exist in the
current market environment 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 New York City office market is currently
experiencing favorable supply and demand characteristics exceeding those
currently in the Company's suburban markets and is also characterized by
similar lack of available land supply and other barriers to entry that limit
competition. The Company's New York City office buildings offer similar
potential for increase in Base Rents as described in (iii) above.

External Growth. The Company seeks to acquire multi-tenant suburban and
CBD 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 $575 million, (ii) ability to acquire a
property for OP Units and thereby defer the seller's income tax on gain,

I-4

(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 and CBD office and industrial
properties and to continue to redevelop existing Properties as these
opportunities arise. For the near future, the Company will concentrate its
development activities on industrial and Class A Suburban and CBD office
properties within the Tri-State Area. The Company's expansion into the New York
City office market and the opening of its New York City division provides it
with additional opportunities to acquire interests 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 (formerly Reckson Service
Industries, Inc.) and RSVP. In connection with the formation of FrontLine, the
Operating Partnership established a credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine to use in its
investment activities, operations and other general corporate purposes. As of
December 31, 2000, the Company had advanced approximately $93.4 million under
the FrontLine Facility. In addition, the Operating Partnership approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) or advances made to FrontLine under terms similar to the FrontLine
Facility. As of December 31, 2000, approximately $83.2 million had been funded
through the RSVP Commitment, of which $41.1 million represents investments in
RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents
advances. In March 2001, the Company increased the RSVP Commitment to $110
million and advanced approximately $24 million under the RSVP Commitment to
fund additional RSVP-controlled (REIT-qualified) joint ventures. In addition,
as of December 31, 2000, the Company, through its Credit Facility, has
allocated approximately $3.2 million in outstanding undrawn letters of credit
for the benefit of FrontLine. Both the FrontLine Facility and the RSVP
Commitment have a term of five years and advances under each are recourse
obligations of FrontLine. Interest accrues on advances made under the credit
facilities at a rate equal to the greater of (a) the prime rate plus two
percent and (b) 12% per annum, with the rate on amounts that are outstanding
for more than one year increasing annually at a rate of four percent of the
prior year's rate. Prior to maturity, interest is payable quarterly but only to
the extent of net cash flow of FrontLine and on an interest-only basis. As of
December 31, 2000, interest accrued under the FrontLine Facility and RSVP
Commitment was approximately $13.8 million.

FrontLine currently has two distinct operating units: one of which
represents its interest in HQ Global Holdings, Inc., the largest provider of
flexible officing solutions in the world, and the other which represents
interests in technology based partner companies. RSVP invests primarily in real
estate and real estate related operating companies generally outside of the
Company's core office and industrial focus.

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 may 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 $3.3 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, 2000, the Company had invested,
through the RSVP Commitment, approximately $20.6 million in the Dominion
Venture which had investments in 13 government office buildings and three
correctional facilities.

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As of December 31, 2000, the Company has invested approximately $11.1
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 $3.5 million to FrontLine through the RSVP Commitment for an
investment in RSVP which was then invested in certain service business
activities related to student housing. As of December 31, 2000, RAP -- SHP had
investments in seven off -- campus student housing projects. Additionally,
during 2000, RAP-SHP entered into an off -- campus development joint venture
with Titan Investments II, a third party national developer. The purpose of the
venture is to develop or reposition off -- campus student housing projects
across the United States.

As of December 31, 2000, the Company has invested approximately $3.4
million, through a subsidiary, in RAP MD, LLC ("RAP -- MD"), a company that
engages primarily in the acquisition, ownership, management and development of
medical office properties. The Company's investment was funded through the RSVP
Commitment. As of December 31, 2000, RAP -- MD had investments in eight medical
office properties.

On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Office Properties aggregating approximately 1.5 million square feet to
the Tri-State JV in exchange for approximately $136 million and a 51% majority
ownership interest in the Tri-State JV. As a result, the Company realized a
gain of approximately $15.2 million. Such gain has been included in gain on
dispositions of real estate on the Company's consolidated statements of income.
Cash proceeds received were used primarily to repay borrowings under the Credit
Facility.

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") 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 CBD Office Properties located in New York City totaling 1.6 million
square feet and one Suburban 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.

The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity investment in Metropolitan.
Crescent's investment 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
Class A common stock at a conversion price of $24.61 per share.

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 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 (loss) on
dispositions of real estate on the Company's consolidated statements of income.

Subsequent to the closing of the merger, the Company acquired title to 919
Third Avenue and 1350 Avenue of the Americas located in New York City. The
Company holds all of the Properties in its New York City division through
Metropolitan.

I-6

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.

ITEM 2. PROPERTIES

GENERAL

As of December 31, 2000, the Company owned and operated 188 Properties
(including 10 joint venture office properties but excluding the RSVP --
controlled joint ventures) in the Tri-State Area encompassing approximately
21.3 million square feet. These properties consist of 65 Class A Suburban
Office Properties encompassing approximately 9.1 million square feet and 17
Class A CBD Office Properties encompassing approximately 5.3 million square
feet. 104 Industrial Properties encompassing approximately 6.8 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, 2000, the Company is in the process
of developing a 315,000 square foot office building and owned approximately 290
acres of land in 13 separate parcels of on which the Company can develop
approximately 1.4 million square feet of office space and approximately 224,000
square feet of industrial space.

Reckson has historically emphasized the development and acquisition of
properties that are in strong CBD markets or are part of large scale office and
industrial parks. Approximately 37% (measured by rentable square footage) of
the Office Properties are CBD Office Properties. In addition, approximately 67%
of the Suburban Office Properties and approximately 59% 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,

I-7

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.

Set forth below is a summary of certain information relating to the
Properties, categorized by Office and Industrial Properties, as of December 31,
2000.

OFFICE PROPERTIES

General

As of December 31, 2000, the Company owned or had an interest in 65 Class
A Suburban Office Properties encompassing approximately 9.1 million square feet
and 17 Class A CBD Office Properties encompassing approximately 5.3 million
square feet. As of December 31, 2000, these Office Properties were
approximately 97.2% leased (percent leased excludes properties under
development) to approximately 1,100 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 two of the 65 Suburban
Office Properties are located in the following ten planned office parks: the
North Shore Atrium, the Huntington Melville Corporate Center, the Nassau West
Corporate Center, the Tarrytown Corporate Center, the Executive Hill Office
Park, the Reckson Executive Park, the University Square Office Complex, the
Summit at Valhalla, the Mt. Pleasant Corporate 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.

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, 2000
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% (2,081) 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 . .............. 51% Fee 1970 5.8
58 South Service Rd (3) . ......... 100% Fee 2000 16.5
1305 Old Walt Whitman Rd .......... 51% Fee 1998(5) 18.1
----
Total--Huntington Melville
Corporate Center (4) ............. 65.8
----

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

Office Properties:
Huntington Melville Corporate
Center, Melville, NY
395 North Service Rd .............. 4 187,393 99.3% $ 4,924,316 $ 26.47 4
200 Broadhollow Rd ................ 4 67,432 100.0% $ 1,553,502 $ 23.04 13
48 South Service Rd ............... 4 125,372 100.0% $ 3,145,035 $ 25.08 8
35 Pinelawn Rd .................... 2 105,241 92.5% $ 2,011,350 $ 20.66 25
275 Broadhollow Rd . .............. 4 124,441 99.6% $ 2,833,490 $ 22.85 13
58 South Service Rd (3) . ......... 4 277,500 -- -- -- --
1305 Old Walt Whitman Rd .......... 3 167,400 98.1% $ 4,124,735 $ 25.13 6
------- ----------- --
Total--Huntington Melville
Corporate Center (4) ............. 1,054,779 98.6% $18,592,428 $ 24.28 69
--------- ----------- --

I-8

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

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 Leasehold
Center II) ........................... 100% (2,082) 1984 9.1
60 Charles Lindbergh Blvd.
(Nassau West Corporate Leasehold
Center I) ............................ 100% (2,082) 1989 7.8
Leasehold
51 Charles Lindbergh Blvd. ............ 100% (2,084) 1989 6.6
Leasehold
55 Charles Lindbergh Blvd. ............ 100% (2,082) 1982 10.0
333 Earl Ovington Blvd. Leasehold
(The Omni) ........................... 60% (2,088) 1991 30.6
Leasehold
90 Merrick Ave. ....................... 51% (2,084) 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
-----
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. .................. 51% Fee 1989 1.3

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

North Shore Atrium, Syosset, NY
6800 Jericho Turnpike
(North Shore Atrium I) ............... 2 209,028 96.0% $ 4,094,898 $ 20.41 44
6900 Jericho Turnpike
(North Shore Atrium II) .............. 4 95,149 100.0% $ 2,156,644 $ 22.67 14
------- ----------- --
Total--North Shore Atrium ............. 304,177 97.3% $ 6,251,542 $ 21.12 58
------- ----------- --
Nassau West Corporate Center,
Mitchel Field, NY
50 Charles Lindbergh Blvd.
(Nassau West Corporate
Center II) ........................... 6 211,845 96.5% $ 4,567,615 $ 22.34 23
60 Charles Lindbergh Blvd.
(Nassau West Corporate
Center I) ............................ 2 195,998 100.0% $ 4,578,271 $ 23.36 7
51 Charles Lindbergh Blvd. ............ 1 108,000 100.0% $ 2,275,649 $ 21.07 1
55 Charles Lindbergh Blvd. ............ 2 214,581 100.0% $ 2,606,170 $ 12.15 2
333 Earl Ovington Blvd.
(The Omni) ........................... 10 575,000 99.3% $16,083,501 $ 28.17 32
90 Merrick Ave. ....................... 9 221,839 97.3% $ 4,997,745 $ 23.15 20
------- ----------- --
Total--Nassau West Corporate
Center ............................... 1,527,263 98.9% $35,108,951 $ 23.24 85
--------- ----------- --
Tarrytown Corporate Center
Tarrytown, NY
505 White Plains Road ................. 2 26,468 95.3% $ 426,143 $ 16.90 21
520 White Plains Road ................. 6 171,761 100.0% $ 3,727,762 $ 21.70 2
555 White Plains Road ................. 5 121,585 94.1% $ 2,692,386 $ 23.53 8
560 White Plains Road ................. 6 126,471 92.7% $ 2,220,688 $ 18.95 14
580 White Plains Road ................. 6 170,726 94.6% $ 3,525,079 $ 21.82 17
660 White Plains Road ................. 6 258,715 92.7% $ 5,090,460 $ 21.23 38
--------- ----------- --
Total--Tarrytown Corporate
Center ............................... 875,726 94.8% $17,682,518 $ 21.30 100
--------- ----------- ---
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% $ 2,015,775 $ 22.10 5
4 International Dr. ................... 3 86,694 89.3% $ 2,014,051 $ 26.01 8
5 International Dr. ................... 3 90,000 100.0% $ 2,181,374 $ 24.24 1
6 International Dr. ................... 3 94,016 100.0% $ 1,656,258 $ 17.62 8
--------- ----------- ---
Total--Reckson Executive Park ......... 541,884 98.3% $10,207,458 $ 19.16 24
--------- ----------- ---
Summit at Valhalla
Valhalla, NY
100 Summit Dr. ........................ 4 249,551 95.7% $ 5,125,534 $ 21.45 9
200 Summit Dr. ........................ 4 240,834 89.7% $ 4,610,306 $ 21.34 13
500 Summit Dr. ........................ 4 208,660 100.0% $ 5,633,820 $ 27.00 1
--------- ----------- ---
Total -- Summit at Valhalla ........... 699,045 94.9% $15,369,660 $ 23.17 23
--------- ----------- ---
Mt. Pleasant Corporate Center .........
115/117 Stevens Ave. .................. 3 162,004 95.6% $ 2,895,825 $ 18.70 15
--------- ----------- ---
Total -- Mt Pleasant Corporate Center.. 162,004 95.6% $ 2,895,825 $ 18.70 15
--------- ----------- ---
Landmark Square
Stamford, CT
One Landmark Square ................... 22 296,716 89.2% $ 6,311,100 $ 23.83 58
Two Landmark Square ................... 3 39,701 87.8% $ 717,196 $ 20.58 10
Three Landmark Square ................. 6 128,286 100.0% $ 1,687,016 $ 13.15 18
Four Landmark Square .................. 5 104,446 93.9% $ 1,723,990 $ 17.57 16
Five Landmark Square .................. 3 57,273 100.0% $ 302,731 $ 5.29 3
Six Landmark Square ................... 10 171,899 96.9% $ 3,920,672 $ 23.53 8
--------- ----------- ---
Total -- Landmark Square .............. 798,321 94.0% $14,662,705 $ 19.54 113
--------- ----------- ---
Stamford Towers Stamford, CT ..........
680 Washington Blvd. .................. 11 132,759 99.5% $ 3,786,544 $ 28.66 7

I-9

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

750 Washington Blvd. ............... 51% Fee 1989 2.4
----
Total--Stamford Towers ............. 3.7
----
Stand-alone Long Island Properties
400 Garden City Plaza
Garden City, NY ................... 51% 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% (2,030) 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, NY ....................... 100% Fee 1989 0.7
538 Broadhollow Road
Melville, NY ...................... 100% Fee 1986 7.5
50 Marcus Drive,
Melville, NY ...................... 100% Fee 2000(5) 12.9
----
Total--Stand-alone Long Island ..... 72.9
----
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) 0.4
245 Main Street
White Plains, NY .................. 100% Fee 1983 0.4
120 White Plains Rd.
Tarrytown, NY ..................... 51% Fee 1984 9.7
80 Grasslands
Elmsford, NY ...................... 100% Fee 1989 4.9
360 Hamilton Avenue
White Plains, NY .................. 100% Fee 1977 1.5
140 Grand Street
White Plains, NY .................. 100% Fee 1991 2.2
----
Total Stand-alone Westchester
Properties ........................ 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
----
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 .......... 51% Fee 1988 11.0
----

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

750 Washington Blvd. ............... 11 192,108 99.6% $ 4,675,265 $ 24.44 11
------- ----------- --
Total--Stamford Towers ............. 324,867 99.6% $ 8,461,809 $ 21.15 18
------- ----------- --
Stand-alone Long Island
Properties
400 Garden City Plaza
Garden City, NY ................... 5 176,073 96.6% $ 4,100,754 $ 24.12 25
88 Duryea Rd.
Melville, NY ...................... 2 25,061 96.7% $ 406,370 $ 16.77 4
310 East Shore Rd.
Great Neck, NY .................... 4 50,000 91.2% $ 1,056,684 $ 23.17 20
333 East Shore Rd.
Great Neck, NY .................... 2 17,715 99.6% $ 452,678 $ 25.65 9
520 Broadhollow Rd.
Melville, NY ...................... 1 83,176 71.1% $ 1,193,719 $ 20.19 2
1660 Walt Whitman Rd.
Melville, NY ...................... 1 73,115 99.9% $ 1,435,770 $ 19.66 5
125 Baylis Rd.
Melville, NY ...................... 2 98,329 95.3% $ 1,842,756 $ 19.66 15
150 Motor Parkway
Hauppauge, NY ..................... 4 191,447 96.1% $ 4,152,752 $ 22.56 23
1979 Marcus Ave.
Lake Success, NY .................. 4 326,612 100.0% $ 7,159,400 $ 21.92 29
120 Mineola Blvd.
Mineola, NY ....................... 6 101,000 100.0% $ 2,398,421 $ 23.75 16
538 Broadhollow Road
Melville, NY ...................... 4 180,339 95.7% $ 4,121,324 $ 23.89 12
50 Marcus Drive,
Melville, NY ...................... 2 163,762 100.0% $ 1,074,688 $ 6.56 1
------- ----------- --
Total--Stand-alone Long Island ..... 1,486,629 96.6% $29,395,316 $ 22.26 161
--------- ----------- ---
Stand-alone Westchester
Properties
155 White Plains Road,
Tarrytown, NY ..................... 2 60,909 99.6% $ 1,168,551 $ 19.27 5
235 Main Street, White
Plains, NY ........................ 6 83,237 93.8% $ 1,513,711 $ 19.38 29
245 Main Street
White Plains, NY .................. 6 73,543 93.3% $ 1,216,955 $ 17.75 15
120 White Plains Rd.
Tarrytown, NY ..................... 6 197,785 99.6% $ 4,730,530 $ 24.03 11
80 Grasslands
Elmsford, NY ...................... 3 85,104 100.0% $ 1,695,536 $ 19.92 5
360 Hamilton Avenue
White Plains, NY .................. 12 382,000 96.5% $ 7,465,521 $ 20.26 15
140 Grand Street
White Plains, NY .................. 9 130,136 93.0% $ 2,663,153 $ 22.00 17
--------- ----------- ---
Total Stand-alone Westchester
Properties ........................ 1,012,714 96.7% $20,453,957 $ 20.89 97
--------- ----------- ---
Executive Hill Office Park
West Orange, NJ
100 Executive Dr ................... 3 92,872 100.0% $ 1,917,717 $ 20.65 11
200 Executive Dr ................... 4 102,630 99.9% $ 2,204,345 $ 20.94 16
300 Executive Dr ................... 4 126,196 100.0% $ 2,213,881 $ 17.54 11
10 Rooney Circle ................... 3 69,684 100.0% $ 1,406,904 $ 20.19 2
--------- ----------- ---
Total--Executive Hill Office Park 391,382 100.0% $ 7,742,847 $ 19.78 40
--------- ----------- ---
University Square
Princeton, NJ
100 Campus Dr. ..................... 1 27,350 100.0% $ 622,621 $ 22.76 3
104 Campus Dr. ..................... 1 70,155 100.0% $ 1,515,517 $ 21.60 2
115 Campus Dr. ..................... 1 33,600 100.0% $ 721,107 $ 21.46 2
--------- ----------- ---
Total University Square ............ 131,105 100.0% $ 2,859,245 $ 21.81 7
--------- -----------
Short Hills Office Complex
Short Hills, NJ
101 West John F. Kennedy
Parkway ........................... 6 185,233 100.0% $ 2,963,728 $ 16.00 1
101 East John F. Kennedy
Parkway ........................... 4 122,841 100.0% $ 655,152 $ 5.33 1
51 John F Kennedy Parkway .......... 5 248,962 100.0% $ 8,790,239 $ 33.79 18
--------- ----------- ---

I-10

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

Total -- Short Hills Office .......... 26.0
-----
Stand-alone New Jersey
Properties
1 Paragon Drive
Montvale, NJ ........................ 100% Fee 1980 11 2
99 Cherry Hill Road
Parsippany, NJ ...................... 100% Fee 1982 8.8 3
119 Cherry Hill Road
Parsippany, NJ ...................... 100% Fee 1982 9.3 3
One Eagle Rock
Hanover, NJ ......................... 100% Fee 1986 10.4 3
155 Passaic Ave.
Fairfield, NJ ....................... 100% Fee 1984 3.6 4
3 University Plaza
Hackensack, NJ ...................... 100% Fee 1985 10.6 6
1255 Broad Street
Clifton, NJ ......................... 100% Fee 1968 11.1 2
492 River Rd,
Nutley, NJ .......................... 100% Fee 1952 17.3 13
-----
Total Stand-alone New Jersey
Properties .......................... 82.1
-----
New York City Properties
120 W. 45th Street New York, NY 100% Fee 1989 0.4 40
100 Wall Street
New York, NY ........................ 100% Fee 1969 0.5 29
810 Seventh Avenue
New York, NY ........................ 100% Fee 1970 0.6 42
919 Third Avenue
New York, NY ........................ 100% Fee(7) 1971 1.5 47
1350 Avenue of the Americas
New York, NY ........................ 100% Fee 1966 0.6 35
-----
Total -- New York City Office
Properties .......................... 3.6
-----
Total--Office Properties (4) ......... 573.3
=====

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

Total -- Short Hills Office .......... 557,036 100.0% $ 12,409,119 $ 22.28 20
------- ------------ --
Stand-alone New Jersey
Properties
1 Paragon Drive
Montvale, NJ ........................ 104,599 81.6% $ 1,763,074 $ 20.67 16
99 Cherry Hill Road
Parsippany, NJ ...................... 93,250 99.0% $ 1,746,078 $ 18.92 16
119 Cherry Hill Road
Parsippany, NJ ...................... 95,724 99.9% $ 1,908,205 $ 19.96 17
One Eagle Rock
Hanover, NJ ......................... 140,000 100.0% $ 3,223,210 $ 23.02 8
155 Passaic Ave.
Fairfield, NJ ....................... 87,986 100.0% $ 1,348,254 $ 15.32 5
3 University Plaza
Hackensack, NJ ...................... 216,403 93.2% $ 4,041,680 $ 20.04 21
1255 Broad Street
Clifton, NJ ......................... 193,574 100.0% $ 4,259,924 $ 22.01 2
492 River Rd,
Nutley, NJ .......................... 130,009 100.0% $ 1,358,105 $ 10.45 1
------- ------------ --
Total Stand-alone New Jersey
Properties .......................... 1,061,545 96.9% $ 19,648,530 $ 19.10 86
--------- ------------ --
New York City Properties
120 W. 45th Street New York, NY 443,109 100.0% $ 15,908,898 $ 35.90 44
100 Wall Street
New York, NY ........................ 458,626 99.3% $ 14,063,841 $ 30.89 38
810 Seventh Avenue
New York, NY ........................ 692,060 95.1% $ 23,323,658 $ 35.44 36
919 Third Avenue
New York, NY ........................ 1,374,966 99.1% $ 32,217,043 $ 23.95 22
1350 Avenue of the Americas
New York, NY ........................ 540,000 92.8% $ 15,848,017 $ 31.62 77
--------- ------------ --
Total -- New York City Office
Properties .......................... 3,508,761 97.0% $101,361,457 $ 29.45 217
--------- ------------ ---
Total--Office Properties (4) ......... 14,437,238 97.2% $323,103,367 $ 23.48 1,133
========== ============ =====

- ----------
(1) Ground lease expirations assume exercise of renewal options by the lessee.

(2) Represents Base Rent of signed leases at December 31, 2000 adjusted for
scheduled contractual increases during the 12 months ending December 31,
2001. Total Base Rent for these purposes reflects the effect of any lease
expirations that occur during the 12-month period ending December 31,
2001. 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 development.

(4) Percent leases excludes properties under development.

(5) Year renovated.

(6) The actual fee interest in 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) There is a ground lease in place on a small portion of the land which
expires in 2066.

INDUSTRIAL PROPERTIES

General

As of December 31, 2000, the Company owned or had an interest in 104
Industrial Properties that encompass approximately 6.8 million rentable square
feet. As of December 31, 2000, the Industrial Properties were approximately
97.5% leased (percentage leased excludes properties under development) to
approximately 230 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

I-11

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 86% of the Industrial Properties, measured by square
footage, are located on Long Island. Sixty eight percent of these properties,
as measured by square footage, are 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
nine Industrial Properties in the other suburban markets. These properties
encompass approximately 940,000 square feet and were approximately 93% leased
as of December 31, 2000.

The following table sets forth certain information as of December 31, 2000
for each of the Industrial Properties.

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

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
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

PRECENTAGE
OFFICE/ ANNUAL
RESEARCH BASE
AND RENT NUMBER
DEVELOP- RENTABLE ANNUAL PER OF
MENT SQUARE PERCENT BASE LEASED TENANTS
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% $543,780 $ 10.07 1
410 Vanderbilt Motor
Parkway ...................... 7% 41,784 90.4% $ 98,302 $ 2.60 3
595 Old Willets Path .......... 14% 31,670 100.0% $192,605 $ 6.08 4
611 Old Willets Path .......... 11% 20,000 100.0% $127,550 $ 6.38 2
631/641 Old Willets Path. 31% 25,000 100.0% $ 95,560 $ 3.82 4
651/661 Old Willets Path.. 45% 25,000 100.0% $184,479 $ 7.38 7
681 Old Willets Path .......... 10% 15,000 100.0% $102,414 $ 6.83 1
740 Old Willets Path .......... 5% 30,000 100.0% $ 29,670 $ 0.99 1
325 Rabro Dr .................. 10% 35,000 100.0% $204,560 $ 5.84 2
250 Kennedy Dr ................ 9% 127,980 100.0% $455,298 $ 3.56 1
90 Plant Ave .................. 13% 75,000 100.0% $452,744 $ 6.04 3
110 Plant Ave ................. 8% 125,000 100.0% $156,250 $ 1.25 1
55 Engineers Rd ............... 8% 36,000 100.0% $351,878 $ 9.77 1
65 Engineers Rd ............... 10% 23,000 100.0% $131,198 $ 5.70 1
85 Engineers Rd ............... 5% 40,800 100.0% $221,601 $ 5.43 2
100 Engineers Rd .............. 11% 88,000 100.0% $ 79,271 $ 0.90 1
150 Engineers Rd .............. 11% 135,000 100.0% $414,528 $ 3.07 1
20 Oser Ave ................... 18% 42,000 98.7% $326,963 $ 7.89 2
30 Oser Ave ................... 21% 42,000 82.1% $212,926 $ 6.17 4
40 Oser Ave ................... 33% 59,800 80.3% $335,405 $ 6.99 11
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% $ 68,961 $ 3.13 1
65 Oser Ave ................... 10% 20,000 100.0% $ 99,670 $ 4.98 1
73 Oser Ave ................... 15% 20,000 100.0% $ 21,271 $ 1.06 1
80 Oser Ave ................... 25% 19,500 100.0% $ 67,516 $ 3.46 1
85 Nicon Ct ................... 10% 104,000 100.0% $544,515 $ 5.24 1
90 Oser Ave ................... 26% 37,500 100.0% $130,779 $ 3.49 1
104 Parkway Dr. ............... 50% 27,600 100.0% $208,033 $ 7.54 1
110 Ricefield Ln .............. 25% 32,264 100.0% $166,220 $ 5.15 1
120 Ricefield Ln .............. 24% 33,060 100.0% $134,055 $ 4.05 1
125 Ricefield Ln .............. 20% 30,495 100.0% $206,643 $ 6.78 1
135 Ricefield Ln .............. 10% 32,340 100.0% $209,761 $ 6.49 1
85 Adams Dr ................... 90% 20,000 100.0% $278,817 $ 13.94 1
395 Oser Ave .................. 100% 50,000 99.0% $441,045 $ 8.91 1

I-12

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

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 ........... 100% Fee 1980 10.0 14
400 Moreland Road(3) ........ 100% Fee 1967 6.3 17
600 Old Willets Path ........ 100% Fee 1965 4.5 14
-----
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
2002 Orville Drive
North ...................... 100% Fee 2000 15.8 24
2004 Orville Drive
North ...................... 100% Fee 1998 7.4 24
2005 Orville Drive
North ...................... 100% Fee 1999 8.7 24
-----
Total Airport
International Plaza ........ 87.1
-----
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
-----

PRECENTAGE
OFFICE/ ANNUAL
RESEARCH BASE
AND RENT NUMBER
DEVELOP- RENTABLE ANNUAL PER OF
MENT SQUARE PERCENT BASE LEASED TENANTS
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- ----------------------------- ----------- ------------ ----------- ------------- ---------- --------

185 Oser Ave ................ 40% 30,000 -- -- -- --
25 Davids Dr ................ 90% 40,000 100.0% $ 334,516 $ 8.36 1
45 Adams Ave ................ 90% 28,000 100.0% $ 226,333 $ 8.08 1
225 Oser Ave ................ 80% 10,000 99.6% $ 116,175 $ 11.67 1
180 Oser Ave ................ 35% 61,868 89.9% $ 424,419 $ 7.63 8
360 Oser Ave ................ 35% 23,000 100.0% $ 96,600 $ 4.20 1
400 Oser Ave ................ 30% 164,936 89.3% $ 1,256,877 $ 8.53 24
375 Oser Ave ................ 40% 20,000 100.0% $ 154,388 $ 7.72 1
425 Rabro Drive ............. 25% 65,641 99.7% $ 469,536 $ 7.18 1
390 Motor Parkway ........... 4% 181,155 100.0% $ 813,435 $ 4.49 1
400 Moreland Road(3) ........ 10% 56,875 -- -- -- --
600 Old Willets Path ........ 25% 69,627 100.0% $ 405,061 $ 5.82 1
------- ----------- --
Total Vanderbilt
Industrial Park (4) ........ 2,379,895 96.8% $12,023,608 $ 5.35 108
--------- ----------- ---
Airport International Plaza
Islip, NY
20 Orville Dr ............... 50% 12,852 100.0% $ 181,720 $ 14.09 1
25 Orville Dr ............... 100% 32,300 100.0% $ 490,561 $ 15.19 2
50 Orville Dr ............... 20% 28,000 99.8% $ 254,320 $ 9.10 3
65 Orville Dr ............... 13% 32,000 100.0% $ 171,588 $ 5.36 2
70 Orville Dr ............... 7% 41,508 100.0% $ 315,731 $ 7.61 2
80 Orville Dr ............... 21% 92,544 100.0% $ 668,272 $ 7.22 9
85 Orville Dr ............... 20% 25,000 100.0% $ 160,569 $ 6.42 2
95 Orville Dr ............... 10% 25,000 100.0% $ 147,583 $ 5.90 1
110 Orville Dr .............. 15% 110,000 100.0% $ 646,433 $ 5.88 1
180 Orville Dr .............. 18% 37,612 100.0% $ 191,971 $ 5.10 2
1101 Lakeland Ave ........... 8% 90,411 100.0% $ 531,315 $ 5.88 1
1385 Lakeland Ave ........... 18% 35,000 64.3% $ 162,344 $ 7.22 2
125 Wilbur Place ............ 31% 62,686 77.1% $ 248,547 $ 5.14 8
140 Wilbur Place ............ 37% 48,500 100.0% $ 210,494 $ 4.34 2
160 Wilbur Place ............ 30% 62,710 100.0% $ 481,790 $ 7.68 2
170 Wilbur Place ............ 28% 72,062 100.0% $ 407,680 $ 5.65 6
4040 Veterans Highway ....... 100% 2,800 100.0% $ 45,051 $ 16.09 1
120 Wilbur Place ............ 15% 35,000 100.0% $ 196,470 $ 5.61 4
2002 Orville Drive
North ...................... 17% 206,000 100.0% $ 1,569,100 $ 7.62 2
2004 Orville Drive
North ...................... 20% 106,515 100.0% $ 732,042 $ 6.87 1
2005 Orville Drive
North ...................... 20% 130,010 100.0% $ 945,977 $ 7.28 1
--------- ----------- ---
Total Airport
International Plaza ........ 1,288,510 98.1% $ 8,759,558 6.93 55
--------- ----------- ---
County Line Industrial Center
Melville, NY
5 Hub Dr .................... 20% 88,001 100.0% $ 536,268 $ 6.09 2
10 Hub Dr ................... 15% 95,546 100.0% $ 698,888 $ 7.94 3
30 Hub Drive ................ 18% 73,127 100.0% $ 483,286 $ 6.61 2
265 Spagnoli Rd ............. 28% 85,500 100.0% $ 673,610 $ 7.87 3
--------- ----------- ---
Total County Line
Industrial Center .......... 342,174 100.0% $ 2,392,052 $ 6.99 10
--------- ----------- ---
Standalone Long Island
Properties
32 Windsor Pl. Islip, NY 10% 43,000 100.0% $ 144,127 $ 3.35 1
42 Windsor Pl. Islip, NY 8% 65,000 100.0% $ 234,744 $ 3.61 1
208 Blydenburgh Rd.
Islandia, NY ............... 17% 24,000 100.0% $ 125,681 $ 5.24 4
210 Blydenburgh Rd.
Islandia, NY ............... 16% 20,000 100.0% $ 115,127 $ 5.76 2
71 Hoffman Ln.
Islandia, NY ............... 10% 30,400 100.0% $ 193,701 $ 6.37 1
135 Fell Ct. Islip, NY ...... 20% 30,000 100.0% $ 240,992 $ 8.03 1
--------- ----------- ---
Subtotal Islip/Islandia ..... 212,400 100.0% $ 1,054,371 $ 4.96 10
--------- ----------- ---

I-13

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

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, NY .......... 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, NY ............. 100% Fee 1968 5.0 16
-----
Subtotal Melville ......... 22.5
-----
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.,
Hicksville, NY ........... 100% Leasehold(7) 1966 4.0 24
100 Andrews Rd.,
Hicksville, NY ........... 100% Fee 1954 11.7 25
-----
Subtotal other ............ 62.9
-----
Total Standalone Long
Island Properties ........ 140.9
-----
Standalone Westchester
Properties
100 Grasslands Rd.,
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 ............... 16.6
-----
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ..... 100% Fee 1965 13.5 16
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
-----
Total New Jersey
Standalone Industrial
Properties ............... 46.7
-----

PRECENTAGE
OFFICE/ ANNUAL
RESEARCH BASE
AND RENT NUMBER
DEVELOP- RENTABLE ANNUAL PER OF
MENT SQUARE PERCENT BASE LEASED TENANTS
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- --------------------------- ----------- ------------ ----------- ------------- --------- --------

70 Schmitt Boulevard,
Farmingdale, NY .......... 10% 76,312 100.0% $ 559,673 $ 7.33 1
105 Price Parkway,
Farmingdale, NY .......... 8.50% 297,000 100.0% $ 1,430,170 $ 4.82 1
110 Bi County Blvd.
Farmingdale, NY .......... 45% 147,303 96.3% $ 1,250,320 $ 8.82 10
------- ----------- --
Subtotal Farmingdale ...... 520,615 98.9% $ 3,240,163 $ 6.29 12
------- ----------- --
70 Maxess Rd,
Melville, NY ............. 38% 78,000 100.0% $ 692,862 $ 8.88 1
20 Melville Park Rd,
Melville, NY ............. 66% 67,922 100.0% $ 393,337 $ 5.79 1
45 Melville Park Drive,
Melville, NY ............. 22% 40,247 100.0% $ 562,060 $ 13.97 1
65 Marcus Drive
Melville, NY ............. 50% 60,000 100.0% $ 623,162 $ 10.39 1
------- ----------- --
Subtotal Melville ......... 246,169 100.0% $ 2,271,421 $ 9.23 4
------- ----------- --
300 Motor Parkway,
Hauppauge, NY ............ 100% 55,942 96.8% $ 907,004 $ 16.75 9
1516 Motor Parkway,
Hauppauge, NY ............ 5% 140,000 100.0% $ 503,883 $ 3.60 1
------- ----------- --
Subtotal Hauppauge ........ 195,942 99.1% $ 1,410,887 $ 7.27 10
------- ----------- --
933 Motor Parkway
Smithtown, NY ............ 26% 48,000 100.0% $ 315,600 $ 6.58 2
65 S. Service Rd ,
Plainview, NY(5) ......... 10% 10,000 100.0% $ 72,008 $ 7.20 1
85 S. Service Rd.
Plainview, NY ............ 60% 20,000 100.0% $ 82,155 $ 4.11 2
19 Nicholas Dr.,
Yaphank, NY (6) .......... 5% 230,000 100.0% $ 1,315,250 $ 5.72 1
48 Harbor Park Dr.,
Port Washington, NY 100% 35,000 100.0% $ 735,646 $ 21.02 1
110 Marcus Dr.,
Huntington, NY ........... 39% 78,240 100.0% $ 506,119 $ 6.47 1
35 Engle St.,
Hicksville, NY ........... 8% 120,000 100.0% $ 607,559 $ 5.06 1
100 Andrews Rd.,
Hicksville, NY ........... 12% 167,500 100.0% $ 1,146,499 $ 6.84 2
------- ----------- --
Subtotal other ............ 708,740 100.0% $ 4,780,836 $ 6.75 11
------- ----------- --
Total Standalone Long
Island Properties ........ 1,883,866 99.6% $12,757,678 $ 6.98 47
--------- ----------- --
Standalone Westchester
Properties
100 Grasslands Rd.,
Elmsford, NY ............. 100% 45,000 87.8% $ 579,637 $ 14.67 3
2 Macy Rd.,
Harrison, NY ............. 100% 26,000 100.0% $ 394,460 $ 15.16 1
500 Saw Mill Rd.,
Elmsford, NY ............. 17% 92,000 100.0% $ 846,400 $ 9.20 1
--------- ----------- --
Total Standalone
Westchester Industrial
Properties ............... 163,000 96.7% $ 1,820,497 $ 11.55 5
--------- ----------- --
Standalone New Jersey
Industrial Properties
40 Cragwood Rd,
South Plainfield, NJ ..... 49% 135,000 57.5% $ 1,188,697 $ 15.31 3
100 Forge Way,
Rockaway, NJ ............. 12% 20,136 100.0% $ 175,842 $ 8.73 5
200 Forge Way,
Rockaway, NJ ............. 23% 72,118 100.0% $ 459,752 $ 6.38 2
300 Forge Way,
Rockaway, NJ ............. 37% 24,000 100.0% $ 230,050 $ 9.51 2
400 Forge Way,
Rockaway, NJ ............. 20% 73,000 100.0% $ 254,120 $ 3.48 2
--------- ----------- --
Total New Jersey
Standalone Industrial
Properties ............... 324,254 82.4% $ 2,308,461 $ 8.64 14
--------- ----------- --

I-14

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

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) ......... 512.4
=====

PRECENTAGE
OFFICE/ ANNUAL
RESEARCH BASE
AND RENT NUMBER
DEVELOP- RENTABLE ANNUAL PER OF
MENT SQUARE PERCENT BASE LEASED TENANTS
PROPERTY FINISH FEET LEASED RENT (2) SQ. FT. LEASES
- ------------------------- ----------- ------------ ----------- --------------- --------- --------

Standalone Connecticut
Industrial Property
710 Bridgeport
Shelton, CT ............ 30% 452,414 100.0% $ 2,876,568 $ 6.36 2
------- ------------ -
Total Connecticut
Standalone Industrial
Property ............... 452,414 100.0% $ 2,876,568 $ 6.36 2
------- ------------ -
Total Industrial
Properties (4) ......... 6,834,113 97.5% $ 42,938,423 $ 6.50 241
========= ============ ===

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

(2) Represents Base Rent of signed leases at December 31, 2000 adjusted for
scheduled contractual increases during the 12 months ending December 31,
2001. Total Base Rent for these purposes reflects the effect of any lease
expirations that occur during the 12 month period ending December 31,
2001. 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 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, 2000, the Company owned two free-standing 10,000 square
foot retail properties located in Great Neck and Huntington, New York of which
one property is fully leased and one property is vacant.

DEVELOPMENTS IN PROGRESS

As of December 31, 2000, the Company had invested approximately $154.7
million in developments in progress. This amount includes approximately $89.0
million relating to existing buildings encompassing approximately 1.3 million
square feet. The Company estimates that if these projects were to be completed,
total additional development costs would be approximately $28 million. In
addition, the Company has also invested approximately $ 65.7 million relating
to approximately 13 acres of land which it can develop approximately 1.6
million square feet. The Company estimates that if these projects were to be
completed, total additional development costs would be approximately $250
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, 2000, 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 OP 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 1996 through 2000 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.

1996 1997 1998 1999 2000
------------- --------------- --------------- --------------- ---------------

NON-INCREMENTAL REVENUE GENERATING
CAPITAL EXPENDITURES
Office Properties
Total ................................... $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899 $ 3,289,116
Per square foot ......................... $ 0.13 $ 0.22 $ 0.23 $ 0.23 $ 0.33
CBD Office Properties
Total ................................... N/A N/A N/A N/A $ 946,718
Per square foot ......................... N/A N/A N/A N/A $ 0.38
Industrial Properties
Total ................................... $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688 $ 813,431
Per square foot ......................... $ 0.18 $ 0.15 $ 0.12 $ 0.11 $ 0.11
NON-INCREMENTAL REVENUE GENERATING
TENANT IMPROVEMENT COSTS AND LEASING
COMMISSIONS
Long Island Office Properties
Annual Tenant Improvement Costs ......... $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357 $ 2,853,706
Per square foot improved ................ 4.28 7.00 3.98 4.73 6.99
Annual Leasing Commissions .............. 119,047 415,822 418,191 551,762 2,208,604
Per square foot leased .................. 0.97 4.83 1.46 2.59 4.96
Total per square foot ................... $ 5.25 $ 11.83 $ 5.44 $ 7.32 $ 11.95
Westchester Office Properties
Annual Tenant Improvement Costs ......... $ 834,764 $ 1,211,665 $ 711,160 $ 1,316,611 $ 1,860,027
Per square foot improved ................ 6.33 8.90 4.45 5.62 5.72
Annual Leasing Commissions .............. 264,388 366,257 286,150 457,730 $ 412,226
Per square foot leased .................. 2.00 2.69 1.79 1.96 3.00
Total per square foot ................... $ 8.33 $ 11.59 $ 6.24 $ 7.58 $ 8.72
Connecticut Office Properties
Annual Tenant Improvement Costs ......... $ 58,000 $ 1,022,421 $ 202,880 $ 179,043 $ 385,531
Per square foot improved ................ 12.45 13.39 5.92 4.88 4.19
Annual Leasing Commissions .............. 0 256,615 151,063 110,252 453,435
Per square foot leased .................. 0 3.36 4.41 3.00 4.92
Total per square foot ................... $ 12.45 $ 16.75 $ 10.33 $ 7.88 $ 9.11
New Jersey Office Properties
Annual Tenant Improvement Costs ......... N/A N/A $ 654,877 $ 454,054 $ 1,580,323
Per square foot improved ................ N/A N/A 3.78 2.29 6.71
Annual Leasing Commissions .............. N/A N/A 396,127 787,065 $ 1,031,950
Per square foot leased .................. N/A N/A 2.08 3.96 4.44
Total per square foot ................... N/A N/A $ 5.86 $ 6.25 $ 11.15
New York Office Properties
Annual Tenant Improvement Costs ......... N/A N/A N/A N/A $ 65,267
Per square foot improved ................ N/A N/A N/A N/A 1.79
Annual Leasing Commissions .............. N/A N/A N/A N/A 418,185
Per square foot leased .................. N/A N/A N/A N/A 11.50
Total per square foot ................... N/A N/A N/A N/A $ 13.29

I-16

1996 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------

Industrial Properties
Annual Tenant Improvement Costs ......... $ 380,334 $ 230,466 $ 283,842 $ 375,646 $ 650,216
Per square foot improved ................ 0.72 0.55 0.76 0.25 0.95
Annual Leasing Commissions .............. 436,213 81,013 200,154 835,108 436,506
Per square foot leased .................. 0.82 0.19 0.44 0.56 0.64
Total per square foot ................... $ 1.54 $ 0.74 $ 1.20 $ 0.81 $ 1.59

I-17

MORTGAGE INDEBTEDNESS

The following table sets forth certain information regarding the mortgage
debt of the Company, as of December 31, 2000.

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

6800 Jericho Turnpike ............... $ 14,324 8.07% 7/1/10 25 year
6900 Jericho Turnpike ............... 7,560 8.07% 7/1/10 25 year
200 Broadhollow Road ................ 6,494 7.75% 6/02/02 30 year
395 North Service Road .............. 20,525 6.45% 10/26/05 (2)
50 Charles Lindbergh Blvd. .......... 15,479 7.50% 7/10/01 (3)
333 Earl Ovington Blvd
(The Omni)(1) ...................... 55,641 7.72% 8/14/07 25 year
310 East Shore Road ................. 2,322 8.00% 7/01/02 (3)
80 Orville Drive .................... 2,616 10.10% 2/01/04 (3)
580 White Plains Road ............... 13,057 7.86% 9/1/10 25 year
Landmark Square ..................... 46,974 8.02% 10/07/06 25 year
110 Bi-County Blvd. ................. 4,043 9.125% 11/30/12 20 year
100 Summit Lake Drive ............... 21,541 8.50% 4/01/07 15 year
200 Summit Lake Drive ............... 20,133 9.25% 1/01/06 25 year
120 West 45th Street ................ 66,103 6.82%(4) 11/01/27 28 year
810 7th Avenue ...................... 85,600 7.73% 8/1/09 25 year
100 Wall Street ..................... 37,094 7.73% 8/1/09 25 year
One Orlando Center .................. 39,465 6.82%(4) 11/01/27 28 year
1350 Avenue of the Americas ......... 70,000 LIBOR + 1.65% 8/1/01 (3)
919 3rd Avenue ...................... 200,000 LIBOR + 1.20% 10/31/03 (3)
---------
Total ............................... $ 728,971
=========

- ----------
(1) The Company has a 60% general partnership interest in the Omni and its
proportionate share of the aggregate principal amount of the mortgage debt
is approximately $33.4 million.

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

(3) Interest only

(4) Subject to interest rate adjustment on November 1, 2004.

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, 2000.

I-18

PART II

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

CLASS A COMMON STOCK

The Company's Class A 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 sale prices per share of the
Company's Class A 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 .............. $ 24.000 $ 20.375 $ .33750
June 30, 1999 ............... $ 26.563 $ 20.438 $ .37125 (1)
September 30, 1999 .......... $ 23.500 $ 19.375 $ .37125
December 31, 1999 ........... $ 20.813 $ 18.000 $ .37125
March 31, 2000 .............. $ 21.313 $ 17.688 $ .37125
June 30, 2000 ............... $ 24.063 $ 18.750 $ .3860 (2)
September 30, 2000 .......... $ 26.813 $ 23.625 $ .3860
December 31, 2000 ........... $ 26.000 $ 21.875 $ .3860

(1) 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.

(2) Commencing with the distribution for the quarter ending June 30, 2000, the
Board of Directors of the Company increased the quarterly distribution to
$.3860 per share, which is equivalent to an annual distribution of $1.544
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 "RA.B". The following table sets forth the quarterly high
and low closing sale prices per share of the Company'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
March 31, 2000 .............. $ 22.875 $ 18.875 $ .5600
June 30, 2000 ............... $ 25.438 $ 19.938 $ .5867 (2)
September 30, 2000 .......... $ 27.563 $ 24.625 $ .6000
December 31, 2000 ........... $ 27.563 $ 22.500 $ .6000

(1) Represents the period May 25, 1999 through June 30, 1999

(2) Commencing with the distribution for the three month period ended July 31,
2000, the Board of Directors of the Company increased the quarterly
distribution to $.60 per share, which is equivalent to an annual
distribution of $2.40 per share.

II-1

ITEM 6. SELECTED FINANCIAL DATA (in thousands except per share data and
property count)

RECKSON ASSOCIATES REALTY
CORP.
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
2000 1999
-------------- --------------

OPERATING DATA:
Total revenues ................................................ $ 509,938 $ 403,153
Total expenses ................................................ 373,711 299,111
Income (before preferred dividends and distributions,
minority interests and extraordinary loss) ................... 136,227 104,042
Preferred dividends and distributions ......................... 28,012 27,001
Minority interests ............................................ 20,789 16,209
Extraordinary loss (net of minority interests' share) ......... 1,396 555
Net income available to Class A common
shareholders ................................................. 62,989 47,529
Net income available to Class B common
shareholders ................................................. 23,041 12,748
PER SHARE DATA - CLASS A COMMON
SHAREHOLDERS:
Basic:
Income before extraordinary loss .............................. $ 1.49 $ 1.19
Extraordinary loss ............................................ ( .03) ( .01)
Net income .................................................... 1.46 1.18
Weighted average shares outstanding ........................... 43,070 40,270
Diluted:
Income before extraordinary loss .............................. $ 1.47 $ 1.18
Extraordinary loss ............................................ ( .02) ( .01)
Diluted net income ............................................ 1.45 1.17
Diluted weighted average shares outstanding ................... 43,545 40,676
PER SHARE DATA - CLASS B COMMON
SHAREHOLDERS:
Basic:
Income before extraordinary loss .............................. $ 2.28 $ 1.91
Extraordinary loss ............................................ ( .04) ( .02)
Net Income .................................................... 2.24 1.89
Weighted average shares outstanding ........................... 10,284 6,744
Diluted:
Income before extraordinary loss .............................. $ 1.62 $ 1.27
Extraordinary loss ............................................ ( .03) ( .01)
Diluted net income ............................................ 1.59 1.26
Diluted weighted average shares outstanding ................... 10,284 6,744
BALANCE SHEET DATA (PERIOD END):
Commercial real estate properties, before accumulated
depreciation ................................................. $ 2,770,607 $ 2,208,399
Total assets .................................................. 2,998,030 2,733,878
Mortgage notes payable ........................................ 728,971 459,174
Unsecured credit facility ..................................... 216,600 297,600
Unsecured term loan ........................................... -- 75,000
Senior unsecured notes ........................................ 449,385 449,313
Market value of equity (1) .................................... 2,016,390 1,726,845
Total market capitalization including debt (1 and 2) .......... 3,397,204 2,993,756
OTHER DATA:
Funds from operations (basic) (3) ............................. $ 167,782 $ 130,820
Funds from operations (diluted) (3) ........................... $ 202,169 $ 161,681
Total square feet (at end of period) .......................... 21,291 21,385
Number of properties (at end of period) ....................... 188 189

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

OPERATING DATA:
Total revenues ................................................ $ 266,373 $ 153,395 $ 96,141
Total expenses ................................................ 201,892 107,905 70,951
Income (before preferred dividends and distributions,
minority interests and extraordinary loss) ................... 64,481 45,490 25,190
Preferred dividends and distributions ......................... 14,244 -- --
Minority interests ............................................ 10,672 8,624 6,768
Extraordinary loss (net of minority interests' share) ......... 1,670 2,230 895
Net income available to Class A common
shareholders ................................................. 37,895 34,636 17,527
Net income available to Class B common
shareholders ................................................. -- -- --
PER SHARE DATA - CLASS A COMMON
SHAREHOLDERS:
Basic:
Income before extraordinary loss .............................. $ 1.00 $ 1.13 $ .92
Extraordinary loss ............................................ ( .04) ( .07) ( .04)
Net income .................................................... 0.96 1.06 .88
Weighted average shares outstanding ........................... 39,473 32,727 19,928
Diluted:
Income before extraordinary loss .............................. $ .99 $ 1.11 $ .91
Extraordinary loss ............................................ ( .04) ( .07) ( .04)
Diluted net income ............................................ .95 1.04 .87
Diluted weighted average shares outstanding ................... 40,010 33,260 20,190
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 average shares outstanding ................... -- -- --
BALANCE SHEET DATA (PERIOD END):
Commercial real estate properties, before accumulated
depreciation ................................................. $ 1,737,133 $ 1,011,228 $ 516,768
Total assets .................................................. 1,854,816 1,113,257 543,758
Mortgage notes payable ........................................ 253,463 180,023 161,513
Unsecured credit facility ..................................... 465,850 210,250 108,500
Unsecured term loan ........................................... 20,000 -- --
Senior unsecured notes ........................................ 150,000 150,000 --
Market value of equity (1) .................................... 1,332,882 1,141,592 653,606
Total market capitalization including debt (1 and 2) .......... 2,199,936 1,668,800 921,423
OTHER DATA:
Funds from operations (basic) (3) ............................. $ 97,697 $ 69,548 $ 41,133
Funds from operations (diluted) (3) ........................... $ 99,450 $ 69,548 $ 41,133
Total square feet (at end of period) .......................... 21,000 13,645 8,800
Number of properties (at end of period) ....................... 204 155 110

(1) Based on the sum of:
(i) the market value of the Company's Class A common stock and operating
partnership units (assuming conversion) of 53,046,928, 48,076,648,
47,800,049, 44,988,846 and 31,119,364 at December 31, 2000, 1999, 1998,
1997 and 1996, respectively (based on a per share/unit price of $25.06,
$20.50, $22.19, $25.38 and $21.13 at December 31, 2000, 1999, 1998, 1997
and 1996, respectively),
(ii) the market value of the Company's Class B common stock of 10,283,513 and
10,283,763 shares at December 31, 2000 and 1999, respectively (based on
a per share price of $27.19 and $22.75 at December 31, 2000 and 1999,
respectively),
(iii) the liquidation preference value of 11,192,000 and 15,192,000 shares of
the Company's preferred stock at December 31, 2000 and 1999,
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, 2000 and 1999 (based on a
per unit value of $1,000) and
(v) the contributed value of Metropolitan's preferred interest of $85
million.

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

(3) 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 and the
completion of development or redevelopment of properties, 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 including
delays in completion and cost overruns, the ability to finance business
opportunities, increases in interest rates 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 its interests in its real properties, directly or
indirectly, through Reckson Operating Partnership, L.P. (the "Operating
Partnership'). As of December 31, 2000, the Company owned and operated 82
office properties (inclusive of ten office properties which are owned through
joint ventures) comprising approximately 14.4 million square feet, 104
industrial properties comprising approximately 6.8 million square feet and two
retail properties comprising approximately 20,000 square feet, located in the
Tri-State Area. In addition, the Company is in the process of developing one
office property encompassing approximately 315,000 square feet. The Company
also owns a 357,000 square foot office building located in Orlando, Florida and
approximately 290 acres of land in 13 separate parcels of which the Company can
develop approximately 1.4 million square feet of office space and approximately
224,000 square feet of industrial space. The Company also has invested
approximately $6.4 million in mortgage notes encumbering approximately 101
acres of land, approximately $17.1 million in a note receivable secured by a
partnership interest in Omni Partner's, L.P., owner of the Omni, a 575,000
square foot Class A office property located in Uniondale, New York and $36.5
million under three notes which are secured by a minority partner's preferred
interest in the Operating Partnership.

On August 9, 1999, the Company executed a contract for the sale, which
took place in three stages, of its interest in Reckson Morris Operating
Partnership, L. P. ("RMI"), which consisted of 28 properties, comprising
approximately 6.1 million square feet and three other big box industrial
properties to

II-3

Keystone Property Trust ("KTR"). 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 sales price of $310 million ($52 million of which is
attributable to the Morris Companies and its affiliates in the form of $41.6
million of preferred units of KTR's operating partnership and $10.4 million of
debt relief) consisted of (i) approximately $159.7 million in cash, (ii) $41.5
million in convertible preferred and common stock of KTR, (iii) $61.6 million
in preferred units of KTR's operating partnership, (iv) approximately $37.1
million of debt relief and (v) approximately $10.1 million in purchase money
mortgage notes secured by certain land that is being sold to Matrix.

As of December 31, 2000, the Matrix Sale and the sale of the Company's
interest in RMI was completed. As a result, the Company realized a gain of
approximately $16.7 million. Such gain has been included in gain on
dispositions of real estate on the Company's consolidated statements of income.
Cash proceeds from the sales were used primarily to repay borrowings under the
Company's unsecured credit facility. In addition, as of December 31, 2000, the
Company redeemed approximately $20 million of the preferred stock of KTR and
received principal repayments of approximately $7.2 million related to the
purchase money mortgage notes, all of which was used primarily for general
operating expenditures.

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") 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.

The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity investment in Metropolitan.
Crescent's investment 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
Class A common stock at a conversion price of $24.61 per share.

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 (loss) on dispositions of real estate on the Company's
consolidated statements of income.

On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Class A suburban office properties aggregating approximately 1.5 million
square feet to the Tri-State JV in exchange for approximately $136 million and
a 51% majority ownership interest in the Tri-State JV. As a result, the Company
realized a gain of approximately $15.2 million. Such gain has been included in
gain on dispositions of real estate on the Company's consolidated statements of
income. Cash proceeds received were used primarily to repay borrowings under
the Company's unsecured credit facility.

The Company has announced that it has withdrawn its offer to purchase a
tract of land located in Suffolk County, New York from the State of New York.
As a result, as of December 31, 2000, the Company incurred a one-time
non-recurring charge of $3.2 million in connection with the discontinuation

II-4

of this development project. Such amount has been included in gain (loss) on
dispositions of real estate on the Company's consolidated statements of income.
Further, this write off will not impact the Company's computation of Funds from
Operations.

During 1997, the Company formed FrontLine Capital Group ("FrontLine")
(formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture
Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the
Operating Partnership established a credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine to use in its
investment activities, operations and other general corporate purposes. As of
December 31, 2000, the Company had advanced approximately $93.4 million under
the FrontLine Facility. In addition, the Operating Partnership approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) or advances made to FrontLine under terms similar to the FrontLine
Facility. As of December 31, 2000, approximately $83.2 million had been funded
through the RSVP Commitment, of which $41.1 million represents investments in
RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents
advances. In March 2001, the Company increased the RSVP Commitment to $110
million and advanced approximately $24 million under the RSVP Commitment to
fund additional RSVP-controlled (REIT-qualified) joint ventures. In addition,
as of December 31, 2000, the Company, through its unsecured credit facility,
has allocated approximately $3.2 million in outstanding undrawn letters of
credit for the benefit of FrontLine. Both the FrontLine Facility and the RSVP
Commitment have a term of five years and advances under each are recourse
obligations of FrontLine. Interest accrues on advances made under the credit
facilities at a rate equal to the greater of (a) the prime rate plus two
percent and (b) 12% per annum, with the rate on amounts that are outstanding
for more than one year increasing annually at a rate of four percent of the
prior year's rate. Prior to maturity, interest is payable quarterly but only to
the extent of net cash flow of FrontLine and on an interest-only basis. As of
December 31, 2000, interest accrued under the FrontLine Facility and RSVP
Commitment was approximately $13.8 million.

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 and to issue preferred stock
and to pay dividends thereon. In consideration of the amendments, FrontLine
paid the Operating Partnership a fee of approximately $3.6 million in the form
of shares of FrontLine common stock. Such fee has been recognized in income
over an estimated nine month benefit period.

FrontLine currently has two distinct operating units: one of which
represents its interest in HQ Global Holdings, Inc., the largest provider of
flexible officing solutions in the world, and the other which represents
interests in technology based partner companies. RSVP invests primarily in real
estate and real estate related operating companies generally outside of the
Company's core office and industrial focus.

The Operating Partnership and FrontLine have entered into an intercompany
agreement (the "Reckson Intercompany Agreement") to formalize their
relationship and to limit conflict 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.

II-5

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 may 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 $3.3 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, 2000, the Company had invested,
through the RSVP Commitment, approximately $20.6 million in the Dominion
Venture which had investments in 13 government office buildings and three
correctional facilities.

As of December 31, 2000, the Company has invested approximately $11.1
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 $3.5 million to FrontLine through the RSVP Commitment for an
investment in RSVP which was then invested in certain service business
activities related to student housing. As of December 31, 2000, RAP -- SHP had
investments in seven off -- campus student housing projects. Additionally,
during 2000, RAP-SHP entered into an off -- campus development joint venture
with Titan Investments II, a third party national developer. The purpose of the
venture is to develop or reposition off - campus student housing projects
across the United States.

As of December 31, 2000, the Company has invested approximately $3.4
million, through a subsidiary, in RAP MD, LLC ("RAP -- MD"), a company that
engages primarily in the acquisition, ownership, management and development of
medical office properties. The Company's investment was funded through the RSVP
Commitment. As of December 31, 2000, RAP -- MD had investments in eight medical
office properties.

The market capitalization of the Company at December 31, 2000 was
approximately $3.4 billion. The Company's market capitalization is based on the
sum of (i) the market value of the Company's Class A common stock and common
units of limited partnership interest in the Operating Partnership ("OP Units")
(assuming conversion) of $25.06 per share/unit (based on the closing price of
the Company's Class A common stock on December 31, 2000), (ii) the market value
of the Company's Class B common stock of $27.19 per share (based on the closing
price of the Company's Class B common stock on December 31, 2000), (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 of $1,000 per unit, (v) the contributed
value of Metropolitan's preferred interest of $85 million and (vi)
approximately $1.4 billion (including its share of joint venture debt and net
of minority partners' interests) of debt outstanding at December 31, 2000. As a
result, the Company's total debt to total market capitalization ratio at
December 31, 2000 equaled approximately 40.6%.

RESULTS OF OPERATIONS

The Company's total revenues increased by $106.8 million or 26.5% from
1999 to 2000 and $136.8 million or 51.4% from 1998 to 1999. Property operating
revenues, which include base rents and tenant escalations and reimbursements
("Property Operating Revenues") increased by $82.9 million or 22.5% from 1999
to 2000 and $116.7 million or 46.2% from 1998 to 1999. The 2000 increase in
Property Operating Revenues is substantially attributable to the assets from
the Tower Portfolio acquisition on May 24, 1999. This accounts for
approximately $31.9 million, or 38.5%, of the increase in Property Operating
Revenues. Additionally, approximately $21.0 million of Property Operating
Revenues was generated from two

II-6

properties acquired in 2000. Property Operating Revenues were also positively
impacted by approximately $15.3 million from increases in occupancies and
rental rates in our "same store" properties, approximately $9.6 million from
newly developed properties added to the operating portfolio and approximately
$2.3 million from 919 Third Avenue, which property operating results were
included in Property Operating Revenues. These increases offset the impact of
approximately $14.8 million of Property Operating Revenues that were generated
in 1999 from properties that were sold in the 1999 "Big Box" industrial
transaction. The remaining balance of the increase in total revenues for 2000
is primarily attributable to an increase in gain on dispositions of real estate
of approximately $11.8 million and an increase of approximately $8.1 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 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 June 15, 1999 acquisition of the first mortgage note secured by
919 Third Avenue which property operating results were included in Properly
Operating Revenues. 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 dispositions of real estate of $10.1
million and an increase of 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 Company's base rent reflects the positive impact of the straight-line
rent adjustment of $38.8 million in 2000, $10.7 million in 1999 and $7.7
million in 1998. The 2000 straight-line rent adjustment includes $23.3 million
at 919 3rd Avenue which is attributable to rental abatement periods for the
three largest tenants.

Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $31.5 million or 25.0% from 1999 to 2000 and by $41.7
million or 49.5% from 1998 to 1999. These increases are primarily due to the
acquisition of the properties included in the Tower Portfolio acquisition on
May 24, 1999 and the June 15, 1999 acquisition of the first mortgage note
secured by 919 Third Avenue which property operating results were included in
Property Expenses. Gross operating margins (defined as Property Operating
Revenues less Property Expenses, taken as a percentage of Property Operating
Revenues) for 2000, 1999, and 1998 were 65.2%, 65.9% and 66.6%, respectively.
The slight decrease in the gross operating margin percentages resulted from a
larger proportionate share of gross operating margin derived from office
properties, which has a lower gross margin percentage. The higher proportionate
share of the gross operating margin attributable to the office properties was a
result of the two office properties acquired in 2000, 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 of properties in office and industrial parks or
in its established sub-markets.

Marketing, general and administrative expenses were $27.4 million in 2000,
$24.3 million in 1999 and $16.9 million in 1998. 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 5.4% in 2000, 6.0% in 1999 and 6.3% in 1998.

II-7

Interest expense was $96.3 million in 2000, $74.3 million in 1999 and
$47.8 million in 1998. The increase of $22.0 million from 1999 to 2000 is
attributable to (i) a full year of interest on the mortgage debt relating to
the Tower Portfolio acquisition (ii) interest on a $70 million mortgage note
for the 1350 Avenue of the Americas acquisition which occurred on January 13,
2000 and (iii) a full year of interest on the $300 million of senior unsecured
notes issued in March 1999. 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 unsecured credit facilities and unsecured term loan.
The weighted average balance outstanding on the Company's unsecured credit
facilities and unsecured term loan was $416.5 million for 2000, $423.8 million
for 1999 and $377.9 million for 1998.

Included in depreciation and amortization expense is amortized financing
costs of $4.1 million in 2000, $3.4 million in 1999 and $1.6 million in 1998.
The increase of approximately $700,000 from 1999 to 2000 is primarily
attributable to the secured financings of 919 Third Avenue and 1350 Avenue of
the Americas. 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.

Extraordinary losses, net of minority interest resulted in a $1.4 million
loss in 2000, a $555,000 loss in 1999 and a $1.7 million loss in 1998. 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 credit facilities and term loans.

LIQUIDITY AND CAPITAL RESOURCES

Summary of Cash Flows

Net cash provided by operating activities totaled $169.5 million in 2000,
$153.9 million in 1999 and $120.1 million in 1998. Increases for each year were
primarily attributable to the growth in cash flow provided by the acquisition
of properties, the increased occupancy levels of the Company's development
properties and the increase in rental rates in all of the Company's markets.

Net cash used in investing activities totaled $281.6 million in 2000,
$392.2 million in 1999 and $615.2 million in 1998. Cash used in investing
activities related primarily to investments in real estate properties including
development costs. The 1999 cash flows were also impacted by the acquisition of
the first mortgage note securing 919 Third Avenue and by proceeds from the
sales of real estate. 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 $108.5 million in 2000,
$257.4 million in 1999 and $475.6 million in 1998. Cash provided by financing
activities in 2000 was primarily attributable to secured debt financings, the
redemption of preferred stock of KTR, minority partner contributions, and
advances under the Company's unsecured credit facilities and term loan. Cash
provided by financing activities in 1999 and 1998 was primarily attributable to
proceeds from the issuances of common and preferred stock, senior unsecured
notes, secured borrowings, minority partner contributions and advances under
the Company's unsecured credit facilities and term loan.

On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.

Investing Activities

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.

II-8

On August 15, 2000, the Company acquired 538 Broadhollow Road, a 180,000
square foot Class A office property located in Melville, New York for a
purchase price of approximately $25.6 million. This acquisition was financed,
in part, through a borrowing 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 investment activities, operations and for other
general corporate purposes. As of December 31, 2000, approximately $93.4
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, 2000, the Company has funded approximately $83.2
million under this commitment, of which $41.1 million represents investments in
RSVP -- controlled (REIT - qualified) joint ventures and $42.1 million
represents advances. In March 2001, the Company increased the RSVP Commitment
to $110 million and advanced approximately $24 million under the RSVP
Commitment to fund additional RSVP-controlled (REIT-qualified) joint ventures.

Financing Activities

During 2000, the Company paid cash dividends on its Class A common stock
of approximately $1.51 per share and approximately $2.32 per share on its 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 Class A 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, 2000, the Company purchased and retired 1,410,804
shares of Class B common stock for approximately $30.3 million.

As of December 31, 2000, the Company had a three year $575 million
unsecured revolving credit facility (the "Credit Facility") from The Chase
Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent
and Deutsche Bank as documentation agent. The Credit Facility matures in
September, 2003 and borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.

The Credit Facility replaced the Company's existing $500 million unsecured
credit facility (together with the Credit Facility, the "Credit Facility") and
$75 million term loan. As a result, certain deferred loan costs incurred in
connection with such unsecured credit facility and term loan were written off.
Such amount is reflected as an extraordinary loss in the Company's consolidated
statements of income.

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At December 31, 2000, the Company had availability under the
Credit Facility to borrow an additional $358.4 million (of which, $51.3 million
has been allocated for outstanding undrawn letters of credit).

On November 2, 2000, the Company obtained a three year secured $250
million first mortgage commitment on the property located at 919 Third Avenue,
New York N. Y. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis points based
upon the outstanding balance. At closing, $200 million was funded under the
commitment at an interest rate of LIBOR plus 120 basis points. In addition, in
connection with the $200 million initial funding, the Company purchased a LIBOR
interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The
initial funding was used primarily to repay outstanding borrowings under the
Company's Credit Facility.

Capitalization

The Company's indebtedness at December 31, 2000 totaled approximately $1.4
billion (including its share of joint venture debt and net of minority
partners' interests) and was comprised of $216.6 million outstanding under the
Credit Facility, approximately $449.4 million of senior unsecured notes and
approximately $714.8 million of mortgage indebtedness with a weighted average
interest rate of approximately 7.8% and a weighted average maturity of
approximately 8.1 years. Based on the Company's total market capitalization of
approximately $3.4 billion at December 31, 2000 (calculated based on the sum

II-9

of (i) the market value of the Company's Class A common stock and OP Units,
assuming conversion, (ii) the market value of the Company's Class B common
stock, (iii) the liquidation preference value of the Company's preferred stock,
(iv) the liquidation preference value of the Operating Partnership's preferred
units, (v) the contributed value of Metropolitan's preferred interest and (vi)
the $1.4 billion of debt), the Company's debt represented approximately 40.6%
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. The Company expects to meet
its short-term liquidity requirements generally through its net cash provided
by operating activities along with the Credit Facility previously discussed.
The Company expects to meet certain of its financing requirements through
long-term secured and unsecured borrowings and the issuance of debt and equity
securities of the Company. In addition, the Company also believes that it will,
from time to time, generate funds from the disposition of certain of its real
estate properties or interests therein. 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 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 90% of REIT
taxable income. The Company expects to use its cash flow from operating
activities for distributions to stockholders and for payment of recurring,
non-incremental revenue-generating expenditures. The Company intends to invest
amounts accumulated for distribution in short-term investments.

On October 16, 2000, the Company's Board of Directors announced that it
adopted a Shareholder Rights Plan (the "Rights Plan") designed to protect
shareholders from various abusive takeover tactics, including attempts to
acquire control of the Company at an inadequate price, depriving shareholders
of the full value of their investment. A description of the Rights Plan is
included in the Notes to Financial Statements of the Company.

INFLATION

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

The Credit Facility and certain mortgage notes payable bear interest at a
variable rate, which will be influenced by changes in short-term interest
rates, and are sensitive to inflation.

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 restructuring 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 November 1999, NAREIT issued a "White Paper" analysis to address
certain interpretive issues under its definition of FFO. The White Paper
provides that FFO should include both recurring and non-recurring operating
results, except those results defined as "extraordinary items" under GAAP. 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):

2000 1999 1998
------------ ----------- -----------

Income before preferred dividends and distributions, limited
partners' minority interest in the operating partnership and
extraordinary loss .............................................. $ 127,107 $ 97,240 $ 61,718
Less:
Preferred dividends and distributions ........................... 28,012 27,001 14,244
Extraordinary loss, net of limited partners' minority
interest in the operating partnership of $175, $74 and
$323, respectively............................................. 1,396 555 1,670
Limited partners' minority interest in the operating
partnership ................................................... 11,669 9,407 7,909
--------- --------- --------
Net income available to common shareholders ...................... 86,030 60,277 37,895
Adjustments for Funds From Operations
Add:
Limited partners' minority interest in the operating
partnership ................................................... 11,669 9,407 7,909
Real estate depreciation and amortization ....................... 90,552 72,124 51,424
Minority interests' in consolidated partnerships ................ 9,120 6,802 2,763
Extraordinary loss, net of limited partners' minority
interest in the operating partnership of $175, $74 and
$323, respectively............................................. 1,396 555 1,670
Less:
Gain (loss) on dispositions of real estate ...................... 18,669 10,052 --
Amount distributed to minority partners in consolidated
partnerships .................................................. 12,316 8,293 3,964
--------- --------- --------
Basic Funds From Operations ...................................... 167,782 130,820 97,697
Add:
Dilutive preferred dividends and distributions .................. 34,387 30,861 1,753
--------- --------- --------
Diluted Fund From Operations ..................................... $ 202,169 $ 161,681 $ 99,450
========= ========= ========
Weighted Average Shares/OP Units outstanding (1) ................. 61,050 54,719 47,201
========= ========= ========
Diluted Weighted Average Shares/OP Units outstanding (1) ......... 78,119 70,013 48,651
========= ========= ========

(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 will, when
advantageous, hedge its interest rate risk using financial instruments. The
Company is not 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
until such time as it is able to retire the short-term variable rate debt with
either a long-term fixed rate debt offering, long term mortgage debt, equity
offerings or through sales or partial sales of assets.

The fair market value ("FMV") 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.

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 FMV at December 31, 2000 (dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2001 2002 2003 2004 2005
------------- ------------- ------------- -------------- -------------

Long term debt:
Fixed rate ............................. $ 23,225 $ 17,011 $ 8,905 $ 112,370 $ 10,467
Weighted average interest rate ......... 7.59% 7.80% 7.79% 7.50% 7.81%

Variable rate .......................... $ 70,000 $ -- $ 416,600 $ -- $ --
Weighted average interest rate ......... 8.43% 7.91%

THEREAFTER TOTAL (1) F M V
-------------- -------------- ------------

Long term debt:
Fixed rate ............................. $ 736,993 $ 908,971 $ 908,971
Weighted average interest rate ......... 7.56% 7.56%

Variable rate .......................... $ -- $ 486,600 $ 486,600
Weighted average interest rate ......... 7.98%

(1) Includes unamortized issuance discounts of $615,000 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 $4.9 million annual increase in
interest expense based on approximately $486.6 million of variable rate debt
outstanding at December 31, 2000.

The following table sets forth the Company's mortgage notes and notes
receivable by scheduled maturity date, weighted average interest rates and
estimated FMV at December 31, 2000 (dollars in thousands):

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
2001 2002 2003 2004 2005
---------- ------------ ------ ------------- ------

Mortgage notes and notes receivable:
Fixed rate ............................. $ 15 $ 4,209 $ -- $ 36,500 $ --
Weighted average interest rate ......... 9.00% 10.08% 10.23%

THEREAFTER TOTAL (2) F M V
------------ ------------- -----------

Mortgage notes and notes receivable:
Fixed rate ............................. $ 16,990 $ 57,714 $ 57,714
Weighted average interest rate ......... 11.65% 10.63%

(2) Excludes mortgage note receivable acquisition costs and interest
receivables aggregating approximately $506,000.

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 2001 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 2001 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
2001 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
2001 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, 2000 and December 31, 1999 ..... IV-6
Consolidated Statements of Income for the years ended December 31, 2000, 1999
and 1998 .................................................................... IV-7
Consolidated Statement of Stockholders' Equity for the years ended December 31,
2000, 1999 and 1998. ........................................................ IV-8
Consolidated Statements of Cash Flows for the years ended December 31, 2000,
1999 and 1998 . ............................................................. IV-9
Notes to Financial Statements ................................................. IV-10
Schedule III - Real Estate and Accumulated Depreciation ....................... IV-29

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.

IV-1

(3) Exhibits

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

3.1 a Amended and
3.1 a Amended and Restated Articles of Incorporation of the Registrant
3.1 a Amended and Restated Articles of Incorporation of the Registrant
3.2 n Amended and Restated By-Laws of the Registrant
3.3 g 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 o 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 j 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 o Articles of Amendment of the Registrant filed with the Maryland State Department
of Assessments and Taxation on January 4, 2000
3.7 o 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 g Specimen Share Certificate of Series A Preferred Stock
4.3 i Form of 7.40% Notes due 2004 of Reckson Operating Partnership, L.P.
4.4 i Form of 7.75% Notes due 2009 of Reckson Operating Partnership, L.P.
4.5 i Indenture, dated March 26, 1999, among Reckson Operating Partnership, L.P., the
Registrant, and The Bank of New York, as trustee
4.6 p Rights Agreement, dated as of October 13, 2000, between the Registrant and
American Stock Transfer & Trust Company, as Rights Agent, which includes, as
Exhibit A thereto, the Form of Articles Supplementary, as Exhibit B thereto, the
Form of Right Certificate, and as Exhibit C thereto, the Summary of Rights to
Purchase Preferred Shares
10.1 a Amended and Restated Agreement of Limited Partnership of Reckson Operating
Partnership, L.P.
10.2 g 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 g 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 g 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 g 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 o 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 o 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 Supplement to the Amended and Restated Agreement of Limited Partnership of
Reckson Operating Partnership, L.P. Establishing the Series F Junior Participating
Preferred Partnership Units
10.9 e Third Amended and Restated Agreement of Limited Partnership of Omni Partners,
L.P.
10.10 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Donald Rechler
10.11 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Scott Rechler

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

10.12 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Mitchell Rechler
10.13 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Gregg Rechler
10.14 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Roger Rechler
10.15 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Michael Maturo
10.16 p Amendment and Restatement of Employment and Noncompetition Agreement,
dated as of August 15, 2000, between the Registrant and Jason Barnett
10.17 a Purchase Option Agreements relating to the Reckson Option Properties
10.18 a Purchase Option Agreements relating to the Other Option Properties
10.19 c Amended 1995 Stock Option Plan
10.20 c 1996 Employee Stock Option Plan
10.21 b Ground Leases for certain of the properties
10.22 h Third Amended and Restated Agreement of Limited Partnership of Reckson FS
Limited Partnership
10.23 a Indemnity Agreement relating to 100 Oser Avenue
10.24 e Amended and Restated 1997 Stock Option Plan
10.25 e 1998 Stock Option Plan
10.26 e Note Purchase Agreement for the Senior Unsecured Notes
10.27 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Donald Rechler
10.28 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Scott Rechler
10.29 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Mitchell Rechler
10.30 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Gregg Rechler
10.31 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Roger Rechler
10.32 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Michael Maturo
10.33 p Amendment and Restatement of Severance Agreement, dated as of August 15, 2000,
between the Registrant and Jason Barnett
10.34 f Amended and Restated Operating Agreement of Metropolitan Partners LLC, dated
December 8, 1998
10.35 h Intercompany Agreement by and between Reckson Operating Partnership, L.P. and
Reckson Service Industries, Inc., dated May 13, 1998
10.36 o 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 o 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 o Letter Agreement, dated November 30, 1999, amending the RSVP Credit Agreement
and the RSI Credit Agreement
10.39 j 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, the
Registrant and Reckson Operating Partnership, L.P. relating to 6,000,000 shares of
Series B Convertible Cumulative Preferred Stock

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

10.40 j 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 the Registrant
relating to 6,000,000 shares of Series B Convertible Cumulative Preferred Stock
10.41 k Consolidated, Amended and Restated Fee and Leasehold Mortgage Note relating to
919 Third Avenue
10.42 m Agreement of Purchase and Sale, between NBBRE 919 Third Avenue Associates,
L.P., as Seller, and Reckson Operating Partnership, L.P., as Purchaser
10.43 k 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
10.44 l 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

IV-2

10.45 q Registration Rights Agreement, dated June 16, 2000, between the Registrant and
Stichting Pensioenfonds ABP
10.46 p $575 million Credit Facility dated as of September 7, 2000 among Reckson Operating
Partnership, L.P., The Chase Manhattan Bank, UBS Warburg Dillon Read, Deutsche
Bank and Chase Securities Inc.
10.47 p Guaranty Agreement dated as of September 7, 2000 among the Registrant, The Chase
Manhattan Bank and UBS Warburg LLC
10.48 p Operating Agreement dated as of September 28, 2000 between Reckson Tri-State
Member LLC (together with its permitted successors and assigns) and TIAA Tri-State
LLC
10.49 Secured Loan Agreement among Metropolitan 919 3rd Avenue LLC (as borrower),
Merrill Lynch Mortgage Capital Inc., Bayerische Landesbank, Cayman Islands
Branch, Commerzbank AG New York and Grand Cayman Branches, Wells Fargo
Bank, National Association and the other lenders signatory thereto.
10.50 Loan agreement between 1350 LLC, as Borrower, and Secore Financial Corporation,
as Lender
10.51 Agreement of Spreader, Consolidation and Modification
of Mortgage Security Agreement among Metropolitan 810
7th Ave., LLC, 100 Wall Company LLC and Monumental
Life Insurance Company
10.52 Consolidated, Amended and Restated Secured Promissory
Note relating to Metropolitan 810 7th Ave., LLC and
100 Wall Company LLC
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)

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

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

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

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

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

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

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

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

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

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

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

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

(n) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the
SEC on November 13, 2000 and incorporated herein by reference.

(o) Previously filed as an exhibit to the Registrant's Form 10-K filed with the
SEC on March 17, 2000 and incorporated herein by reference.

(p) Previously filed as an exhibit to the Registrant's Form 8-K filed with the
SEC on October 17, 2000 and incorporated herein by reference.

(q) Previously filed as an exhibit to the Registrant's Form 10-Q filed with the
SEC on August 11, 2000 and incorporated herein by reference.

(B) REPORTS ON FORM 8-K

On October 17, 2000, the Registrant filed a report on Form 8-K relating to:

(i) the authorization by the Registrant's Board of Directors of a dividend
distribution of one preferred share purchase right for each outstanding
shares of Class A common stock of the Registrant under a shareholder
rights plans;

(ii) the purchase by a subsidiary of Teachers Insurance and Annuity Association
of America from a subsidiary of the Operating Partnership of a 49%
interest in RT Tri-State LLC for approximately $136 million;

(iii) the Operating Partnership entering into an unsecured revolving credit
facility of up to $575 million with The Chase Manhattan Bank, UBS Warburg
LLC, Deutsche Bank and Chase Securities Inc;

(iv) the Registrant's entrance into employment and noncompetition agreements
and severance agreements with each of its executive officers; and

(v) the adoption by the Registrant's Board of Directors of a new bylaw
provision.

On November 2, 2000, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit its third quarter presentation in satisfaction of
the requirements of Regulation FD.

On November 3, 2000, the Registrant submitted a report on Form 8-K under Item 9
thereof in order to submit supplemental operating and financial data for the
third quarter in satisfaction of the requirements of Regulation FD.

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 21, 2001.
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, 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 21, 2001.

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 N. Klein Director
---------------- Co-Chief Executive Officer -----------------
(Scott Rechler) and Director (John 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, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. 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, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, 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 13, 2001

IV-5

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

DECEMBER 31,
---------------------------------
2000 1999
--------------- ---------------

ASSETS
Commercial real estate properties, at cost: (Notes 2, 3, 5, 6 and 8)
Land ..................................................................... $ 396,482 $ 276,204
Buildings and improvements ............................................... 2,219,448 1,802,611
Developments in progress:
Land ..................................................................... 60,918 60,894
Development costs ........................................................ 93,759 68,690
Furniture, fixtures and equipment ......................................... 7,138 6,473
----------- -----------
2,777,745 2,214,872
Less accumulated depreciation .......................................... (288,479) (218,385)
----------- -----------
2,489,266 1,996,487
Investments in real estate joint ventures (Note 8) ........................ 43,534 31,531
Investment in mortgage notes and notes receivable (Note 6) ................ 58,220 352,466
Cash and cash equivalents (Note 9) ........................................ 17,843 21,368
Tenant receivables ........................................................ 11,511 5,117
Investments in and advances to affiliates (Note 8) ........................ 177,474 178,695
Deferred rents receivable ................................................. 67,930 32,132
Prepaid expenses and other assets ......................................... 68,895 66,977
Contract and land deposits and pre-acquisition costs ...................... 1,676 9,585
Deferred lease and loan costs, less accumulated amortization of $32,773
and $24,484, respectively................................................. 61,681 39,520
----------- -----------
Total Assets .............................................................. $ 2,998,030 $ 2,733,878
=========== ===========
LIABILITIES
Mortgage notes payable (Note 2) ........................................... $ 728,971 $ 459,174
Unsecured credit facility (Note 3) ........................................ 216,600 297,600
Unsecured term loan (Note 3) .............................................. -- 75,000
Senior unsecured notes (Note 4) ........................................... 449,385 449,313
Accrued expenses and other liabilities (Note 5) ........................... 95,393 82,079
Dividends and distributions payable ....................................... 28,801 27,166
----------- -----------
Total Liabilities ......................................................... 1,519,150 1,390,332
----------- -----------
Minority interests' in consolidated partnerships .......................... 226,350 93,086
Preferred unit interest in the operating partnership ...................... 42,518 42,518
Limited partners' minority interest in the operating partnership .......... 97,353 90,986
----------- -----------
366,221 226,590
----------- -----------
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, 2,000,000 and 6,000,000 shares issued and
outstanding, respectively .............................................. 20 60
Common Stock, $.01 par value, 100,000,000 shares authorized
Class A common stock, 45,352,286 and 40,375,506 shares issued and
outstanding, respectively .............................................. 454 404
Class B common stock, 10,283,513 and 10,283,763 shares issued and
outstanding, respectively .............................................. 103 103
Additional paid in capital ................................................ 1,111,990 1,116,297
----------- -----------
Total Stockholders' Equity ................................................ 1,112,659 1,116,956
----------- -----------
Total Liabilities and Stockholders' Equity ................................ $ 2,998,030 $ 2,733,878
=========== ===========

(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,
------------------------------------------------
2000 1999 1998
-------------- -------------- --------------

REVENUES (Note 10):
Base Rents ................................................................. $ 397,327 $ 324,146 $ 224,703
Tenant escalations and reimbursements ...................................... 54,750 44,989 27,744
Equity in earnings of service companies and real estate joint ventures. 4,383 2,148 1,836
Interest income on mortgage notes and notes receivable ..................... 8,212 7,944 7,739
Gain (loss) on dispositions of real estate (Note 6) ........................ 18,669 10,052 --
Investment and other income ................................................ 26,597 13,874 4,351
----------- ----------- -----------
Total Revenues ............................................................. 509,938 403,153 266,373
----------- ----------- -----------
EXPENSES:
Property operating expenses ................................................ 157,456 125,994 84,280
Marketing, general and administrative ...................................... 27,371 24,293 16,860
Interest ................................................................... 96,337 74,320 47,795
Depreciation and amortization .............................................. 92,547 74,504 52,957
----------- ----------- -----------
Total Expenses ............................................................. 373,711 299,111 201,892
----------- ----------- -----------
Income before preferred dividends and distributions, minority
interests and extraordinary loss .......................................... 136,227 104,042 64,481
Minority partners' interests in consolidated partnerships .................. (9,120) (6,802) (2,763)
Distributions to preferred unit holders .................................... (2,641) (2,641) (1,753)
Limited partners' minority interest in the operating partnership ........... (11,669) (9,407) (7,909)
----------- ----------- -----------
Income before dividends to preferred shareholders and extraordinary
loss ...................................................................... 112,797 85,192 52,056
Extraordinary loss on extinguishment of debts, net of limited partners'
minority interest share of $175, $74 and $323, respectively (Note 3) . (1,396) (555) (1,670)
----------- ----------- -----------
Net Income ................................................................. 111,401 84,637 50,386
Dividends to preferred shareholders ........................................ (25,371) (24,360) (12,491)
----------- ----------- -----------
Net income available to common shareholders ................................ $ 86,030 $ 60,277 $ 37,895
=========== =========== ===========
Net income available to:
Class A common shareholders ............................................... $ 62,989 $ 47,529 $ 37,895
Class B common shareholders ............................................... 23,041 12,748 --
----------- ----------- -----------
Total ...................................................................... $ 86,030 $ 60,277 $ 37,895
=========== =========== ===========
Basic earnings per weighted average common share:
Class A common shareholders ............................................... $ 1.49 $ 1.19 $ 1.00
Extraordinary loss per Class A common share ............................... ( .03) ( .01) ( .04)
----------- ----------- -----------
Net income per Class A common share ....................................... $ 1.46 $ 1.18 $ .96
=========== =========== ===========
Class B common shareholders ............................................... $ 2.28 $ 1.91 $ --
Extraordinary loss per Class B common share ............................... ( .04) ( .02) --
----------- ----------- -----------
Net income per Class B common share ....................................... $ 2.24 $ 1.89 $ --
=========== =========== ===========
Basic weighted average common shares outstanding:
Class A common shareholders ............................................... 43,070,000 40,270,000 39,473,000
Class B common shareholders ............................................... 10,284,000 6,744,000 --
Diluted net income per weighted average common share:
Class A common shareholders ............................................... $ 1.45 $ 1.17 $ .95
Class B common shareholders ............................................... $ 1.59 $ 1.26 $ --
Diluted weighted average common shares outstanding:
Class A common shareholders ............................................... 43,545,000 40,676,000 40,010,000
Class B common shareholders ............................................... 10,284,000 6,744,000 --

(see accompanying notes to financial statements)

IV-7

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

LIMITED
CLASS A 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
--------- --------- ----------- ----------- --------------- ------------ --------------- ------------

Stockholders equity
January 1, 1998 ........... $ 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
A common stock
offerings ................. 21 -- -- -- 41,340 -- 41,361 8,785
Issuance of OP 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 OP Units...... -- -- -- -- -- -- -- (1,485)
Net proceeds from long
term compensation
issuances ................. 4 -- -- -- 1,593 -- 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 ......... 404 103 92 60 1,116,297 -- 1,116,956 90,986
Conversion of Series B
Preferred Stock ........... 42 -- -- (40) (6,765) -- (6,763) 6,763
Redemption of OP Units...... -- -- -- -- -- -- -- (125)
Net proceeds from long
term compensation
issuances ................. 8 -- -- -- 6,656 -- 6,664 --
Net income ................. -- -- -- -- -- 86,030 86,030 11,494
Dividends and
distributions paid and
payable ................... -- -- -- -- (4,198) (86,030) (90,228) (11,765)
----- ----- --- ------ ----------- ---------- ----------- ---------
Stockholders' equity
December 31, 2000 ......... $ 454 $ 103 $92 $ 20 $ 1,111,990 $ -- $ 1,112,659 $ 97,353
===== ===== === ====== =========== ========== =========== =========

(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,
---------------------------------------
2000 1999 1998
------------ ------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ....................................................................... $ 111,401 $ 84,637 $ 50,386
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................................... 92,547 74,504 52,957
Extraordinary loss, net of minority interests .................................... 1,396 555 1,670
Minority partners' interests in consolidated partnerships ........................ 9,120 6,802 2,763
Limited partners' minority interest in the operating partnership ................. 11,669 9,407 7,909
Gain (loss) on dispositions of real estate, securities and mortgage repayment..... (18,669) (9,657) (52)
Distributions from investments in real estate joint ventures ..................... 368 442 470
Equity in earnings of service companies and real estate joint ventures ........... (4,383) (2,148) (1,836)
Changes in operating assets and liabilities:
Deferred rents receivable ........................................................ (35,798) (2,158) (7,553)
Prepaid expenses and other assets ................................................ (9,582) (24,414) (4,597)
Tenant and affiliate receivables ................................................. (6,394) 42 (184)
Accrued expenses and other liabilities ........................................... 17,857 15,888 18,176
---------- ---------- ----------
Net cash provided by operating activities ........................................ 169,532 153,900 120,109
---------- ---------- ----------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchases of commercial real estate properties ................................... (190,548) (284,741) (449,241)
Investment in mortgage notes and notes receivable ................................ -- (295,048) 4,072
(Increase) decrease in contract deposits and preacquisition costs ................ (2,023) (12,650) 8,839
Additions to developments in progress ............................................ (13,392) (9,615) (97,570)
Additions to commercial real estate properties ................................... (89,818) (28,135) (21,181)
Payment of leasing costs ......................................................... (24,082) (16,467) (8,802)
Investments in securities ........................................................ -- -- (42,299)
Additions to furniture, fixtures and equipment ................................... (742) (461) (2,071)
Investments in real estate joint ventures ........................................ (10,780) (15,033) (7,773)
Investment in and distributions from service companies ........................... -- -- 15
Proceeds from dispositions of real estate, securities and mortgage note
receivable repayments ........................................................... 49,810 269,916 809
---------- ---------- ----------
Net cash used in investing activities ............................................ (281,575) (392,234) (615,202)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured borrowings ................................................. 297,163 125,548 11,458
Principal payments on secured borrowings ......................................... (27,367) (4,714) (4,735)
Proceeds from issuance of senior unsecured notes, net of issuance costs .......... -- 299,262 --
Proceeds from issuance of preferred stock, net of issuance costs ................. -- 148,000 220,800
Proceeds from redemption of KTR preferred stock .................................. 19,903 -- --
Payment of loan and equity issuance costs ........................................ (11,649) (8,264) (4,738)
Investments in and advances to affiliates ........................................ (12,516) (125,007) (23,452)
Proceeds from unsecured credit facilities and term loans ......................... 689,600 397,500 413,100
Principal payments on unsecured credit facilities and term loans ................. (845,600) (510,750) (137,500)
Repurchases of Class B common stock .............................................. -- (30,287) --
Proceeds from issuance of common stock and exercise of options, net of
issuance costs .................................................................. 4,010 1,512 51,934
Contributions by minority partners in consolidated partnerships .................. 135,975 75,500 10,000
Distributions to minority partners in consolidated partnerships .................. (12,632) (6,701) (3,570)
Distributions to limited partners in the operating partnership ................... (11,654) (11,177) (7,576)
Distributions to preferred unit holders .......................................... (2,641) (2,641) (1,312)
Dividends to common shareholders ................................................. (87,437) (68,031) (39,157)
Dividends to preferred shareholders .............................................. (26,637) (22,397) (9,638)
---------- ---------- ----------
Net cash provided by financing activities ........................................ 108,518 257,353 475,614
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents ............................. (3,525) 19,019 (19,479)
Cash and cash equivalents at beginning of period ................................. 21,368 2,349 21,828
---------- ---------- ----------
Cash and cash equivalents at end of period ....................................... $ 17,843 $ 21,368 $ 2,349
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, including interest capitalized ......... $ 106,106 $ 77,014 $ 52,622
========== ========== ==========

(see accompanying notes to financial statements)

IV-9

RECKSON ASSOCIATES REALTY CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000

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 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 ("OP 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 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, 2000 and 1999 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000. The
Operating Partnership's investments in Metropolitan, Omni Partner's, L. P.
("Omni"), the Tri-State JV (see note 6) and certain industrial joint venture
properties formerly owned by Reckson Morris Operating Partnership, L. P.
("RMI") 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 Keystone Property Trust
("KTR"). 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.

IV-10

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

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

The merger with Tower 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 the accounting
principles generally accepted in the United States ("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.

The minority interests at December 31, 2000 represent an approximate 12%
limited partnership minority interest in the Operating Partnership, a
convertible preferred interest in Metropolitan, a 49% interest in the Tri-State
JV 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.

Tenant's lease security deposits aggregating approximately $6.1 million
and $5.1 million at December 31, 2000 and 1999, respectively have been included
in cash and cash equivalents on the accompanying balance sheets.

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 90% 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 2000, the Company paid cash dividends on its Class A common stock
of approximately $1.51 per share and $2.32 per share on its Class B common
stock. During 1999, the Company paid cash dividends on its Class A common stock
of approximately $1.42 per share and approximately $.98 per

IV-11

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

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

share (representing the period from May 24, 1999 through October 31, 1999) on
its Class B common stock. For 2000, approximately 90.08% of the dividends paid
on the Company's Class A common stock and Class B common stock were considered
ordinary income for federal tax purposes. The remaining 9.92% of the dividends
paid were treated as a capital gain distribution, with approximately 5.65% of
the dividends subject to a 20% tax rate and approximately 4.27% of the
dividends subject to a 25% tax rate for individuals and certain other tax
payers. For 1999, approximately 92.75% of the dividends paid on the Company's
Class A 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.

Revenue Recognition

Minimum rental income is recognized on a straight-line basis over the term
of a 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: (i) the status of the loan, (ii) the value of the underlying
collateral, (iii) the financial condition of the borrower and (iv) anticipated
future events.

Gain (loss) on dispositions 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. The conversion of OP Units into Class A common
stock would not have a significant effect on per share amounts as the OP Units
share proportionately with the Class A 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).

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

IV-12

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

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

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 Company will adopt the new Statement effective January 1, 2001.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant
effect on earnings or the financial position of the Company.

Reclassifications

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

2. MORTGAGE NOTES PAYABLE

At December 31, 2000, there were 19 mortgage notes payable with an
aggregate outstanding principal amount of approximately $729 million.
Properties with an aggregate carrying value at December 31, 2000 of
approximately $1,362 million are pledged as collateral against the mortgage
notes payable. In addition, approximately $47 million of the $729 million are
recourse to the Company. The mortgage notes bear interest at rates ranging from
6.45% to 10.10%, and mature between 2001 and 2027. The weighted average
interest rates on the outstanding mortgage notes payable at December 31, 2000,
1999 and 1998 were approximately 7.8%, 7.6% and 7.8%, 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,
- --------------------------------

2001 ......................... $ 93,225
2002 ......................... 17,011
2003 ......................... 208,905
2004 ......................... 12,370
2005 ......................... 10,467
Thereafter ................... 386,993
---------
$ 728,971
=========

On January 13, 2000, in connection with the acquisition of 1350 Avenue of
the Americas, the Company obtained a secured $70 million first mortgage
commitment which matures in August 2001 and bears interest at LIBOR plus 165
basis points.

On November 2, 2000, in connection with the acquisition of 919 Third
Avenue, the Company obtained a three year secured $250 million first mortgage
commitment. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis points based
upon the outstanding balance. At closing, $200 million was funded under the
commitment at an interest rate of LIBOR plus 120 basis points. In addition, in
connection with the $200 million initial funding, the Company purchased a LIBOR
interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The
initial funding was used primarily to repay outstanding borrowings under the
Company's unsecured credit facility.

IV-13

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

3. UNSECURED CREDIT FACILITY

As of December 31, 2000, the Company had a three year $575 million
unsecured revolving credit facility (the "Credit Facility") from The Chase
Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent
and Deutsche Bank as documentation agent. The Credit Facility matures in
September, 2003 and borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.

The Credit Facility replaced the Company's existing $500 million unsecured
credit facility (together with the Credit Facility, the "Credit Facility") and
$75 million term loan. As a result, certain deferred loan costs incurred in
connection with such unsecured credit facility and term loan were written off.
Such amount is reflected as an extraordinary loss in the accompanying
consolidated statements of income.

The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At December 31, 2000, the Company had availability under the
Credit Facility to borrow an additional $358.4 million (of which, $51.3 million
has been allocated for outstanding undrawn letters of credit).

The Company capitalized interest incurred on borrowings to fund certain
development costs in the amount of $11.5 million, $9.8 million and $7.3 million
for the years ended December 31, 2000, 1999 and 1998, respectively.

4. SENIOR UNSECURED NOTES

As of December 31, 2000, the Operating Partnership had outstanding
approximately $449.4 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. Such discount is being amortized over the term of the
Senior Unsecured Notes to which they relate.

5. LAND LEASES AND AIR RIGHTS

The Company leases, pursuant to noncancellable operating leases, the land
on which fourteen of its buildings were constructed. The leases, which contain
renewal options, expire between 2009 and 2236. The leases either contain
provisions for scheduled increases in the minimum rent at specified intervals
or 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 $2.7 million and
$2.6 million at December 31, 2000 and 1999, respectively. These amounts are
included in accrued expenses and other liabilities on the accompanying balance
sheets.

In addition, the Company, through the acquisition of certain properties,
is subject to three air rights lease agreements. These lease agreements have
terms expiring between 2048 and 2236, including renewal options.

IV-14

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

5. LAND LEASES AND AIR RIGHTS - (CONTINUED)

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

YEAR ENDED DECEMBER 31, LAND LEASES AIR RIGHTS
- ---------------------------- ------------- -----------

2001 ..................... $ 2,114 $ 940
2002 ..................... 2,059 941
2003 ..................... 2,058 944
2004 ..................... 2,182 954
2005 ..................... 2,185 954
Thereafter ............... 51,084 137,791
-------- ---------
$ 61,682 $ 142,524
======== =========

6. COMMERCIAL REAL ESTATE INVESTMENTS

The Tower Merger

In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") 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.

The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity investment in Metropolitan.
Crescent's investment 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
Class A common stock at a conversion price of $24.61 per share.

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 (loss) on
dispositions of real estate on the accompanying consolidated statements of
income.

"Big Box" Industrial Investment Activity

On August 9, 1999, the Company executed a contract for the sale, which
took 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 the Matrix Development Group ("Matrix") relating to
a first mortgage note and certain industrial land holdings (the "Matrix Sale").
The combined total sales price of $310 million ($52 million

IV-15

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

6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED)

of which is attributable to the Morris Companies and its affiliates in the form
of $41.6 million of preferred units of KTR's operating partnership and $10.4
million of debt relief) consisted of (i) approximately $159.7 million in cash,
(ii) $41.5 million in convertible preferred and common stock of KTR, (iii)
$61.6 million in preferred units of KTR's operating partnership, (iv)
approximately $37.1 million of debt relief and (v) approximately $10.1 million
in purchase money mortgage notes secured by certain land that is being sold to
Matrix.

As of December 31, 2000, the Matrix Sale and the sale of the Company's
interest in RMI was completed. As a result, the Company realized a gain of
approximately $16.7 million. Such gain has been included in gain on
dispositions of real estate on the accompanying consolidated statements of
income. Cash proceeds from the sales were used primarily to repay borrowings
under the Credit Facility. In addition, as of December 31, 2000, the Company
redeemed approximately $20 million of the preferred stock of KTR and received
principal repayments of approximately $7.2 million related to the purchase
money mortgage notes, all of which was used primarily for general operating
expenditures.

Other Real Estate Investment Activity

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 dispositions of real estate on the accompanying
consolidated statements of income.

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 entitled 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 and through draws under the
Credit Facility. Current financial accounting guidelines provides that where a
lender has virtually the same risks and potential rewards as those of a real
estate owner it should recognize the full economics associated with the
operations of the property. As such, the Company has recognized the real estate
operations of 919 Third Avenue in the accompanying consolidated statements of
income from the date of acquisition. On July 28, 2000, the Company consented to
the filing of a consensual, pre-packaged bankruptcy plan with the current fee
owner and on November 2, 2000 the Company obtained title to 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
Credit Facility.

On August 15, 2000, the Company acquired 538 Broadhollow Road, a 180,000
square foot Class A office property located in Melville, New York for a
purchase price of approximately $25.6 million. This acquisition was financed,
in part, through a borrowing under the Credit Facility.

On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Class A suburban office properties aggregating approximately 1.5 million
square feet to the Tri-State JV in exchange for approximately $136 million and
a 51% majority ownership interest in the Tri-State JV. As a result, the Company
realized a gain of approximately $15.2 million. Such gain has been included in
gain on dispostions of real estate on the accompanying consolidated statements
of income. Cash proceeds received were used primarily to repay borrowings under
the Credit Facility.

IV-16

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

6. COMMERCIAL REAL ESTATE INVESTMENTS - (CONTINUED)

In addition, as of December 31, 2000, the Company has invested
approximately $6.4 million in mortgage notes encumbering approximately 101
acres of land, approximately $17.1 million in a note receivable secured by a
partnership interest in Omni Partner=s, L.P., owner of the Omni, a 575,000
square foot Class A office property located in Uniondale, New York and $36.5
million under three notes which bear interest at rates ranging from 10.5% to
11% per annum and are secured by a minority partner's preferred unit interest
in the Operating Partnership.

The Company has announced that it has withdrawn its offer to purchase a
tract of land located in Suffolk County, New York from the State of New York.
As a result, as of December 31, 2000, the Company incurred a one-time
non-recurring charge of $3.2 million in connection with the discontinuation of
this development project. Such amount has been included in gain (loss) on
dispostions of real estate on the accompanying consolidated statements of
income.

7. STOCKHOLDERS' EQUITY

An OP Unit and a share of Class A 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 OP Units may either be redeemed for cash or, at the election of the
Company, for shares of Class A common stock on a one-for-one basis.

On May 24, 1999, 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 GAAP purposes at $26 per share for
total consideration of approximately $304.1 million. The shares of Class B
common stock were entitled to receive an initial annual dividend of $2.24 per
share, which dividend is subject to adjustment annually. On July 1, 2000, the
annual dividend on the Class B common stock was increased to $2.40 per share.

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 Class A 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 Class A
common stock at any time following November 23, 2003.

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
Class A 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. On June 20, 2000, the Company issued 4,181,818
shares of Class A common stock in exchange for four million shares of Series B
preferred stock with a liquidation preference value of $100 million.

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. In addition, the
Board of Directors has also authorized the purchase of up to an additional
three million shares of the Company's Class B common stock and/or its Class A
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, 2000, the Company had purchased
and retired 1,410,804 shares of Class B common stock for approximately $30.3
million.

On October 16, 2000, the Company's Board of Directors announced that it
adopted a Shareholder Rights Plan (the "Rights Plan") designed to protect
shareholders from various abusive takeover tactics, including attempts to
acquire control of the Company at an inadequate price, depriving shareholders
of

IV-17

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

the full value of their investment. The Rights Plan is designed to allow the
Board of Directors to secure the best available transaction for all the
Company's shareholders. The Rights Plan was not adopted in response to any
known effort to acquire control of the Company.

Under the Rights Plan, each shareholder will receive a dividend of one
Right for each share of the Company's outstanding Class A common stock owned.
The Rights will be exercisable only if a person or group acquires, or announces
their intent to acquire, 15% or more of the Company's Class A common stock, or
announces a tender offer the consummation of which would result in beneficial
ownership by a person or group of 15% or more of the Class A common stock. Each
Right will entitle the holder to purchase one one-thousandth of a share of a new
series of junior participating preferred stock of the Company at an initial
exercise price of $84.44.

If any person acquires beneficial ownership of 15% or more of the
outstanding shares of Class A common stock, then all Rights holders except the
acquiring person will be entitled to purchase the Company's Class A common
stock at a price discounted from the then market price. If the Company is
acquired in a merger after such an acquisition, all Rights holders except the
acquiring person will also be entitled to purchase stock in the buyer at a
discount in accordance with the Rights Plan.

The distribution of Rights was made to Class A common shareholders of
record at the close of business on October 27, 2000 and shares of Class A
common stock that are newly-issued after that date (including shares of Class A
common stock issued upon conversion of the outstanding Class B common stock)
will also carry Rights until the Rights become detached from the Class A common
stock. The Rights will expire at the close of business on October 13, 2010,
unless earlier redeemed by the Company. The Rights distribution is not taxable
to stockholders.

The Company has made loans to certain executive officers to purchase
1,022,393 shares of Class A common stock at market prices ranging from $18.44
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 ratably forgiven each year on the annual
anniversary of the grant date based upon amortization periods ranging from four
to ten years and in certain instances based on meeting certain performance
criteria. Loans which are secured by 310,834 shares of Class A common stock are
due with a balloon payment on the fifth anniversary of the grant date. The loan
balances aggregated approximately $18.7 million and $11.1 million at December
31, 2000 and 1999, respectively 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, 2000,
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 ......... 1,507,538 $ 12.04 $ 25.56
1996 Employee Stock Option Plan ......... 252,100 $ 19.63 $ 26.13
1997 Employee Stock Option Plan ......... 2,485,965 $ 22.67 $ 27.04
1998 Employee Stock Option Plan ......... 2,152,501 $ 17.75 $ 25.67
---------
Total ................................... 6,398,104
=========

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

IV-18

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

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

The independent directors of the Company have been granted options to
purchase 141,000 shares of Class A common stock 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 of Class A common stock 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.

During 2000 and 1999, employees exercised 280,087 and 88,308 options,
respectively resulting in proceeds to the Company of approximately $4.2 million
and $1.2 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 2000, 1999 and 1998, respectively: risk-free
interest rate of 5%; dividend yields of 6.69%, 7.47% and 6.45%; volatility
factors of the expected market price of the Company's Class A common stock of
.206 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 its
Class A common stockholders for the years ended December 31:

2000 1999 1998
------------- ------------- -------------

Pro Forma net income (in thousands) ........... $ 62,671 $ 46,744 $ 32,846
--------- --------- ---------
Basic pro forma earnings per share ............ $ 1.46 $ 1.16 $ .83
--------- --------- ---------
Diluted pro forma earnings per share .......... $ 1.44 $ 1.15 $ .82
--------- --------- ---------

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

WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
------------- -----------------

Outstanding -- January 1, 1998 ........... 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
---------

IV-19

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

7. STOCKHOLDERS' EQUITY - (CONTINUED)

WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
------------- -----------------

Outstanding - December 31, 1999 ......... 5,173,921 $ 22.17
Granted ................................. 739,750 $ 22.86
Exercised ............................... (280,087) $ 13.00
Forfeited ............................... (145,000) $ 22.50
---------
Outstanding - December 31, 2000 ......... 5,488,584 $ 22.70
---------

The weighted average fair value of options granted for the years ended
December 31, 1998, 1999 and 2000 was $2.06, $2.10 and 2.15, respectively. In
addition, there were 4,527,144 options at a weighted average per share exercise
price of $22.22, 5,137,588 options at a weighted average per share exercise
price of $22.17 and 4,498,828 options at a weighted average per share exercise
price of $22.70 exercisable at December 31, 1998, 1999 and 2000, respectively.

Exercise prices for options outstanding as of December 31, 2000 ranged
from $12.04 per share to $27.04 per share. The weighted-average remaining
contractual life of those options is approximately 7.61 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 weighted average
share for the Company's Class A common stock as required by Statement 128 for
the years ended December 31 (in thousands except for earnings per share data):

2000 1999 1998
------------ ----------- -----------

Numerator:
Income before extraordinary loss, dividends to preferred
shareholders and income allocated to Class B shareholders ......... $ 112,797 $ 85,192 $ 52,056
Dividends to preferred shareholders ................................. (25,371) (24,360) (12,491)
Extraordinary loss (net of share applicable to limited partners and
Class B common shareholders) ...................................... (1,032) (389) (1,670)
Income allocated to Class B common shareholders ..................... (23,405) (12,914) --
--------- --------- ---------
Numerator for basic and diluted earnings per share ................... $ 62,989 $ 47,529 $ 37,895
========= ========= =========
Denominator:
Denominator for basic earnings per share- weighted average Class A
common shares ..................................................... 43,070 40,270 39,473
Effect of dilutive securities:
Employee stock options .............................................. 475 406 537
--------- --------- ---------
Denominator for diluted earnings per Class A common share-adjusted
weighted average shares and assumed conversions ..................... 43,545 40,676 40,010
========= ========= =========
Basic earnings per Class A common share:
Income before extraordinary loss .................................... $ 1.49 $ 1.19 $ 1.00
Extraordinary loss .................................................. ( .03) ( .01) ( .04)
--------- --------- ---------
Net income per Class A common share ................................. $ 1.46 $ 1.18 $ .96
========= ========= =========
Diluted earnings per Class A common share:
Income before extraordinary loss .................................... $ 1.47 $ 1.18 $ .99
Extraordinary loss .................................................. ( .02) ( .01) ( .04)
--------- --------- ---------
Diluted net income per Class A common share ......................... $ 1.45 $ 1.17 $ 95
========= ========= =========

IV-20

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 common
share and the computation of basic and diluted earnings per weighted average
share for the Company's Class B common stock as required by Statement 128 for
the years ended December 31 (in thousands except for earnings per share data):

2000 1999
----------- ------------

Numerator:
Income before extraordinary loss, dividends to preferred
shareholders and income allocated to Class A common
shareholders .............................................. $ 112,797 $ 85,192
Dividends to preferred shareholders ......................... (25,371) (24,360)
Extraordinary loss (net of share applicable to limited
partners and Class A common shareholders) ................. (364) (166)
Income allocated to Class A common shareholders ............. (64,021) (47,918)
--------- ---------
Numerator for basic earnings per share ....................... 23,041 12,748
Add back:
Net income allocated to Class A common shareholders ......... 62,989 47,529
Limited partners' minority interest in the operating
partnership ............................................... 11,669 9,407
--------- ---------
Numerator for diluted earnings per share ..................... $ 97,699 $ 69,684
========= =========
Denominator:
Denominator for basic earnings per share- weighted average
Class B common shares ..................................... 10,284 6,744
Effect of dilutive securities:
Weighted average Class A common shares outstanding .......... 43,070 40,270
Weighted average OP Units outstanding ....................... 7,696 7,705
Employee stock options ...................................... 475 406
--------- ---------
Denominator for diluted earnings per Class B common
share-adjusted weighted average shares and assumed
conversions ................................................. 61,525 55,125
========= =========
Basic earnings per Class B common share:
Income before extraordinary loss ............................ $ 2.28 $ 1.91
Extraordinary loss .......................................... ( .04) ( .02)
--------- ---------
Net income per Class B common share ......................... $ 2.24 $ 1.89
========= =========
Diluted earnings per Class B common share:
Income before extraordinary loss ............................ $ 1.62 $ 1.27
Extraordinary loss .......................................... ( .03) ( .01)
--------- ---------
Diluted net income per Class B common share ................. $ 1.59 $ 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 Class A common stock.

IV-21

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. As of December 31, 2000 one of these
properties was sold by the Reckson Group to a third party and four of these
properties were acquired by the Company for an aggregate purchase price of
approximately $35 million, which included the issuance of approximately 475,000
OP Units valued at approximately $8.8 million.

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.

The Operating Partnership and FrontLine Capital Group ("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 Reckson Strategic
Venture Partners, LLC ("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.

RSVP-Controlled REIT-Qualified Joint Venture Investments

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 may 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 $3.3 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

IV-22

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

8. RELATED PARTY TRANSACTIONS - (CONTINUED)

related to the real estate activities. As of December 31, 2000, the Company had
invested, through the RSVP Commitment, approximately $20.6 million in the
Dominion Venture which had investments in 13 government office buildings and
three correctional facilities.

As of December 31, 2000, the Company has invested approximately $11.1
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 $3.5 million to FrontLine through the RSVP Commitment for an
investment in RSVP which was then invested in certain service business
activities related to student housing. As of December 31, 2000, RAP -- SHP had
investments in seven off -- campus student housing projects. Additionally,
during 2000, RAP-SHP entered into an off -- campus development joint venture
with Titan Investments II, a third party national developer. The purpose of the
venture is to develop or reposition off -- campus student housing projects
across the United States.

As of December 31, 2000, the Company has invested approximately $3.4
million, through a subsidiary, in RAP MD, LLC ("RAP -- MD"), a company that
engages primarily in the acquisition, ownership, management and development of
medical office properties. The Company's investment was funded through the RSVP
Commitment. As of December 31, 2000, RAP -- MD had investments in eight medical
office properties.

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, 2000 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 office and industrial 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.

IV-23

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, 2000 are as follows (in
thousands):

2001 ..................... $ 378,057
2002 ..................... 380,665
2003 ..................... 355,064
2004 ..................... 324,183
2005 ..................... 278,782
Thereafter ............... 1,465,457
-----------
$ 3,182,208
===========

11. SEGMENT DISCLOSURE

The Company owns all of the interests in its real estate properties by or
through the Operating Partnership. 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"). The Company's portfolio also includes
one office property located in Orlando, Florida, certain industrial joint
venture properties formerly owned by RMI and for the period commencing January
6, 1998 and ending September 26, 1999, industrial properties which were owned
by RMI and subsequently sold to KTR. 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, the Company does not consider (i) interest incurred on its
Credit Facility, term loan and Senior Unsecured Notes, (ii) the operating
performance of the office property located in Orlando, Florida and (iii)
commencing January 1, 2000, the operating performance of the industrial joint
venture properties formerly owned by RMI as part of its Core Portfolio's
property operating performance.

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 (in thousands):

2000
-------------------------------------------
CORE CONSOLIDATED
PORTFOLIO OTHER TOTALS
-------------- ------------- --------------

REVENUES:
Base rents, tenant escalations and
reimbursements ........................ $ 442,326 $ 9,751 $ 452,077
Equity in earnings of real estate joint
ventures and service companies ........ --- 4,383 4,383
Other income ........................... 1,212 52,266 53,478
----------- --------- -----------
Total Revenues ......................... 443,538 66,400 509,938
----------- --------- -----------
EXPENSES:
Property expenses ...................... 154,930 2,526 157,456
Marketing, general and
administrative ........................ 20,606 6,765 27,371
Interest ............................... 40,465 55,872 96,337
Depreciation and amortization .......... 84,401 8,146 92,547
----------- --------- -----------
Total Expenses ......................... 300,402 73,309 373,711
----------- --------- -----------
Income (loss) before preferred
dividends and distributions,
minority interests and extraordinary
loss .................................. $ 143,136 $ (6,909) $ 136,227
=========== ========= ===========
Total assets ........................... $ 2,428,500 $ 569,530 $ 2,998,030
=========== ========= ===========

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 (loss) before preferred
dividends and distributions,
minority interests and extraordinary
loss .................................. $ 115,226 $ 8,341 $ (19,525) $ 104,042
=========== ======= ========== ===========
Total assets ........................... $ 2,142,696 $ 0 $ 591,182 $ 2,733,878
=========== ======= ========== ===========

IV-24

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:

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 $10.1
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. In May 2000, the Company contributed the common stock
it received from FrontLine to RMG in exchange for 50 shares of non voting
preferred stock, 97 shares of 8% preferred stock and a $1.4 million note.

On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B preferred stock with a
liquidation preference value of $100 million.

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 2000 and
1999 the Company made no contributions.

The Company had outstanding undrawn letters of credit against its Credit
Facility of approximately $51.3 million and $52.3 million at December 31, 2000
and 1999, respectively.

IV-25

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 fiscal quarter during 2000 and 1999 (in thousands, except share amounts):

2000
----------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
--------------- ---------------- --------------- ---------------

Total revenues ................................ $ 117,659 $ 125,455 $ 140,302 $ 126,522
=========== =========== =========== ===========
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ........................... $ 28,080 $ 35,836 $ 43,383 $ 28,928
Preferred dividends and distributions ......... (7,985) (7,857) (6,085) (6,085)
Minority interests ............................ (4,253) (5,008) (5,924) (5,604)
Extraordinary loss ............................ -- -- (1,396) --
----------- ----------- ----------- -----------
Net income available to common
shareholders ................................. $ 15,842 $ 22,971 $ 29,978 $ 17,239
=========== =========== =========== ===========
Net income available to:
Class A common shareholders .................. $ 11,446 $ 16,655 $ 22,143 $ 12,745
Class B common shareholders .................. 4,396 6,316 7,835 4,494
----------- ----------- ----------- -----------
Total ......................................... $ 15,842 $ 22,971 $ 29,978 $ 17,239
=========== =========== =========== ===========
Basic net income per weighted average
common share before extraordinary
loss:
Class A common shareholders .................. $ .28 $ .40 $ .51 $ .28
Extraordinary loss per Class A
common share ............................... -- -- ( .02) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class A common share ....................... $ .28 $ .40 $ .49 $ .28
=========== =========== =========== ===========

Class B common shareholders .................. $ .43 $ .61 $ .80 $ .44
Extraordinary loss per Class B
common share ............................... -- -- ( .04) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class B common share ....................... $ .43 $ .61 $ .76 $ .44
=========== =========== =========== ===========
Weighted average common shares
outstanding:
Class A common shareholders .................. 40,382,182 41,343,118 45,178,451 45,326,438
Class B common shareholders .................. 10,283,598 10,283,513 10,283,513 10,283,513
Diluted net income per weighted average
common share:
Class A common shareholders .................. $ .28 $ .40 $ .48 $ .28
Class B common shareholders .................. $ .31 $ .44 $ .53 $ .31
Diluted weighted average common
shares outstanding:
Class A common shareholders .................. 40,709,045 41,700,478 49,818,354 45,954,256
Class B common shareholders .................. 10,283,598 10,283,513 10,283,513 10,283,513

IV-26

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

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

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:
Class A 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:
Class A common shareholders .................. $ .28 $ .23 $ .38 $ .29
Extraordinary loss per Class A
common share ............................... -- -- ( .01) --
----------- ----------- ----------- -----------
Basic net income per weighted average
Class A 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:
Class A 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:
Class A common shareholders .................. $ .28 $ .23 $ .37 $ .29
Class B common shareholders .................. $ -- $ .24 $ .41 $ .32
Diluted weighted average common
shares outstanding:
Class A 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

15. PRO FORMA RESULTS (unaudited)

The following unaudited pro forma operating results of the Company for the
year ended December 31, 2000 have been prepared as if the property acquisitions
and dispositions made during 2000 had occurred on January 1, 2000. Unaudited
pro forma financial information is presented for

IV-27

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

15. PRO FORMA RESULTS (unaudited) - (CONTINUED)

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, 2000, nor does it purport to represent the results of operations
for future periods (in thousands except per share data):

Total Revenues .............................................. $ 508,401
=========
Income before preferred dividends and distributions, minority
interests and extraordinary loss ........................... $ 133,403
=========
Net income available to Class A common shareholders ......... $ 53,569
=========
Net income per Class A common share ......................... $ 1.24
=========
Net income available to Class B common shareholders ......... $ 19,813
=========
Net income per Class B common share ......................... $ 1.93
=========

16. OTHER INVESTMENTS AND ADVANCES

During 1997, the Company formed FrontLine (formerly Reckson Service
Industries, Inc.) and RSVP. In connection with the formation of FrontLine, the
Operating Partnership established a credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine to use in its
investment activities, operations and other general corporate purposes. As of
December 31, 2000, the Company had advanced approximately $93.4 million under
the FrontLine Facility. In addition, the Operating Partnership approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint ventures (for REIT-qualified
investments) or advances made to FrontLine under terms similar to the FrontLine
Facility. As of December 31, 2000, approximately $83.2 million had been funded
through the RSVP Commitment, of which $41.1 million represents investments in
RSVP-controlled (REIT-qualified) joint ventures and $42.1 million represents
advances.

In March 2001, the Company increased the RSVP Commitment to $110 million
and advanced approximately $24 million under the RSVP Commitment to fund
additional RSVP-controlled (REIT-qualified) joint ventures (unaudited).

In addition, as of December 31, 2000, the Company, through its Credit
Facility, has allocated approximately $3.2 million in outstanding undrawn
letters of credit for the benefit of FrontLine. Both the FrontLine Facility and
the RSVP Commitment have a term of five years and advances under each are
recourse obligations of FrontLine. Interest accrues on advances made under the
credit facilities at a rate equal to the greater of (a) the prime rate plus two
percent and (b) 12% per annum, with the rate on amounts that are outstanding
for more than one year increasing annually at a rate of four percent of the
prior year's rate. Prior to maturity, interest is payable quarterly but only to
the extent of net cash flow of FrontLine and on an interest-only basis. As of
December 31, 2000, interest accrued under the FrontLine Facility and RSVP
Commitment was approximately $13.8 million.

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 and to issue preferred stock
and to pay dividends thereon. In consideration of the amendments, FrontLine
paid the Operating Partnership a fee of approximately $3.6 million in the form
of shares of FrontLine common stock. Such fee has been recognized in income
over an estimated nine month benefit period.

FrontLine currently has two distinct operating units: one of which
represents its interest in HQ Global Holdings, Inc., the largest provider of
flexible officing solutions in the world, and the other which represents
interests in technology based partner companies. RSVP invests primarily in real
estate and real estate related operating companies generally outside of the
Company's core office and industrial focus.

IV-28

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(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) -- $ 1,940 $ 9,955 -- 10,608
85 Nicon Court
Hauppauge, New York ..................... -- 797 2,818 -- 64
104 Parkway Drive So.,
Hauppauge, New York ..................... -- 54 804 -- 200
125 Ricefield Lane
Hauppauge, New York ..................... -- 13 852 -- 330
110 Ricefield Lane
Hauppauge, New York ..................... -- 33 1,043 1 57
120 Ricefield Lane
Hauppauge, New York ..................... -- 16 1,051 -- 192
135 Ricefield Lane
Hauppauge, New York ..................... -- 24 906 -- 473
1997 Portfolio Acquisition,
Hauppauge, New York
(10 additional buildings in
Vanderbilt Industrial Park) ............. -- 930 (B) 20,619 1 3,069
425 Rabro Drive
Hauppauge, New York ..................... -- 665 3,489 -- 71
600 Old Willets Path
Hauppauge, New York ..................... -- 295 3,521 -- 727
Airport International Plaza,
Islip, New York
(17 buildings in an industrial park)..... 2,616 (C) 1,263 13,608 -- 11,055
120 Wilbur Place
Islip, New York ......................... -- 202 1,154 8 117
2004 Orville Drive North
Islip, New York ......................... -- 633 4,226 -- 1,413
2005 Orville Drive North
Islip, New York ......................... -- 984 5,410 -- 984
County Line Industrial Center,
Melville, New York
(3 buildings in an industrial park) ..... -- 628 3,686 -- 2,823
30 Hub Drive
Melville, New York ...................... -- 469 1,571 -- 312
32 Windsor Place,
Islip, New York ......................... -- 32 321 -- 46

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

Vanderbilt Industrial Park,
Hauppauge, New York
(27 buildings in an industrial park) 1,940 20,563 22,503 14,499 1961-1979 1961-1979
85 Nicon Court
Hauppauge, New York ..................... 797 2,882 3,679 480 1984 1995
104 Parkway Drive So.,
Hauppauge, New York ..................... 54 1,004 1,058 161 1985 1996
125 Ricefield Lane
Hauppauge, New York ..................... 13 1,182 1,195 296 1973 1996
110 Ricefield Lane
Hauppauge, New York ..................... 34 1,100 1,134 191 1980 1996
120 Ricefield Lane
Hauppauge, New York ..................... 16 1,243 1,259 168 1983 1996
135 Ricefield Lane
Hauppauge, New York ..................... 24 1,379 1,403 367 1981 1996
1997 Portfolio Acquisition,
Hauppauge, New York
(10 additional buildings in
Vanderbilt Industrial Park) ............. 931 23,688 24,619 3,445 1974-1982 1997
425 Rabro Drive
Hauppauge, New York ..................... 665 3,560 4,225 433 1980 1997
600 Old Willets Path
Hauppauge, New York ..................... 295 4,248 4,543 358 1999 1999
Airport International Plaza,
Islip, New York
(17 buildings in an industrial park)..... 1,263 24,663 25,926 15,729 1970-1988 1970-1988
120 Wilbur Place
Islip, New York ......................... 210 1,271 1,481 116 1972 1998
2004 Orville Drive North
Islip, New York ......................... 633 5,639 6,272 921 1998 1998
2005 Orville Drive North
Islip, New York ......................... 984 6,394 7,378 387 1999 1999
County Line Industrial Center,
Melville, New York
(3 buildings in an industrial park) ..... 628 6,509 7,137 4,636 1975-1979 1975-1979
30 Hub Drive
Melville, New York ...................... 469 1,883 2,352 358 1976 1996
32 Windsor Place,
Islip, New York ......................... 32 367 399 357 1971 1971

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

Vanderbilt Industrial Park,
Hauppauge, New York
(27 buildings in an industrial park) 10 - 30 Years
85 Nicon Court
Hauppauge, New York ..................... 10 - 30 Years
104 Parkway Drive So.,
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
1997 Portfolio Acquisition,
Hauppauge, New York
(10 additional buildings in
Vanderbilt Industrial Park) ............. 10 - 30 Years
425 Rabro Drive
Hauppauge, New York ..................... 10 - 30 Years
600 Old Willets Path
Hauppauge, New York ..................... 10 - 30 Years
Airport International Plaza,
Islip, New York
(17 buildings in an industrial park)..... 10 - 30 Years
120 Wilbur Place
Islip, New York ......................... 10 - 30 Years
2004 Orville Drive North
Islip, New York ......................... 10 - 30 Years
2005 Orville Drive North
Islip, New York ......................... 10 - 30 Years
County Line Industrial Center,
Melville, New York
(3 buildings in an industrial park) ..... 10 - 30 Years
30 Hub Drive
Melville, New York ...................... 10 - 30 Years
32 Windsor Place,
Islip, New York ......................... 10 - 30 Years

Continued

IV-29

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000 (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
- ----------------------------------- ------------- -------- --------------- ------ ---------------

42 Windsor Place
Islip, New York .................. -- 48 327 -- 548
505 Walt Whitman Rd.,
Huntington, New York ............. -- 140 42 -- 59
1170 Northern Blvd.,
N. Great Neck, New York .......... -- 30 99 -- 34
50 Charles Lindbergh Blvd.,
Mitchel Field, New York .......... 15,479 A 12,089 -- 5,361
200 Broadhollow Road
Melville, New York ............... 6,494 338 3,354 -- 3,430
48 South Service Road
Melville, New York ............... -- 1,652 10,245 -- 5,108
395 North Service Road
Melville, New York ............... 20,525 A 15,551 -- 7,298
6800 Jericho Turnpike
Syosset, New York ................ 14,324 582 6,566 -- 9,357
6900 Jericho Turnpike
Syosset, New York ................ 7,560 385 4,228 -- 3,572
300 Motor Parkway
Hauppauge, New York .............. -- 276 1,136 -- 1,665
88 Duryea Road
Melville, New York ............... -- 200 1,565 -- 748
210 Blydenburgh Road
Islandia, New York ............... -- 11 158 -- 156
208 Blydenburgh Road
Islandia, New York ............... -- 12 192 -- 147
71 Hoffman Lane
Islandia, New York ............... -- 19 260 -- 172
933 Motor Parkway
Hauppauge, New York .............. -- 106 375 -- 396
65 and 85 South Service Road
Plainview, New York .............. -- 40 218 -- 17
333 Earl Ovington Blvd., (Omni)
Mitchel Field, New York .......... 55,641 A 67,221 -- 19,025
135 Fell Court
Islip, New York .................. -- 462 1,265 -- 261
40 Cragwood Road
South Plainfield, New Jersey ..... -- 725 7,131 -- 5,873
110 Marcus Drive
Huntington, New York ............. -- 390 1,499 -- 107

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

42 Windsor Place
Islip, New York .................. 48 875 923 768 1972 1972 10 - 30 Years
505 Walt Whitman Rd.,
Huntington, New York ............. 140 101 241 85 1950 1968 10 - 30 Years
1170 Northern Blvd.,
N. Great Neck, New York .......... 30 133 163 130 1947 1962 10 - 30 Years
50 Charles Lindbergh Blvd.,
Mitchel Field, New York .......... -- 17,450 17,450 9,985 1984 1984 10 - 30 Years
200 Broadhollow Road
Melville, New York ............... 338 6,784 7,122 4,087 1981 1981 10 - 30 Years
48 South Service Road
Melville, New York ............... 1,652 15,353 17,005 7,957 1986 1986 10 - 30 Years
395 North Service Road
Melville, New York ............... -- 22,849 22,849 11,974 1988 1988 10 - 30 Years
6800 Jericho Turnpike
Syosset, New York ................ 582 15,923 16,505 9,443 1977 1978 10 - 30 Years
6900 Jericho Turnpike
Syosset, New York ................ 385 7,800 8,185 4,161 1982 1982 10 - 30 Years
300 Motor Parkway
Hauppauge, New York .............. 276 2,801 3,077 1,510 1979 1979 10 - 30 Years
88 Duryea Road
Melville, New York ............... 200 2,313 2,513 1,359 1980 1980 10 - 30 Years
210 Blydenburgh Road
Islandia, New York ............... 11 314 325 302 1969 1969 10 - 30 Years
208 Blydenburgh Road
Islandia, New York ............... 12 339 351 337 1969 1969 10 - 30 Years
71 Hoffman Lane
Islandia, New York ............... 19 432 451 431 1970 1970 10 - 30 Years
933 Motor Parkway
Hauppauge, New York .............. 106 771 877 627 1973 1973 10 - 30 Years
65 and 85 South Service Road
Plainview, New York .............. 40 235 275 226 1961 1961 10 - 30 Years
333 Earl Ovington Blvd., (Omni)
Mitchel Field, New York .......... -- 86,246 86,246 23,633 1990 1995 10 - 30 Years
135 Fell Court
Islip, New York .................. 462 1,526 1,988 381 1965 1992 10 - 30 Years
40 Cragwood Road
South Plainfield, New Jersey ..... 725 13,004 13,729 7,381 1970 1983 10 - 30 Years
110 Marcus Drive
Huntington, New York ............. 390 1,606 1,996 1,230 1980 1980 10 - 30 Years

Continued

IV-30

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000 (CONTINUED)
(IN THOUSANDS)

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------- ------------- ------------------------ ---------------------- ----------------------------------
COST CAPITALIZED,
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------------ ---------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- -------------------------------- ------------- -------- --------------- ------ --------------- -------- --------------- ---------

333 East Shore Road
Great Neck, New York .......... -- A 564 -- 271 -- 835 835
310 East Shore Road
Great Neck, New York .......... 2,322 485 2,009 -- 1,610 485 3,619 4,104
70 Schmitt Blvd.
Farmingdale, New York ......... -- 727 3,408 -- 33 727 3,441 4,168
19 Nicholas Drive
Yaphank, New York ............. -- 160 7,399 -- 6,042 160 13,441 13,601
1516 Motor Parkway
Hauppauge, New York ........... -- 603 6,722 -- 271 603 6,993 7,596
125 Baylis Road
Melville, New York ............ -- 1,601 8,626 -- 2,026 1,601 10,652 12,253
35 Pinelawn Road
Melville, New York ............ -- 999 7,073 -- 2,165 999 9,238 10,237
520 Broadhollow Road
Melville, New York ............ -- 457 5,572 -- 1,669 457 7,241 7,698
1660 Walt Whitman Road
Melville, New York ............ -- 370 5,072 -- 463 370 5,535 5,905
70 Maxess Road
Melville, New York ............ -- 367 1,859 95 2,957 462 4,816 5,278
20 Melville Park Rd.,
Melville, New York ............ -- 391 2,650 -- 101 391 2,751 3,142
105 Price Parkway
Farmingdale, New York ......... -- 2,030 6,327 -- 469 2,030 6,796 8,826
48 Harbor Park Drive
Port Washington, New York ..... -- 1,304 2,247 -- 93 1,304 2,340 3,644
60 Charles Lindbergh
Mitchel Field, New York ....... -- A 20,800 -- 1,904 -- 22,704 22,704
155 White Plains Road,
Tarrytown, New York ........... -- 1,613 2,542 -- 921 1,613 3,463 5,076
235 Main Street
White Plains, New York ........ -- 933 5,375 -- 1,233 933 6,608 7,541
245 Main Street
White Plains, New York ........ -- 1,235 7,284 1 806 1,236 8,090 9,326
505 White Plains Road
Tarrytown, New York ........... -- 210 1,332 -- 271 210 1,603 1,813
555 White Plains Road
Tarrytown, New York ........... -- 712 4,133 51 4,517 763 8,650 9,413
560 White Plains Road
Tarrytown, New York ........... -- 1,521 8,756 -- 2,011 1,521 10,767 12,288

COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- -------------------------------- -------------- -------------- ---------- --------------
LIFE ON WHICH
ACCUMULATED DATE OF DATE DEPRECIATION
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
- -------------------------------- -------------- -------------- ---------- --------------

333 East Shore Road
Great Neck, New York .......... 582 1976 1976 10 - 30 Years
310 East Shore Road
Great Neck, New York .......... 1,773 1981 1981 10 - 30 Years
70 Schmitt Blvd.
Farmingdale, New York ......... 613 1965 1995 10 - 30 Years
19 Nicholas Drive
Yaphank, New York ............. 1,623 1989 1995 10 - 30 Years
1516 Motor Parkway
Hauppauge, New York ........... 1,245 1981 1995 10 - 30 Years
125 Baylis Road
Melville, New York ............ 1,814 1980 1995 10 - 30 Years
35 Pinelawn Road
Melville, New York ............ 1,939 1980 1995 10 - 30 Years
520 Broadhollow Road
Melville, New York ............ 1,837 1978 1995 10 - 30 Years
1660 Walt Whitman Road
Melville, New York ............ 992 1980 1995 10 - 30 Years
70 Maxess Road
Melville, New York ............ 800 1967 1995 10 - 30 Years
20 Melville Park Rd.,
Melville, New York ............ 420 1965 1996 10 - 30 Years
105 Price Parkway
Farmingdale, New York ......... 1,140 1969 1996 10 - 30 Years
48 Harbor Park Drive
Port Washington, New York ..... 391 1976 1996 10 - 30 Years
60 Charles Lindbergh
Mitchel Field, New York ....... 3,945 1989 1996 10 - 30 Years
155 White Plains Road,
Tarrytown, New York ........... 523 1963 1996 10 - 30 Years
235 Main Street
White Plains, New York ........ 1,159 1974 1996 10 - 30 Years
245 Main Street
White Plains, New York ........ 1,515 1983 1996 10 - 30 Years
505 White Plains Road
Tarrytown, New York ........... 347 1974 1996 10 - 30 Years
555 White Plains Road
Tarrytown, New York ........... 2,302 1972 1996 10 - 30 Years
560 White Plains Road
Tarrytown, New York ........... 2,602 1980 1996 10 - 30 Years

Continued

IV-31

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000 (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
- --------------------------------- ------------- -------- --------------- ------ ---------------

580 White Plains Road
Tarrytown, New York ............ 13,057 2,414 14,595 -- 3,056
660 White Plains Road
Tarrytown, New York ............ -- 3,929 22,640 45 4,801
Landmark Square
Stamford, Connecticut .......... 46,974 11,603 64,466 832 27,610
110 Bi -County Blvd.
Farmingdale, New York .......... 4,043 2,342 6,665 -- 187
One Eagle Rock,
East Hanover, New Jersey ....... -- 803 7,563 -- 3,025
710 Bridgeport Avenue
Shelton, Connecticut ........... -- 5,405 21,620 7 719
101 JFK Expressway
Short Hills, New Jersey ........ -- 7,745 43,889 -- 1,154
10 Rooney Circle
West Orange, New Jersey--- ..... -- 1,302 4,615 1 425
Executive Hill Office Park
West Orange, New Jersey ........ -- 7,629 31,288 4 1,299
3 University Plaza
Hackensack, New Jersey---. ..... -- 7,894 11,846 -- 2,425
One Paragon Drive
Montvale, New Jersey ........... -- 2,773 9,901 -- 687
150 Motor Parkway
Hauppauge, New York ............ -- 1,114 20,430 -- 2,688
Reckson Executive Park
Ryebrook, New York ............. -- 18,343 55,028 -- 2,168
University Square
Princeton, New Jersey .......... -- 3,288 8,888 -- 419
100 Andrews Road
Hicksville, New York ........... -- 2,337 1,711 151 5,742
2 Macy Road
Harrison, New York ............. -- 642 2,131 -- 66
80 Grasslands
Elmsford, New York ............. -- 1,208 6,728 -- 436
65 Marcus Drive
Melville, New York ............. -- 295 1,966 56 883
Triad V -- 1979 Marcus Rd.,
Lake Success, New York ......... -- 3,528 31,786 -- 7,921
100 Forge Way
Rockaway, New Jersey ........... -- 315 902 -- 90

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

580 White Plains Road
Tarrytown, New York ............ 2,414 17,651 20,065 3,515 1997 1996 10 - 30 Years
660 White Plains Road
Tarrytown, New York ............ 3,974 27,441 31,415 5,523 1983 1996 10 - 30 Years
Landmark Square
Stamford, Connecticut .......... 12,435 92,076 104,511 12,076 1973-1984 1996 10 - 30 Years
110 Bi -County Blvd.
Farmingdale, New York .......... 2,342 6,852 9,194 972 1984 1997 10 - 30 Years
One Eagle Rock,
East Hanover, New Jersey ....... 803 10,588 11,391 1,683 1986 1997 10 - 30 Years
710 Bridgeport Avenue
Shelton, Connecticut ........... 5,412 22,339 27,751 2,893 1971-1979 1997 10 - 30 Years
101 JFK Expressway
Short Hills, New Jersey ........ 7,745 45,043 52,788 5,478 1981 1997 10 - 30 Years
10 Rooney Circle
West Orange, New Jersey--- ..... 1,303 5,040 6,343 699 1971 1997 10 - 30 Years
Executive Hill Office Park
West Orange, New Jersey ........ 7,633 32,587 40,220 3,968 1978-1984 1997 10 - 30 Years
3 University Plaza
Hackensack, New Jersey---. ..... 7,894 14,271 22,165 1,785 1985 1997 10 - 30 Years
One Paragon Drive
Montvale, New Jersey ........... 2,773 10,588 13,361 1,320 1980 1997 10 - 30 Years
150 Motor Parkway
Hauppauge, New York ............ 1,114 23,118 24,232 2,986 1984 1997 10 - 30 Years
Reckson Executive Park
Ryebrook, New York ............. 18,343 57,196 75,539 6,192 1983-1986 1997 10 - 30 Years
University Square
Princeton, New Jersey .......... 3,288 9,307 12,595 940 1987 1997 10 - 30 Years
100 Andrews Road
Hicksville, New York ........... 2,488 7,453 9,941 1,194 1954 1996 10 - 30 Years
2 Macy Road
Harrison, New York ............. 642 2,197 2,839 234 1962 1997 10 - 30 Years
80 Grasslands
Elmsford, New York ............. 1,208 7,164 8,372 778 1989/1964 1997 10 - 30 Years
65 Marcus Drive
Melville, New York ............. 351 2,849 3,200 454 1968 1996 10 - 30 Years
Triad V -- 1979 Marcus Rd.,
Lake Success, New York ......... 3,528 39,707 43,235 4,514 1987 1998 10 - 30 Years
100 Forge Way
Rockaway, New Jersey ........... 315 992 1,307 107 1986 1998 10 - 30 Years

Continued

IV-32

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000 (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
- ----------------------------------- ------------- ----------------- --------------- -------- ---------------

200 Forge Way
Rockaway, New Jersey ............. -- 1,128 3,228 -- 178
300 Forge Way
Rockaway, New Jersey ............. -- 376 1,075 -- 254
400 Forge Way
Rockaway, New Jersey ............. -- 1,142 3,267 -- 179
51 - 55 Charles Lindbergh Blvd.
Mitchel Field, New York .......... -- A 27,975 -- 4,258
155 Passaic Avenue
Fairfield, New Jersey ............ -- 3 (A) 3,538 -- 2,126
100 Summit Drive
Valhalla, New York ............... 21,541 3,007 41,351 -- 4,140
115/117 Stevens Avenue
Valhalla, New York ............... -- 1,094 22,490 -- 733
200 Summit Lake Drive
Valhalla, New York ............... 20,133 4,343 37,305 -- 1,961
140 Grand Street
White Plains, New York ........... -- 1,932 18,744 -- 309
500 Summit Lake Drive
Valhalla, New York ............... -- 7,052 37,309 -- 7,794
99 Cherry Hill Road
Parsippany, New Jersey ........... -- 2,360 7,508 -- 373
119 Cherry Hill Road
Parsippany, New Jersey ........... -- 2,512 7,622 -- 879
45 Melville Park Road
Melville, New York ............... -- 355 1,487 -- 1,822
500 Saw Mill River Road
Elmsford, New York ............... -- 1,542 3,796 -- 185
120 W.45th Street
New York, New York ............... 66,103 28,757 (A) 162,809 (10) 1,237
1255 Broad Street
Clifton, New Jersey .............. -- 1,329 15,869 -- 3,976
810 7th Avenue
New York, New York ............... 85,600 26,984 (A) 152,767 112 9,155
120 Mineola Blvd.
Mineola, New York ................ -- 1,869 10,603 5 256
100 Wall Street
New York, New York ............... 37,094 11,749 66,517 90 4,568
One Orlando
Orlando, Florida ................. 39,465 9,386 51,136 29 1,639

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

200 Forge Way
Rockaway, New Jersey ............. 1,128 3,406 4,534 342 1989 1998 10 - 30 Years
300 Forge Way
Rockaway, New Jersey ............. 376 1,329 1,705 176 1989 1998 10 - 30 Years
400 Forge Way
Rockaway, New Jersey ............. 1,142 3,446 4,588 346 1989 1998 10 - 30 Years
51 - 55 Charles Lindbergh Blvd.
Mitchel Field, New York .......... -- 32,233 32,233 4,495 1981 1998 10 - 30 Years
155 Passaic Avenue
Fairfield, New Jersey ............ 3 5,664 5,667 623 1984 1998 10 - 30 Years
100 Summit Drive
Valhalla, New York ............... 3,007 45,491 48,498 4,441 1988 1998 10 - 30 Years
115/117 Stevens Avenue
Valhalla, New York ............... 1,094 23,223 24,317 2,128 1984 1998 10 - 30 Years
200 Summit Lake Drive
Valhalla, New York ............... 4,343 39,266 43,609 3,493 1990 1998 10 - 30 Years
140 Grand Street
White Plains, New York ........... 1,932 19,053 20,985 1,746 1991 1998 10 - 30 Years
500 Summit Lake Drive
Valhalla, New York ............... 7,052 45,103 52,155 3,569 1986 1998 10 - 30 Years
99 Cherry Hill Road
Parsippany, New Jersey ........... 2,360 7,881 10,241 676 1982 1998 10 - 30 Years
119 Cherry Hill Road
Parsippany, New Jersey ........... 2,512 8,501 11,013 706 1982 1998 10 - 30 Years
45 Melville Park Road
Melville, New York ............... 355 3,309 3,664 407 1998 1998 10 - 30 Years
500 Saw Mill River Road
Elmsford, New York ............... 1,542 3,981 5,523 399 1968 1998 10 - 30 Years
120 W.45th Street
New York, New York ............... 28,747 164,046 192,793 9,065 1998 1999 10 - 30 Years
1255 Broad Street
Clifton, New Jersey .............. 1,329 19,845 21,174 1,057 1999 1999 10 - 30 Years
810 7th Avenue
New York, New York ............... 27,096 161,922 189,018 8,785 1970 1999 10 - 30 Years
120 Mineola Blvd.
Mineola, New York ................ 1,874 10,859 12,733 608 1977 1999 10 - 30 Years
100 Wall Street
New York, New York ............... 11,839 71,085 82,924 3,845 1969 1999 10 - 30 Years
One Orlando
Orlando, Florida ................. 9,415 52,775 62,190 2,770 1987 1999 10 - 30 Years

Continued

IV-33

RECKSON ASSOCIATES REALTY CORP.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000 (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
- -------------------------------- ------------- ------------------ --------------- --------- ---------------

1350 Avenue of the Americas
New York, New York ............ 70,000 19,222 109,168 -- 6,142
919 3rd. Avenue
New York, New York ............ 200,000 101,644 (A) 205,736 -- 316
538 Broadhollow Road
Melville, New York ............ -- 3,900 21,413 -- 867
360 Hamilton Avenue
White Plains, New York (D) .... -- 2,838 34,606 -- 19,048
492 River Road
Nutley, New Jersey ............ -- 2,615 5,102 -- 1,525
275 Broadhollow Road
Melville, New York ............ -- 3,850 12,958 -- 1
400 Garden City Plaza
Garden City, New York ......... -- 9,081 17,004 -- 69
90 Merrick Avenue
East Meadow, New York ......... -- (A) 23,804 -- 19
120 White Plains Road
Tarrytown, New York ........... -- 3,852 24,861 -- 16
100 White Plains Road
Tarrytown, New York ........... -- 79 472 -- 7
51 JFK Parkway
Short Hills, New Jersey ....... -- 10,053 62,504 1 115
680 Washington Blvd
Stamford, Connecticut ......... -- 4,561 23,698 -- 6
750 Washington Blvd
Stamford, Connecticut ......... -- 7,527 31,940 -- 23
1305 Walt Whitman Road
Melville, New York ............ -- 3,934 24,040 -- 4
Land held for development ...... -- 60,823 -- -- --
Developments in progress ....... -- -- 77,076 -- --
Other property ................. -- -- -- -- 9,777
------- ------- ------- -- ------
Total .......................... $728,971 $ 455,920 $2,037,742 $1,480 $275,465
======== =========== ========== ====== ========

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

1350 Avenue of the Americas
New York, New York ............ 19,222 115,310 134,532 3,500 1966 2000
919 3rd. Avenue
New York, New York ............ 101,644 206,052 307,696 1,085 1970 2000
538 Broadhollow Road
Melville, New York ............ 3,900 22,280 26,180 239 2000 2000
360 Hamilton Avenue
White Plains, New York (D) .... 2,838 53,654 56,492 1,494 2000 2000
492 River Road
Nutley, New Jersey ............ 2,615 6,627 9,242 38 2000 2000
275 Broadhollow Road
Melville, New York ............ 3,850 12,959 16,809 896 1970 1997
400 Garden City Plaza
Garden City, New York ......... 9,081 17,073 26,154 811 1989 1997
90 Merrick Avenue
East Meadow, New York ......... -- 23,823 23,823 3,393 1985 1997
120 White Plains Road
Tarrytown, New York ........... 3,852 24,877 28,729 1,401 1984 1997
100 White Plains Road
Tarrytown, New York ........... 79 479 558 5 1984 1997
51 JFK Parkway
Short Hills, New Jersey ....... 10,054 62,619 72,673 3,201 1988 1998
680 Washington Blvd
Stamford, Connecticut ......... 4,561 23,704 28,265 1,143 1989 1998
750 Washington Blvd
Stamford, Connecticut ......... 7,527 31,963 39,490 1,482 1989 1998
1305 Walt Whitman Road
Melville, New York ............ 3,934 24,044 27,978 959 1999 1999
Land held for development ...... 60,823 -- 60,823 -- N/A Various
Developments in progress ....... -- 77,076 77,076 --
Other property ................. -- 9,777 (B) 9,777 1,209
------- ------- ------- -----
Total .......................... $457,400 $2,313,207 $2,770,607 $284,315
======== ========== ========== ========

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

1350 Avenue of the Americas
New York, New York ............ 10 - 30 Years
919 3rd. Avenue
New York, New York ............ 10 - 30 Years
538 Broadhollow Road
Melville, New York ............ 10 - 30 Years
360 Hamilton Avenue
White Plains, New York (D) .... 10 - 30 Years
492 River Road
Nutley, New Jersey ............ 10 - 30 Years
275 Broadhollow Road
Melville, New York ............ 10 - 30 Years
400 Garden City Plaza
Garden City, New York ......... 10 - 30 Years
90 Merrick Avenue
East Meadow, New York ......... 10 - 30 Years
120 White Plains Road
Tarrytown, New York ........... 10 - 30 Years
100 White Plains Road
Tarrytown, New York ........... 10 - 30 Years
51 JFK Parkway
Short Hills, New Jersey ....... 10 - 30 Years
680 Washington Blvd
Stamford, Connecticut ......... 10 - 30 Years
750 Washington Blvd
Stamford, Connecticut ......... 10 - 30 Years
1305 Walt Whitman Road
Melville, New York ............ 10 - 30 Years
Land held for development ...... N/A
Developments in progress .......
Other property .................
Total ..........................

- ------
A These land parcels, or a portion of the land parcels, on which the building
and improvements were constructed are subject to a ground lease.
B The land parcel on which the building and improvements were constructed for
one property is subject to a ground lease.
C The Encumbrance of $2,616 is related to one property.
D As of December 31, 2000, this property was partially under development. As a
result, certain costs have been classified as development costs on the
Company's accompanying balance sheet.
The aggregate cost of Federal Income Tax purposes was approximately
$ 2,169 million at December 31, 2000.

IV-34

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

The changes in real estate for each of the periods in the three years
ended December 31, 2000 are as follows:

2000 1999 1998
-------------- ------------- -------------

Real estate balance at beginning of
period .................................... 2,208,399 1,737,133 $1,011,228
Improvements / revaluations ................ 166,260 57,571 134,582
Disposal, including write-off of fully
depreciated building improvements ......... (52,092) (317,864) --
Acquisitions ............................... 448,040 731,559 591,323
--------- --------- ----------
Balance at end of period ................... $2,770,607 2,208,399 1,737,133
========== ========= ==========

The change 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, 2000 are as follows:

2000 1999 1998
----------- ------------ -----------

Balance at beginning of period .............. $215,112 156,231 $108,652
Depreciation for period ..................... 71,478 65,471 47,579
Disposal, including write-off of fully
depreciated building improvements .......... (2,275) (6,590) --
-------- ------- --------
Balance at end of period .................... $284,315 $215,112 $156,231
======== ======== ========

IV-35